Modern Banking Arrives

Afghanistan, a country in which those people who have savings tend to keep the cash under their beds, has just got its first automatic cash machine.

And with several private international banks poised to begin operations in the country, Dr Anwar Ahadi, the head of Afghanistan's central bank, says the nation is about to enter a new financial era.

“The foreign banks pave the way for the growth of the economy,” he said in an exclusive interview with IWPR.

After years of state control, political manipulation and neglect, Ahadi predicts the banking sector will see a new era of professionalism and transparency – not to mention a whole new level of customer service.

“The latest systems practiced in the world will be implemented here as well,” he said. "Those banking services provided to people in other countries will be provided to people here as well."

The British-based Standard Chartered Bank recently had a ribbon-cutting ceremony for its limited-service cash machine, and the National Bank of Pakistan has already started operations in the country.

And the First Micro Finance Bank - backed by the Aga Khan Fund for Economic Development – as well as Pakistan's Habib Bank and the Afghanistan International Bank plan to begin operations soon.

Meanwhile, the country’s six state-operated banks are about to be restructured and in some cases merged. The central Da Afghanistan Bank, which until now has been keeping track of accounts in ledger books with carbon copies, is due to be fully computerised within three months.

Ahadi hopes that these moves will increase trust in public institutions and decrease use of the private hawala networks, an old system in which private operators move money around secretly. Such networks have long been seen as a way for terrorists to finance their operations far from public scrutiny.

In December alone, Ahadi said, his bank handled 130 million US dollars worth of financial transfers, and as a result “the activity of private hawalas is getting weaker by the day”.

Much has changed since March 2002 when Ahadi returned after 15 years teaching political science at Providence College in the United States, to find that the central bank possessed only three computers - and even those were being used only for word processing.

“In reality it was a bank in name only,” Ahadi told IWPR. It was love of his country that brought him back – along with a personal invitation from President Hamed Karzai.

“There was control neither over the printing nor the supply of money,” he said. “The staff were not very professional.”

Indeed, rival warlords printed their own money, and counterfeiting by gangs in Pakistan and Russia was rife.

The inflation rate was so high that people had to carry around vast wads of cash for even the simplest transactions.

One of Ahadi’s first steps was to take control of the country’s finances by launching a new currency, valued at 1,000 times less than the old afghani.

The changeover went remarkably smoothly and today the new afghani is one of the most stable currencies in Asia. Ahadi sees a bright future.

“We have successfully controlled the printing and supply of afghanis, and we are carefully supervising these things,” he said. “People should not be concerned, our national treasury is very strong. We have plenty of foreign currency.”

Ahadi concedes that nearly all of Afghanistan's foreign currency comes in the form of aid. But he says that is only to be expected, until Afghanistan can truly stand on its own feet again.

Ahadi does not see any problem with the provision in the new constitution that requires that the central bank consult with a parliamentary committee over printing money. He said that with control over the supply and distribution of currency, the bank will be able to retain enough independence.

The bank is, however, attempting to curb the use of foreign currencies for everyday transactions on the streets of Afghanistan.

Many goods and services in the major cities are openly advertised in American dollars, while in the bazaars of border provinces, Pakistani rupees are often the currency of choice.

Ahadi said this needs to be stopped. “We will instruct violators to obey this law: even in the provinces this issue is now under investigation,” he said. “The use of foreign money will be stopped.”

Ahadi denies that his position as the long-time leader of the Afghan Millat Party, a Pashtun-dominated grouping, has influenced his decisions at the bank.

“National interests and professionalism are the main principle for me in banking affairs, and it is for that reason that I carry out policies,” he said.

Hafizullah Gardesh is an IWPR staff reporter in Kabul. Danish Karokhel, an IWPR editor in Kabul, also contributed to this report.