Islamic Republic of Afghanistan

Ministry of Higher Education

Jahan University
Directorate of Academic Affairs
Faculty of Economics
Finance Department

Bachelor Thesis
A Study in to The Causes of Financial Crises in Afghanistan
Banking Sector

Submitted by: Ehsanullah (Yaqoobi)

Supervisor: Hayat Ullah (Momand)

Judge: Committee

Year: 1401
‫بسم هللا الرحمن الرحیم‬
Dedication
I would like to dedicate this project to my parents, my lecturers who have always encouraged me
throughout my academic career and made it possible for me to stand where I am today, moreover
I dedicate it to my beloved homeland BBA and economics students who strive and study for
achieving economic growth in the country.
Acknowledgement
Firstly, I thank my Allah SWT who has given me health; strength and perseverance to continue
and complete this study. Secondly, I would like to express my sincere gratitude to Mr. Hayat
Ullah (Mohmand) Lecturer, Jahan University of Higher Education, my thesis supervisor, for his
guidance, support, advice and encouragement added considerably to enrich my work. Thirdly, I
am much indebted to my family for their unconditional support and courage. They are truly my
inspirations and responsible for my success in life. Without their support for sure I would have
not been in a position to complete this study.

Additionally, I would like to thank all the participants who took part in the surveys conducted as
a part of this research for their valuable time and kind assistance. I am also grateful to all my
colleagues and friends for their comments and review, which helped enrich this thesis work.
Abstract
The Banking Industry was once a simple and reliable business that took deposits from investors at
a lower interest rate and loaned it out to borrowers at a higher rate. The purpose of this research is
to study the effect of the Bank crises on the financial performance of the Afghanistan Banking
sector. And the main research question is “What is the effect of bank Supervisory Boards on the
(DA Afghanistan Bank) Performance? the first sub question is What is the importance of bank
supervisory board characteristics on the financial performance of (DA Afghanistan bank)? the
second sub question is “What is the relationship between critical factors in employee motivation
and performance of (DA Afghanistan bank)?” the main hypothesis is“ It seems that the bank
supervisory board characteristics positively effect on performance improvement of (DA
Afghanistan bank),, The first sub hypothesis is “ It seems that the bank supervisory board
characteristics increase the (DA Afghanistan banking) revenue. The second sub hypothesis is “It
seems that financial and non-financial factors of motivation effect on employee performance
positively in (DA Afghanistan bank),,My research is based on binary method, in this research
qualitative and quantitative approaches are used. Data collection methods are primary and
secondary data collection methods. The Primary data collected through the questionnaires from
various employees of Kabul Bank a questionnaire survey was conducted from November to
December 2011, after the descriptive investigation of the operations of Kabul bank. on the other
hand, and the secondary data is collected from the Internet, related websites, books, articles and
journals. This thesis focuses on some major areas that caused Banking sector run to insolvency,
lack of professional staff, not having tight site supervision by the Central Bank officials and not
existence of a strong legal framework. Moreover, it explains the negative impacts of the Banking
sector situation on the future of the banking sector, peoples’ perception of keeping their money in
the banks and the most important the effects of this crisis on the overall economy of Afghanistan.
This thesis will present a survey on individuals, government officials and Commercial Banks about
the crises in the commercial banking area that highly affect the economy and the banking system
of the country.

Keywords: Commercial banks, Bank crises, financial Performance, Financial liberalization

Effect.
 Table of Contents
Title Page number
A. Introduction: .............................................................................................................................i
B. Literature review ......................................................................................................................ii
C. Problem Statement ..................................................................................................................iii
D. Research Need ........................................................................................................................iv
E. Research Question ....................................................................................................................v
F. Research hypostases ................................................................................................................vi
G. Research Objective ................................................................................................................vii
H. Research method ...................................................................................................................viii
I. Research Design ...................................................................................................................... x
J. Researchlimitations.................................................................................................................xi
K. Research innovation ………………………………………………………………………...xii

Chapter One
Concepts and Generalities
Topic one: concept of banking crises ............................................................................................. 2
Section one: Meaning of banking crises .................................................................................... 3
Sub-section one: Dictionary meaning of crises of banking .................................................... 3
Sub-Section two: Causes of banking crises …………………………………………………. 3
Section two: Definition of Run on the Banks ............................................................................ 4
Sub-Section One: Financial Performance of Commercial Banks in Afghanistan .................. 5
Sub-Section two: Financial liberalization and Crisis ........................................................... 10
Topic two: Generalities ................................................................................................................ 11
Section One: Historical Perspective ......................................................................................... 12
Sub-Section One: Performance of financial board in (DA Afghanistan bank) .................... 14
Sub-Section two: purpose of banking supervisor board ....................................................... 14
Section two: Characteristics of supervisor board ...................................................................... 16
Sub-section one: educational diversity of crises in banking system .................................... 16
 Sub-section two: Implications of the Banking sector Crisis ................................................ 17

Chapter two
Data Analysis and Finding
Topic one: characteristics of crisis effects on financial bank’s performance …………………. 22

Section One: Meeting of crises supervisory board with bank authorities ................................ 22
Sub-section one: Good corporate governance and crises bank performance ....................... 23
Sub-section two: Supervisor board in DA Afghanistan bank .............................................. 23
Section two: Challenges Facing Crises Supervisory board ……………………………......... 25
Sub-section one: DA Afghanistan Bank profile ................................................................... 27
Sub-section two: performance of supervisory board toward crises ..................................... 28
Topic two: data analysis results ................................................................................................... 28
Section one: Causes of decline in deposits and upraise of withdrawals in Kabul Bank ........... 29
Sub-section one: the effect of banking sector ...................................................................... 33
Sub-section two: DAB Supervision on Commercial Bank and Reporting Cycle ................ 33
Section two: Effects of Bank Crises on the Economy of Afghanistan ……………………… 38
Sub-section One: Regression Analysis ................................................................................. 42
Sub-section Two: A turbulent time for the financial sector ................................................. 43
Finding: ........................................................................................................................................ 48
Conclusion: .................................................................................................................................. 49
Recommendation: ........................................................................................................................ 50
References .................................................................................................................................... 53
 LIST OF TABLES
Table Number Table Name Page number
Table 1 Consolidated Afghanistan Banking sector Data ..……………….................................. 21
Table 2 Regression Analysis for dependent Variable Return on Equity ……………………… 35
Table 3 Central Banking supervision and External Auditors ………………………………………….. 40
Table 4 Determinants of commercial banking profitability …………………………………... 42
 List of Figures
Figure Number Figure Name Page number
Figure 1 Asset and deposits of the banking sector in Afghanistan ……………………………. 22
Figure 2 Loan portfolio by 28.9% of AFN 15 billion …………………………......................... 24
Figure 3 Deferent aspects of central bank supervision and staff proficiency …………………. 42
Figure 4 Banking sector Data and of FY 2015(Million USD) ………………………………... 44
LIST OF ACRONYMS
AFN AFGHANISTAN LOCAL CURRENCY (Afghani)

