The collapse of Kabul Bank in August 2010, which left a $900m hole in the bank in a country whose annual tax take is only $1.7bn, was an unmitigated disaster for Afghanistan’s fragile financial sector and for its economy in general. Yet it also stood as a testimony to the country’s resilience. The losses amounted to roughly 5% of Afghanistan’s gross domestic product (GDP).
Even worse for the country’s political stability and image, the Kabul Bank fraud extended beyond the financial sector. Some $900m in loans were made to insiders with little or no collateral and even no repayment plan in what auditors have described as effectively an extensive Ponzi scheme that misused depositors’ funds for fraudulent loans on Dubai and Afghan property.
