Pakistan's MCB Bank Bids to Buy Afghanistan's New Kabul Bank

  • New Kabul Bank to be privatized within four months: Kohistani
  • Afghan firm vows to invest $1 billion if announced winner

Pakistan’s MCB Bank Ltd. is looking to buy New Kabul Bank, which was Afghanistan’s largest lender before it was defrauded in 2010.

"The Pakistani bank is one of two preferred bidders," Mohammad Aqa Kohistani, treasury director in Afghanistan’s Finance Ministry, said by phone. "Within four months, the bank will be privatized and sold to one of them."

The second bidder is a local Afghan company that has vowed to invest $1 billion if announced the winner, Kohistani said. MCB Bank has proved it has enough funds to buy New Kabul Bank and has placed a $20 million guarantee, matching the minimum needed under Afghan law, while the Afghan company has provided $168 million, Kohistani said. MCB Bank’s head of corporate finance and international banking Muhtashim Ashai declined to comment.

While privatization of New Kabul Bank would rid Afghan President Ashraf Ghani of a headache that U.S. investigators say has lost $65 million over the past six years, analysts are skeptical about whether a Pakistani lender would win confidence. Afghanistan and Pakistan have long accused each other of harboring terrorists that attack the neighboring country.

"Given the two nations’ troubled relations, it seems hardly likely that a Pakistani firm will be awarded the contract," says Sayed Massoud, who teaches economics at Kabul University. "I don’t think Pakistanis will be welcomed here by our depositors."

Banking Sector

A border skirmish has further strained relations, prompting Afghans to purchase fewer Pakistani goods, according to the Afghanistan Investment Support Agency. Just 10 percent of the country’s 30 million population hold a bank account.

Three Pakistani Banks -- Habib Bank Ltd., National Bank of Pakistan and Bank Alfalah Ltd. -- are among 15 lenders operating in Afghanistan, according to the Afghan central bank’s website. The sector has $632 million in outstanding loans.

New Kabul Bank has 114 branches and $330 million in deposits, which don’t pay interest under Islamic banking rules. However it’s a target for militants because it pays the salaries of Afghan forces and government civilian workers. The Afghan government had nationalized New Kabul Bank in 2010 after its owners embezzled $825 million.

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