Afghan Bank Takes A Gamble On Success

The Age

Wednesday September 13, 2006

ERIC ELLIS

Life's a bit of a lottery for some depositors in the strife-torn country, writes Eric Ellis.

IN AN exotic world of banking, there are systems such as Switzerland's, secure and secretive; of economies such as Australia's, staid and safe, and those of Asia during the crises of the 1990s, so afflicted by corruption you could never be sure who was holding your money.

And then there is Afghanistan in a colourful class of its own. Its leading commercial banker is a professional Las Vegas poker player. His bank's most popular product is basically a lottery, advertised on Kabul streets as "The easiest way to make a million". Kabul's newest banking tycoon is a petroleum trader, his right-hand man a former adviser of Afghanistan's king whose company car is a gleaming black and bulletproof Humvee, with two armed guards.

Credit cards are unknown, and to use one of the few ATMs means braving a street known as Sniper Alley. Getting caught with the wrong notes in your change is not unknown - there were four competing tenders until recently, including two minted by warlords acceptable as half face value outside their fiefdoms. The biggest bank branch was once the Pakistan embassy, the Taliban's paymaster, and you can risk your life entering the central bank on the wrong day; those big bollards out front are designed to ward off suicide bombers.

And all that's before any discussion of where most of Afghanistan's money-handling takes place - among the grizzled operators of hawala, the informal transfer honesty system Washington suspects funds international terror.

"These are exciting times," says Noorullah Delawari, governor of Afghanistan's reconstructed central bank, Da Afghanistan Bank. "The development of a banking system has been one of Afghanistan's success stories since we were liberated." Delawari is paid to take a glass-half-full view of the world. An affable 62-year-old Afghan-American, Delawari spent a career as a commercial banker in southern California before returning in 2002 to help fix his birthplace.

Delawari has sacrificed his retirement, building a banking system from scratch. His bank now has $2 billion in foreign reserves after being looted by the fleeing Taliban in 2001. He administers 13 licensed banks, and there is talk about capital markets and a stock exchange.

There are banks from Britain, India, Tajikistan, Iran and Pakistan. The three biggest local banks have taken $500 million in deposits in the two years they've been open. There's at last a single currency - the afghani - and it is proving to be remarkably stable, perhaps with the Iraqi dinar the only currency that's backed not so much by reserves or gold but by the political will and rhetoric of the international community.

But much of it is banking that Ian Macfarlane or Ben Bernanke wouldn't recognise. Take Afghanistan's biggest local bank, Kabulbank. Its most popular product is called Bakht, which translates as "fortune" in Afghanistan's Dari tongue. Marketed as banking by Koranic principles, Bakht has been a mighty success among Afghans since it was introduced in April. Kabulbank's Indian chief executive, M.R. Johnson, said depositors had tripled to almost 70,000 since Bakht was launched, drawn partly by its slogan, "The easiest way to earn a million".

For every $100, or 5000 afghanis, deposited in a Bakht account, the depositor is given a ticket in a lucky draw, held monthly and broadcast on television. The winner, always a male, is given a cheque for $20,000, the million afghanis as promoted, a lifetime's income for most of Afghanistan's 30 million people.

So it is a lottery? "No, you cannot say it is a lottery," insists Johnson, a mid-ranked official at a small Indian bank before arriving in Kabul in 2004. Now he sits in Kabulbank's head office, the former Pakistan embassy. "Here you don't lose your money, you are getting an incentive by way of luck," he says. "It's an Islamic banking product, it coincides with religious sentiments."

It's a semantic argument. Gambling is haram (unlawful) in Islam. "There's no interest paid on a Bahkt account," Johnson says. "That would be against Islam." Instead, Bakht depositors keep their stake even if they don't win the draw. Indeed, they remain eligible for the following draws. It's a stroke of marketing genius. Kabulbank has $200 million on deposit but its monthly obligations to Bakht customers fall well under what a bank would ordinarily return as interest on deposit. "Of course we are profitable," Johnson says.

At the new competing Azizi Bank, Hayatullah Dayani frowns on Kabulbank's self-professed Islamic credentials. A former adviser to the deposed king of Afghanistan, Dayani returned to Kabul from a moneyed exile in Germany, where he was a rag trader. A "good Muslim", Dayani says "many people misuse religion" in Afghanistan. "One should keep business away from religion and away from politics; let this country stand on its own feet."

Dayani's bank is named after its Dubai-based chairman and major shareholder, Mirwais Azizi, regarded by many Afghans as their country's richest man.

Azizi handles as much as 70 per cent of the petroleum products sold in Afghanistan. He joined another Afghan tycoon, a hawala operator called Haji Ali Akbar, in starting Azizi Bank, and sent a message that the bank is in Kabul for the long term by buying an $8 million villa abutting the presidential palace. A renovated mosque stands in its grounds for staff use, and the villa has been converted into a lavish carpeted banking hall, screens flickering the latest deposit rates and spreads. "We are not involved with any drug money, with any war economy," says Dayani.

That Kabulbank's Bakht resembles gambling is perhaps not surprising. Kabulbank's leading shareholder is Sherkhan Farnood, a Dubai-based Afghan and regarded as one of Afghanistan's richest men. But it may not please those Kabulbank depositors who believe they are banking Islamically if they knew he is also a professional poker player. The week I was in Kabul to interview Farnood, he was in Las Vegas participating in the World Series of Poker. The Poker Database website says: "Sherkhan has found his way to many final tables. He did a double in Australia last year, a double in Paris in September and a double in Walsall in November 2003. He likes to drink double Blue Label (Johnny Walker whisky)." Another website for poker aficionados, pokerforum.com, describes him as "certainly Afghanistan's most accomplished poker player. Farnood works as a banker."

Farnood doesn't hide his poker prowess, and likes to describe himself as one of the world's leading players. But his reputation among hawala operators is sound. As one of his colleagues says: "There has never been incident where he has not paid up, despite his people getting killed and money going missing."

In corporate Afghanistan, that is as ringing an endorsement as you can hear.

Eric Ellis is South-East Asia correspondent for Fortune Magazine.

© 2006 The Age

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