CIC CURRENCY IN CIRCULLATION

DAB DA AFGHANISTAN BANK

FSD FINANCIAL SUPERVISION DEPARTMENT

GDP GROSS DOMESTIC PRODUCT

GNP GROSS NATIONAL PRODUCT

GOA GOVERNMENT OF AFGHANISTAN

KB KABUL BANK

MOF MINISTRY OF FINANCE

USD UNITED STATES DOLLAR

Research Methodology
A. Introduction:
The Money market in Afghanistan is developing rapidly regardless of deficiencies in the legal
framework notably weak formal mechanisms for contract implementation. As of November 2015,
there are 17 licensed commercial banks that are supervised by the central bank. These banks
operate in the same environment, yet have generally different approaches to lending: at one
extreme are banks that have negligible lending activity, while others have a large portfolio of loans
to domestic businesses. This project explores the rationale behind the disparity in risk-taking by
commercial banks. How do commercial banks lend on the domestic market given limited recourse
for contract implementation under existing laws and institutions Why do Banks run What factors
allow some commercial banks to lend under current conditions; in particular, in the absence of an
adequate (enough) legal framework, how do banks enforce loan contracts? Do the banks that
engage in riskier behavior ultimately generate higher return on assets Do they the commercial
Banks estimate the risk behind lending in the current situation of Afghanistan. Commercial bank
data was obtained from the central bank of Afghanistan (Da Afghanistan Bank) commercial banks,
and the Revenue Department of the Ministry of Finance of Afghanistan. The data included
CAMEL ratings of banks, bank balance sheets, income statements, cumulative amount of loans
extended, Interest rates, default rates, and annual tax paid by each commercial bank. There have
been numerous systemic banking crises in the world during the past two decades. Using CAMEL-
type variables, Arena (2005) concludes that Bank Level fundamentals significantly affect the like
hood of bank failure Personal interviews were carried out with officials at 2 commercial banks and
the Central Bank. The interviews provided insight as to how commercial banks assess risk and
undertake decisions to lend; how they enforce collection; how collateral affects lending, and
similar issues, so as to understand better the significant differences in operations across banks
Analysis of the data and interview responses was carried out to determine: (I) the factors that
encourage or discourage risk-taking; (ii) the reasons why some banks appear better suited than
others to operate in an environment of limited formal contract enforcement; and, (iii) whether
greater risk-taking increases returns on assets.

i
B. Literature review
The need for the literature review is to serve as a foundation for rational reasoning on which the
current topic can be built upon. This will give an insight of the current status of Bank Crisis and
especially its impacts on the current and future direction of banking industry in Afghanistan A
bank run (also known as a run on the bank) occurs when a large number of bank customers
withdraw their deposits because they believe the bank is, or might become, insolvent. As a bank
run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy (or positive
feedback): as more people withdraw their deposits, the likelihood of default increases, and this
encourages further withdrawals. This can destabilize the bank to the point where it faces
bankruptcy. A banking panic or bank panic is a financial crisis that occurs when many banks suffer
runs at the same time. A systemic banking crisis is one where all or almost all of the banking
capital in a country is wiped out. The resulting chain of bankruptcies can cause a long economic
recession. Much of the Great Depression's economic damage was caused directly by bank runs
The cost of cleaning up a systemic banking crisis can be huge, with fiscal costs averaging 13% of
GDP and economic output losses averaging 25% of GDP for important crises from 1970 to 2015
In recent decades, a large number of countries have experienced financial distress of varying
degrees of severity, and some have suffered repeated bouts of distress (Hardy, 1998) Pazarbasioglu
(1999) believes that the best warning signs of financial crises are proxies for the weakness of the
banking and corporate sector. He showed that full-blown banking crises are associated more with
external developments, and domestic variables are the main leading indicators of severe but
contained banking distress. He adds that the most obvious indicators that can be used to predict
banking crises are those that relate directly to the soundness of the banking system. In the 1980's
and early 1990's, several countries in developed, developing and transition economies experienced
several banking crises requiring a major overhaul of their banking systems (IMF, 1998). Kenya
has experienced banking problems since 1986 culminating in major bank failures (37 failed banks
as at 1998) following the crises of; 1986 - 1989, 1993/1994 and 1998 (Kithinji and Waweru, 2007
Ngugi, 2001). Presently, several developed countries including the USA are experiencing a
banking crisis. For example, the Citibank group alone, has written off more than $39 billion in
losses (Elliot, 2008). Despite the problems facing the global financial market, Canadian banks
have remained relatively stable. Eliot (2008) attributes this to a combination of regulatory
discipline and cultural mindset among Canadian banks. In Afghanistan banking crisis was new

ii
and has hit two commercial banks, (Development Bank of Afghanistan, then it was sold and
restarted its operations under new license and name (Bakhter Bank) and Banking sector which is
still suffering and the management is trying to recover its loans and keep serving the government
and the public. Basic laws and regulations required for banking sector operation, and, in particular
banks’ lending activities were put in place in 2003 and in early 2004. The laws include the Law of
da Afghanistan Bank, which was introduced in February 2004. With the help of the international
community and donors, DAB started to develop the capacity to carry out bank supervision and
monetary policy operations. The Banking Law came into force in September 2003, establishing
the legal framework for commercial bank operation in Afghanistan. The law stipulates that the
central bank is authorized to register, regulate and monitor commercial banks. The banking system
grew rapidly in the post-Taliban period: by 2005 there were eleven licensed banks: three state
owned banks and eight private local and foreign banks, including Standard Chartered Bank, and
Afghanistan International Bank (AIB) established with 25 percent ownership held by the Asian
Development Bank. Three state-owned banks were relicensed initially: the Export Promotion Bank
(EPB), Bank Millie Afghan (BMA) and Pashtany Tejaraty Bank (PTB) Despite numerous
shortcomings (weak management, unsound practices and banking law violations), these banks
were still operating at a profit. The other three state-owned banks were not relicensed, primarily
because they failed to meet minimum capital requirements. As of 2005, most banks offered basic
services and their operations were constrained severely due to deficiencies with regard to
inadequate laws and regulations (including bankruptcy, mortgage and contract laws), property
rights and inaccurate, incomplete and flawed title deeds and inefficient and corrupt courts.
Uncertainty and security issues limited the operation of commercial banks in remote areas. As of
March 2015, the financial system of Afghanistan comprised: I) 18 licensed commercial banks with
183 branches in 34 provinces; ii) 332 foreign exchange dealers; and iii) 100 licensed money service
providers.

iii
C. Problem Statement
This project is all about the risk that is taken by commercial banks, lending huge amounts of money
to the limited market, nonexistence of a strong legal framework and the lack of tight and scheduled
Bank supervision on the commercial Banks also the impacts on the economy of the Afghanistan.
Afghanistan’s banking sector remains highly stressed amid a crippling liquidity crisis and a
deteriorating economic condition. The protracted systemic bank run, sparked by panic around the
government’s fall in August 2021, is partially addressed by the Central Bank of Afghanistan/Da
Afghanistan Bank (DAB) imposed daily withdrawal limits on deposits. The exchange rate has
recently stabilized after experiencing severe fluctuations over the past five months. High
dollarization, illiquidity, and extended closure of banks and other financial institutions during the
five months served as speed bumps stalling a spectacular currency crash. Despite that, the
exchange rate tumbled in mid-December to record lows not seen since the currency reform two
decades ago, leading to a sharp increase in the prices of essential goods and pushing Consumer
Price Index (CPI) inflation to a double-digits territory. In the meantime, the central bank’s lack of
access to the country’s international reserves continues to breed a system-wide liquidity crunch in
a cash-hungry dollarized economy. The recent limited dollar injections by UN agencies, although
helpful, seem to be too little and even too late. DAB’s unannounced move to overtake control of
the operations in one stressed bank was an important step to contain growing financial instability.
This unfolding instability was also reflected in the formal banking sector’s increasing loss of
ground to an informal, mostly unregulated, and sophisticated Hawala system, which, if left
unleashed, is poised to reclaim the unrivaled relevance it enjoyed during the 1990s. The outlook for
the financial sectors’ returns to normalcy remains clouded by continued uncertainties. In addition, against
the backdrop of a new economic and political landscape, Afghanistan remains highly exposed to a potential
Financial Action Task Force (FATF) classification and a complete loss of correspondent banking
relationships. This, combined with the international political division on how to deal with the developments
in Afghanistan, may temporarily postpone the process, too.

iv
D. Research Need
The primary need of the research is to analyze the key factors which increase employee motivation
among the employee in (DA Afghanistan bank) and its relationship with employee productivity.

E. Research Question
Main question:
What is the effect of bank Supervisory Boards on the (DA Afghanistan Bank) Performance?

Sub-Question:
i. What is the importance of bank supervisory board characteristics on the financial
performance of (DA Afghanistan bank)?
ii. What is the relationship between critical factors in employee motivation and performance
of (DA Afghanistan bank)?

F. Research hypostases
Main hypostasis:
It seems that the bank supervisory board characteristics positively effect on performance
improvement of (DA Afghanistan bank)

Sub-Hypostasis:
i. It seems that the bank supervisory board characteristics increase the (DA Afghanistan
banking) revenue.
ii. It seems that financial and non-financial factors of motivation effect on employee
performance positively in (DA Afghanistan bank)

G. Research Objective
i. To analyzed the effect of bank Supervisory Board on (DA Afghanistan Bank) Performance.
ii. To assess the effects of critical factors of motivation on employees’ performance at work
place.
iii. To examine the relationship between motivation and employee performance.

H. Research method
I have used regression analysis, normality test and Heteroscedasticity test for collecting and
analyzing the secondary data collection method from (DA Afghanistan bank) annual report and

v
related books, journals and related websites. The population of the study was 12 banks of
Afghanistan. The target population of this study about the whole Afghanistan banking sector of
Afghanistan. The method of selecting samples by using purposive technique to select only one
banks providing full banking services in Afghanistan which is (DA Afghanistan bank) of
Afghanistan (DAB) Due to data availability limitations, the data are extracted of SSB
characteristics from IBs annual reports from 2019 to 2020.

I. Research Design
This is quantitative and qualitative research. The secondary has been data taken from annual
reports of (DA Afghanistan Banks) in Afghanistan 2019 to 2020. And reports on the
implementation of Good Corporate. Therefore, in this study hypotheses were tested and the
variables causational study was found out also this study penal in nature.

J. Research innovation
• The data that the researcher collected during this research in different books, websites,
journals.
• and was in different style and format and the researcher collected these data and arranged
to be clearly understandable for the reader and this is the first time in Afghanistan that
research has been conducted on this topic.

K. Research limitations
• When collecting information regarding this topic form different sources, the researcher
faced with some limitations of gathering secondary data which confused and waste of the
researcher precious time.
• Due to Covid 19 quarantine the researcher couldn’t collect data sooner for the thesis. Some
of the limitations encountered in the course of this research work were, poor access to
relevant information, some sources couldn’t provide to the researcher right information to
understand about impact of motivation of employees.

vi
 Chapter One
Concepts and Generalities
Topic one: The concept of banking crises

The systemic banking crisis occurs when many banks in a country are in serious solvency or
liquidity problems at the same time, either because there are all hit by the same outside shock or
because failure in one bank or a group of banks spreads to other banks in the system. More
specifically, a systemic banking crisis is a situation when a country’s corporate and financial
sectors experience a large number of defaults and financial institutions and corporations face great
difficulties repaying contracts on time. The Money market in Afghanistan is developing rapidly
regardless of deficiencies in the legal framework notably weak formal mechanisms for contract
implementation. As of November 2015, there are 17 licensed commercial banks that are supervised
by the central bank. These banks operate in the same environment, yet have generally different
approaches to lending: at one extreme are banks that have negligible lending activity, while others
have a large portfolio of loans to domestic businesses. This project explores the rationale behind
the disparity in risk-taking by commercial banks. How do commercial banks lend on the domestic
market given limited recourse for contract implementation under existing laws and institutions
Why do Banks run What factors allow some commercial banks to lend under current conditions in
particular, in the absence of an adequate (enough) legal framework, how do banks enforce loan
contracts Do the banks that engage in riskier behavior ultimately generate higher return on assets?
Do they the commercial Banks estimate the risk behind lending in the current situation of
Afghanistan. Commercial bank data was obtained from the central bank of Afghanistan (Da
Afghanistan Bank), commercial banks, and the Revenue Department of the Ministry of Finance of
Afghanistan. The data included CAMEL ratings of banks, bank balance sheets, income statements
cumulative amount of loans extended, interest rates, default rates, and annual tax paid by each
commercial bank. There have been numerous systemic banking crises in the world during the past
1
two decades.

1
Boissay, F., Collard, F. and Smets, F. (2013). ”Booms and Systemic Banking Crises”. European Central Bank.
1
Working Paper NO.1514. https://www.researchgate.net/publication/327931434...

2
Section one: Meaning of banking crisis
Banking crisis reflects the crisis of liquidity and insolvency of one or more banks in the financial
system. Due to bank's sizable losses, bank encounters critical liquidity shortage to the extent this
has disrupted its ability in repaying the debt contracts and the withdrawals demanded by
depositors. Refers to a subset of financial crises that are felt particularly acutely within
the banking sector of local financial markets, and that are generally thought of as situations having
national and international implications wherein either the given capital of the banking system is
practically exhausted, or where non-performing loans or assets amount to or exceed 15% -20% of
the overall capital infrastructure, or where the cost of resolving the problems of a financial system
amounts to at least 3-5% of the national Gross Domestic Product.

Sub-section one: Dictionary meaning of crises of banking

A financial crisis is when financial instruments and assets decrease significantly in value. As a
result, businesses have trouble meeting their financial obligations, and financial institutions lack
sufficient cash or convertible assets to fund projects and meet immediate needs.

Sub-Section two: Causes of banking crises

Nowadays, there are many complaints from customers about the inefficiency and complexity of
the loan-service, which has become increasingly challenging to the banks’ business management,
although it is hard to evaluate the existing process across the board. The main problems caused by
the current process are first, inefficiency - the careful consideration of the safety and profitability
of the organization itself led to detailed and time costing steps to ensure the high credit degree of
the customer. Second, Complex and rigid procedures - so many departments and individuals were
involved in the process including the customer, the lawyer, the bank employee, the loan agent, the
loan processor and even the bank board.

____________________________

- Grauwe, Paul De (2008). ”The Banking Crisis: Causes, Consequences and Remedies”. Center for European Policy
Studies. No.178. https://financial-dictionary.thefreedictionary.com/Banking+crisis

3
Section two: Definition of Run on the Banks
A bank run (also known as a run on the bank) occurs when a large number of bank customers
withdraw their deposits because they believe the bank is, or might become, insolvent. As a bank
run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy (or positive
feedback) as more people withdraw their deposits, the likelihood of default increases, and this
encourages further withdrawals. This can destabilize the bank to the point where it faces
bankruptcy. A (systemic) banking crisis occurs when many banks in a country are in serious
solvency or liquidity problems at the same time either because there are all hit by the same outside
shock or because failure in one bank or a group of banks spreads to other banks in the system. A
financial crisis is when financial instruments and assets decrease significantly in value. As a result
businesses have trouble meeting their financial obligations, and financial institutions lack
sufficient cash or convertible assets to fund projects and meet immediate needs.

Table 1: Consolidated Afghanistan Banking Sector Data

In millions of AFN

2011 2012 2013 2014 2015

Total Assets 361 409 447 466 532.7

Cash and Bank

Balance 158 213 84.5 79.2 81

Loan and Advance 0.354 0.636 1.3 1.8 1.71

Total Deposits 169 178 234.6 164.2 171.1

____________________________

https://www.semanticscholar.org/paper/Financial...

4
 The development of commercial banks’ balance sheets over the period 2011-2015 is set out in
Table 1, which shows a rapid increase in bank deposit-taking as well as the provision of loans
and advances. On the asset side the share of foreign-owned banks remained broadly constant
while the share of local privately-owned banks grew rapidly, dwarfing the relative importance
of state-owned banks in lending. On the deposit side, local private sector bank growth outpaced
both state-owned and foreign-owned banks. As of March 2011, the two largest domestic private
banks accounted for almost 50 percent of total banking system assets. The combined loans of
these two banks were 70 percent of total commercial bank lending. The breakdown of banking
sector assets and deposits held by private, state-owned and foreign-owned banks is set out in
Figure 2 below.

Figure 1: Assets and deposit of the banking sector in Afghanistan

Chart Title
500

400

300

200

100

0
2011 2012 2013 2014 2015

Total Assets Cash and Bank Balance Loan and Advance Total Deposits

Sub-Section One: Financial Performance of Commercial Banks in Afghanistan

Commercial banks in Afghanistan are not publishing complete set of financial statements except
for few including Afghanistan International Bank (AIB).
____________________________

https://www.researchgate.net/publication/327931434...
01/03/2018 · A study carried out by (Qais & Boris , 2018) on Financial Performance of Commercial Banks
in Afghanistan.

5
Notes the financial statements which are an integral part of the financial statements based on IFRS
1 are not readily available, information pertaining to quality of portfolio can only be determined
through these notes however for the purpose of this study asset quality is measured based on
periodical impairment charges to closing balance of portfolio, approach applied consistently across
all banks to study relative impact. The min value of -207 indicates 207% impairment charge to
closing balance of portfolio in Pashtany Bank, this is a state-owned commercial bank that held
huge delinquent and defaulted loans. Radical changes were brought in the management of the bank
in 2015, entire portfolio of the bank is written off and much effort is on the recoveries. The Max
positive of 4% indicates decline in impairment charges in Bank Alfalah Limited (BAL). Limitation
of data on asset quality restricts further analysis however it is noted that investments had more
stable returns with lower risk than loan portfolios. Loan portfolios have shrinked in favor of other
investments in BAL, Habib Bank Limited, National Bank of Pakistan. AIB had a consistent
investment approach over the 5 years period by not relying on loan portfolio in contrast to
Azizi Bank (AZB), both of which are the biggest banks operating in terms of their market share of
total assets. AIB holds average of 21.5% of industry assets and AZB an average of 12.3% over
the 5 years period as shown in Min Management efficiency as Expenditure (before tax) to total
revenue of 6.9 is from Pashtany Bank in 2012 due to the same challenges aforementioned. Max
management efficiency of 0.2is from National Bank of Pakistan in 2015, overall, the mean
management efficiency of 1.04 indicates the industry is only sustainable without prospects of
dividends for the investors or probably appropriate tax planning is made by most of the
professionals in the industry.
• Testing Accuracy of Model
Another assumption of the regression model for RoA is the normality and has been validated here
below. The test below in is to make sure the residuals in the error term are normally distributed
with mean the residuals as seen in the above histogram Figure 4 is bell shaped and shows a normal
distribution around the mean u ~ 0. However, to ensure more accurate symmetrical normal
distribution of residuals Jerque Bera test is considered but the model is not accurate for less.
• Regression Results
This section provides the regression model results and related discussion. Table 4 provides the
regression results. All the RoA multivariate regression assumptions have been validated above
Table 4 provides the key statistical information on the model for interpretation. The R2 of the

6
model is 87.2% on 72 observations. R2 indicates the percentage of change in dependent variable
explained by the expected independent variables. In this model it is evident that 87.2% of change
in the RoA is determined by the independent variables of the CAMEL framework. Adjusted R2 is
also high at 86.3% which indicates the potential for additional variables and that there are no
unnecessary band needless explanatory variables included in the model. The number of
observations made are 72 which is of 15 banks over 5 years. However only 3 years data on National
Bank of Pakistan (NBP) from 2012 to 2013 were not available hence 3 samples are excluded, thus
making the number observations as 72 and not 7.

Table 4: Determinants of commercial banking profitability

Standard
Variables Coefficients t-stat P
error
Capital
0.0453 0.0088 5.1232 0.0000
adequacy
Asset quality 0.0001 0.0000 2.3210 0.0234
Management
0.0248 0.0013 19.4652 0.0000
efficiency
Liquidity 0.0063 0.0087 0.7282 0.4691
GDP growth 0.0381 0.0302 1.2606 0.2119
Intercept 0.0177 0.0053 3.3151 0.0015
R2 0.8723
Adjusted R2 0.8626
Observations 72
GDP: Gross domestic
p

2.2. Assessment of Risks

This project also examines differences in lending behavior based on quantitative data and
interviews with bank officials. Commercial banks in Afghanistan operate in the same environment,
yet their lending activities differ widely, ranging from negligible lending by internationally-
reputable foreign-owned banks to large loan portfolios and extensive credit activity, mostly in
domestically-owned banks. Detailed data on banks is obtained from DAB, commercial banks, and
the Revenue Department of the Ministry of Finance of Afghanistan.

____________________________

Ali, K., Akhtar, M.F., Ahmed, H.Z. (2011), Bank-specific and macroeconomic indicators of profitability-empirical
evidence from the commercial banks of Pakistan. International Journal of Business and Social Science, 2(6), 235-242.

7
The data included CAMEL ratings of banks, bank balance sheets, income statements, cumulative
amount of loans extended, interest rates, default rates and annual tax paid by each commercial
bank. Selection of banks for the qualitative study drew upon data that allowed the determination
of which commercial banks satisfied either the requirement that their total assets represented a
substantial share of the total banking sector assets in Afghanistan or that the bank was involved
substantially in lending (as a share of its total assets). The rationale behind the sample choice was
that all different bank types should be represented but that little insight was to be gained by
interviewing the management of banks with a negligible presence in Afghanistan in terms of their
assets or lending operations. Eight commercial banks were identified for interviews, accounting
for nearly 90 percent of total banking sector assets and representing over 90 percent of lending
Two banks were state-owned banks (Bank Millie Afghan and Pashtany Bank), two were domestic
private banks (Azizi Bank and Kabul Bank), and the remaining four were international private
banks (Afghanistan International Bank, Bank Alfalah Ltd., Standard Chartered Bank and The First
Micro Finance Bank).

2.3. Net Loans

The loan portfolio continues to grow, totaling, AF 65.13 billion (USD 1.38 billion) at the end of
FY 1391– up by AF 14.59 billion or 29 percent since end of FY 1394 or 36 percent of total assets
the highest amount as well as percentage share in total assets among different asset categories. The
increase occurred in gross loan portfolio, loss reserves as percentage of gross loans are 2 percent.
Increases in lending were observed at all but two of the banking organizations; however more than
two-third of the growth is still attributable to private bank’s group; and more than half to one
banking institution. As increase of AF. By far, the major component of loan portfolio is other
commercial loans (67 percent). This concentration in other commercial loans, to the exclusion of
all other types of lending, has been the dominant trend. As a new piece of information in this major
share of loans we do have small and medium enterprises and micro credit loans amounting AF
10.31 billion (USD 219 million) by nine banking institutions.

____________________________

Anbar, A., Alper, D. (2011), Bank specific and macroeconomic determinants of commercial bank profitability:
Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139-152.

8
Thus, lending is picking up, but still not sufficient in some loan categories related to important
sectors of the economy, e.g., agriculture has not benefited much from this increase.

Figure 2: Loan Portfolio by 28.97 % or AFN 15 billion

2.4. Interest Rate Risk

Overall, the banking institution is in interest-rate sensitive position. If the interest rate increases by
3 percentage points, then there will be an increase of 911.1 million in net interest income over the
next 12 months. Conversely if the interest-rate decreases by 3 percentage points then the interest
income will decline to AF 911.1 million. For the tow banking institution if the interest-rate
increases by 3 percentage points, that will decrease their net interest income over the next 12
months. (Branches of foreign banks are not required to file the interest-rate sensitivity schedule,
because like FX risk, interest-rate sensitivity of the banks is the large excess of risk is managed on
a whole-bank basis). The major reason for the overwhelming asset-sensitivity of the banks is the
large excess of interest-bearing assets over interest-bearing liabilities. Although it may improve
the net interest margin and overall profitability of the bank, but this situation makes the banks more
vulnerable to a sudden decrease in market rates.

____________________________

https://ideas.repec.org/a/eco/journ1/2018-01-30.html

9
Sub-Section two: Financial liberalization and Crisis
A pre-liberalized banking-financial sector is typically one in which only a small number of
domestic banks operate. Foreign banks, and sometimes even new domestic ones, cannot enter the
market because of a complicated licensing requirement or outright prohibition on foreign
ownership of banks. There is usually also a ceiling on the interest rate that banks are allowed to
offer depositors so as to prevent competition among banks operating in a particular geographical
region. Sometimes other interest rates, such as for loans and mortgages, are also specified by
regulatory authorities and are not determined by markets. Often, there are also restrictions placed
on the geographical or functional areas in which banks are allowed to operate. In some cases, these
institutions are not allowed to sell insurance, investments, consulting, or other services. Another
typical characteristic of pre-liberalized banking sectors is that government often plays a central
role. The banks may operate as oligopolies with implicit government support. In other cases, the
government itself may own all or many of the banks and therefore have an explicit stake in the
profitability and stability of the sector. While this is the general state of pre-liberalized banking
sectors, considerable variation is found across the countries of Asia. In some, many small domestic
banks operate, while in others only a very limited number of banks are allowed. Other differences
in the trajectory of liberalization, in addition to differences in the initial state of the sector, can also
be observed. A complete liberalization of the domestic financial banking sector will entail the
removal of all the restrictions discussed above. While this is the general state of pre-liberalized
banking sectors, considerable variation is found across the countries of Asia. In some, many small
domestic banks operate, while in others only a very limited number of banks are allowed other
differences in the trajectory of liberalization, in addition to differences in the initial state of the
sector, can also be observed. A complete liberalization of the domestic financial banking sector
will entail the removal of all the restrictions discussed above. In a fully liberalized sector, banks
are not restricted in their scope of operations nor are they restricted in their geographical location
or ownership. Interest rates are determined by the demand and supply of deposits and loans.

____________________________

Bekaert, Geert, Campbell Harvey, and Christian Lundblad. 2005. “Does Financial Liberalization Spur Growth?”
Journal of Financial Economics 77: 3 56.

10
In most Asian countries that have liberalized, some forms of restrictions typically remain even
after the liberalization, most notably in restrictions on functional areas of operation or in the degree
of government involvement in the sector.

• Prudential Supervision of Banks

Although the onset of financial liberalization seems to be a significant destabilizing force for the
financial industry, there appears to be professional consensus that, in the long run, a liberalized
financial market will be stabilizing, will channel investment and saving more productively, will
enable maintenance of steady consumption levels, and will be conducive to more rapid and
sustainable growth. In view of these long-term benefits, and however one evaluates the importance
of each of the two hypotheses to the relationship between liberalization and crises, it is clear that
there is still a distinct role for liberalization and a banking supervisory agency. A supervisory
agency should regulate banks activities and provide insurance to small depositors. This is
necessary in order to prevent the instability that inevitably results even in pre-liberalized financial
sectors. Regulatory practices should include: development and maintenance of honest and
impartial legal systems; mandating strict information disclosure practices; establishment of limits
on the rate at which banks can lend or on the rate of increase in their exposure to riskier sectors
(so-called speed bumps‖); requiring diversification of bank portfolios; strict capital and liquidity
standards that account for different degrees of risk exposures; strict and transparent accounting of
nonperforming loans; and rigorous mandatory balance sheet adjustment once a loan is determined
to be non-performing.

Topic two: Generalities

Two sectors are highly developed and still needs to be developed in Afghanistan, Banking, and
Telecommunication. We have 17 commercial banks operating in Kabul with branches across the
country that moves millions of USD around.

____________________________

https://www.journalijar.com/article/28475/a-study...

11
People are feeling much secure to move their money from one point to another, in spite of not have
a security in all over the country but still banks are very helpful in the case, comparing to history
that people were transporting cash in bags around the country for business/investment purposes,
which involved high risks such as robbery, theft or even death. This paper describes a case study
of bankruptcy that highly affects the Banking Sector, Peoples’ Trust and above all the Economy
of the country. Looking over to the responses from the participants, we find out that the Central
Bank officials were going for site examination once a month, and at the same time Commercial
Banks are sending their reports once a month. The period of examination is only two business
days, looking over to the complexity of the operations of a bank, two business days won’t be
enough to cover all the different aspects of the operations, that are very critical and risky which
can make the bank fail. Shareholders are working in the key positions of the management of the
bank; this will have very negative influence on the operations of the bank. There is no clearly
defined structure for the bank, if look over from the legal point of view. Right now, the people of
Afghanistan do not have enough knowledge about banking and they don’t feel secure about their
money when the deposit it in the bank. On the other hand, most of the Afghanistan people think
that banking is not Sharia compliance. However, there are other Islamic countries in which
scholars have justified it and their nation takes benefits from both the conventional and Islamic
banking. So, this issue needs to be addressed at priority by the scholars of Afghanistan. There are
many other issues that covered Banking sector that is violation of laws, un-transparent banking
activities, interference of shareholders in the operations of the bank and many more. To avoid such
risks the following recommendations are required and necessary to be considered by the
government of Afghanistan (Da Afghanistan Bank) and the commercial banks.

Section One: Historical Perspective

In late 2001, following decades of conflict, the financial and banking systems of Afghanistan were
devastated. Afghanistan had six licensed state-owned commercial banks that were almost entirely
Kabul-based and, to a large extent, inactive. The banks lake of connectivity, reliable information
on assets and liabilities, and did not follow commonly agreed and accepted accounting
standards. Minimum capital requirements were set out in the 1994 Law on Money and Banking,

12
2
but risk management systems that would remotely resemble modern banking was missing. Non-
performing loans were not written off and no provisioning was made for them.
Managers were political appointees with little or no banking experience; knowledge and capacity
of bank staff were low. The operation of commercial banks had been hampered during the Taliban
era as banks were not allowed to pay or to charge interest, in line with Islamic law. As a result,
banks had ceased all lending activities, which had moved into the informal sector. Nevertheless,
the banks had substantial assets (primarily real estate) on their books; they were solvent and some
earned income from foreign currency deposits held abroad. New banking laws were passed in 2003
and in early 2004, based largely on international best practice. In 2004 total commercial bank
assets were less than US$300 million. By March 2015, the total assets of the 16 operating
commercial banks were almost US$1.7 billion. In 2015, five banks, accounting for over 60 percent
of commercial bank assets, were assigned a composite CAMEL rating of 4 by the central bank;
four banks had a composite CAMEL rating of 3. Despite the small sample size, a statistically
significant relationship between composite CAMEL ratings of commercial banks and gross
domestic lending as a share of total assets was established: banks with worse ratings had more
lending to domestic clients. Using corporate income tax paid as a uniform measure of profit, a
statistically significant relationship between profit and composite CAMEL rating was established
after adjusting for bank size, banks with worse composite CAMEL ratings paid less tax. Curiously
there was no statistically significant relationship between profits and total assets or between
lending assets versus profit/assets, which implies that lending may not be profitable. During the
first half of 2015, IMF conducted interviews of senior management of 8 banks accounting for about
90 percent of the commercial banking system by assets and by domestic lending. The operation of
commercial banks had been hampered during the Taliban era as banks were not allowed to pay or
to charge interest, in line with Islamic law. As a result, banks had ceased all lending activities
which had moved into the informal sector. Nevertheless, the banks had substantial assets (primarily
real estate) on their books; they were solvent and some earned income from foreign currency
deposits held abroad. At that time, banking system insiders corroborated the evidence that poorly
rated banks lend to domestic clients, whereas highly rated banks do not lend. Banks that lend
extensively domestically engage in extra-judicial, non-traditional contract enforcement. Some

2
https://www.investopedia.com/terms/f/financial-crisis.asp

13
bankers expressed concern about systemic risk. The Hawala system remained important for many
transactions because the public was comfortable with its procedures. This system is perceived to
provide services more rapidly, at a lower cost, and in a more convenient manner than commercial
banks because it appears better-suited to many aspects of local circumstances: it requires no
paperwork or bureaucratic procedures for client verification, risk assessment or transaction
approval.

Sub-Section One: Performance of financial board in (DA Afghanistan bank)

This study attempts primarily to measure the financial performance of Da Afghanistan Bank which
one of the largest government banks of Afghanistan for the period 2015-2016 and to identify
whether any difference exists between a banks’ years of operation and its performance classifying
two period (2015-2016). To complete my task, I have to use various materials and take help form
online source. Analyses the ratio here used financial ratio analysis (FRA) method which help to
draw an overview about financial performance of the Da Afghanistan bank in terms of profitability,
liquidity. These analyses help to see the current performance condition of this bank compare past
performance. Because now a day’s banking sector of Afghanistan is suffering the disease of default
culture which is the consequence or result of bad performance of most banks. The performances
of banks are dependent more on the management’s ability in formulating strategic plans and the
efficient implementation of its strategies. The study findings can be helpful for management of Da
Afghanistan, always for private commercial banks in Afghanistan to improve their financial
performance and formulate policies that will improve their performance. The study also identified
specific areas for bank to work on which can ensure sustainable growth for these banks.

Sub-Section two: purpose of banking supervisor board

Supervisory boards play a major role in managing risks. They contribute to the checks and
balances that every bank needs. They are a core element of good governance. And we have high
expectations of you and of what you can do to make your bank more resilient. The Bank's
governance structure establishes proper incentives for the Supervisory and Management Boards to
pursue objectives that are in the interest of the Bank.

14
3
and effectively manage the relationship between the Management Board, the Supervisory Board,
shareholders and other stakeholders. TBC Bank's corporate governing bodies are the General
Meeting of Shareholders, the Supervisory Board and the Management Board. A number of
appropriate committees have been established at both the Supervisory and Management Board
levels. The General Meeting of Shareholders is the supreme governing body of the Bank, with
authority over all key decisions. It elects the Bank's Supervisory Board, which is responsible for
the supervision and appointment of members to the Management Board. The Management Board
is responsible for TBC's day-to-day management, with the exception of functions reserved to the
General Meeting of Shareholders and the Supervisory Board. The Supervisory Board appoints the
members of the Management Board for renewable terms of four years and is also in charge of their
dismissal. Banking regulations contain certain limitations as to who may become a member of the
Management Board and criteria that each Director must fulfil. The scope of authority of each
member of the Management Board is defined by a contract entered into with the Director upon
appointment. The Supervisory Board plays a key role in the Corporate Governance of the Bank. It
has ultimate responsibility for the Bank's business, risk strategy and financial soundness, as well
as how the Bank organizes and governs itself. The Supervisory Board appoints and supervises
Management to ensure both the achievement of the Bank's strategic objectives and Management's
ongoing response to the risks inherent in the business activities. The Supervisory Board is also
responsible for the appointment, evaluation and compensation of the Management Board
members. In addition, the Supervisory Board is responsible for the following specific
areas: Approving purchases or disposals by TBC Bank that exceed 3% of the Bank's equity;
Approving the issuance of procure (general power of attorney) by the management of TBC Bank.

Section two: Characteristics of supervisor board

Being a good supervisor is an important part of maintaining productivity and morale among staff.
Individuals who are successful in this role often possess both interpersonal and management skills,

3
https://www.readkong.com/page/financial...

Haidary and Abbey: Financial Performance of Commercial Banks in Afghanistan risks and volatilities, which are
specific risks like default on loan macroeconomic conditions. Under …

15
plus an approachable, confident and supportive personality. A great supervisor is one who strives
to continually learn, build upon their strengths and identify any areas of weakness in which to
improve in this article, we'll explore some of the qualities of a good supervisor, as well as the skills
common of leaders and how you can become an effective supervisor yourself. There are several
characteristics, habits and qualities that contribute to someone being a good supervisor. Employers
value supervisors who are proactive, responsible, reliable and capable. The best supervisors aid
each member of their team by helping them to grow and succeed. Here are some other elements of
a good supervisor to consider Resourceful and determined Values each member of their team
equally Shows respect and consideration to both management and employees Capable of giving
employees both positive feedback and constructive criticism Handles in-office conflict quickly
and fairly.

Sub-section one: educational diversity of crises in banking system

It was everyone's worst nightmare; the specter of systemic collapse. And this time, everyone was
in it together. The complexity of modern financial instruments was one obvious culprit. Century’s
old legal principles, such as the notion of "insurable interest", were also cast aside; old fashioned
"gaming laws" which had once served to dampen the worst aspects of irresponsible speculation no
longer operated. And, unlike financial products of the past, these new inventions linked ho-hum
retail banking directly to supercharged capital markets, Main Street to Wall Street. This was not
just a housing bubble bursting; it was not just a credit crisis; it was not just a stock market crash.
The new hybrid financial products, by linking heretofore loosely correlated markets, became
purveyors of systemic risk. Chaos theory, as applied to financial systems, would suggest that
crises, like hurricanes, are predictable. The question then is why so many were caught unawares
by this one. In particular, the Financial Stability Forum (FSF), created in the aftermath of the Asian
financial crisis specifically to detect "vulnerabilities" in financial systems and serve as an early
4
warning system, was caught flat-footed. The widespread adoption of top-down, assumption-
riddled, standards and their use as indicators of potential financial instability, as promoted by the
FSF, failed to signal or avert the crisis. The seeming resilience of some economies to the financial
crisis may also put into question the desirability of the international best practice and international

4
https://www.readkong.com/page/financial...

16
standards Approach propagated by the international financial institutions. Although it may be too
soon to judge whether such resilience is real or a temporary mirage, it does suggest that diversity,
like the rain forest for the planet, is a good thing for financial systems.

Sub-section two: Implications of the Banking sector Crisis

There are a range of economic, governance and security implications of the ongoing crisis. Despite
the fact that a relatively small proportion of Afghans – estimated at 3% by Reuters –has bank
accounts; the ―reach‖ of this incident is much broader. It conveys implicit messages which are
being watched and interpreted by a significant proportion of the Afghan population, including
insurgent elements. Soon after the media began reporting on the financial difficulties being faced
by Kabul Bank, Al-Jazeera suggested that „conflicts between unpaid workers, private security
guards and armed depositors‟ were feared by some in Afghanistan. Yet, the Banking sector crisis
was notable in that few security incidents were reported. Depositors attempting to withdraw funds
from the bank were described as „panicked‟ and „angry‟ but not violent, even in those instances
in which particular branches were, due to cash limitations, unable to provide customers with the
full amounts requested. The most notable security incident resulting from the crisis occurred on
Wednesday, 08 September in the final hours before the main Banking sector location closed for
the Eidul-Fitr holiday. A group of more than 500 depositors comprised mostly of civil servants
who were attempting to withdraw their recent salary payments from the bank in advance of the
four-day holiday were reportedly punched, shoved and threatened by members of the Afghan
domestic intelligence service, the NDS, who were guarding the branch. No further violence was
reported, though tensions were running high among Afghan civil servants, including members of
the security services, who were unable to withdraw funds from their Banking sector accounts in
advance of an important and frequently expensive holiday weekend. Beyond steps to improve
public confidence in Kabul Bank, the Afghan government also shifted responsibility for security
at banking sector branches from Khurasan Security Services, a private company affiliated with the
bank’s former CEO, to the Afghan National Police (ANP) and National Directorate of Security
(NDS), the domestic intelligence agency, as of 05 September. Initial progress was also made in
recouping losses from Kabul Bank’s major shareholders and loan recipients. Five individuals,
including the former Chairman, CEO and Deputy CEO, were forbidden to sell any property held
in their name within the capital, according to the Washington Post. The other two individuals

17
affected by the asset freeze are Haseen Fahim, the brother of Afghanistan’s First Vice President,
and a businessman, Abdul Ghafer Dawi, who the Washington Post describes as having large
outstanding loans with the bank.3 While symbolically important in suggesting that individuals
involved in creating the Banking sector crisis would face consequences, the widely reported „asset
freeze‟ applied only to real estate in Kabul rather than throughout the country and had no bearing
on these individuals‟ other assets, particularly their bank accounts in Afghanistan and overseas.
For example, Britain’s Guardian newspaper found that officials in Dubai or elsewhere in the
United Arab Emirates (UAE) had not received any requests to freeze assets of implicated
individuals. Furthermore, the fact that these restrictions did not apply to Mahmood Karzai, the
bank’s third largest shareholder and brother of the Afghan President – who does not own property
in his own name in Kabul – was greeted with suspicion by the international media and by
Afghanistan’s international donors, who began calling for an investigation once the situation
seemed to be cooling.

Economic Implications: Despite reassuring statements from DAB and the slowdown in
withdrawals from Kabul Bank, Afghan and foreign investors will likely grow less willing to invest
in Afghanistan if they fear that the banking system cannot be entrusted with their funds.5

(Or that it may collapse and negatively affect the entire economy). According to a Financial Times
interview with former Afghan Minister of Finance Ashraf Ghani, depositors are likely to grow
increasingly concerned about storing their money within the formal banking system unless
confidence-building measures are implemented. Fewer deposits will significantly undermine
banks‟ liquidity and their corresponding ability to lend. Capital for nascent entrepreneurs may be
harder to find, though micro and small enterprises will likely find the microfinance market, which
is increasingly trusted given its widespread adoption of Islamic lending methods, unaffected.

The banking and finance sector in Afghanistan is likely to suffer as a result of this crisis.
Commercial banks as well as the Afghan government’s regulatory capacity have been undercut by
recent events, thus making it unlikely that the two state-run or the 14 other commercial banks will
pick up a significant proportion of current and future depositors fleeing Kabul Bank. Individuals

5
3. Da Afghanistan Bank. "The Afghanistan Bank" (https://web.archive.org/web/201904110527
11/http://www.dab.gov.af/). Da Afghanistan Bank. Archived from the original (http://www.dab. gov.af/) on 11 April
2019. Retrieved 14 March 2016.

18
and businesses with larger sums to deposit are likely to sidestep the Afghan banking system
altogether if possible and establish accounts with international banks offering services in
Afghanistan. Smaller depositors may also be attracted by emerging savings schemes being
designed by microfinance institutions (MFIs) in Afghanistan or may prefer to keep possession of
their money rather than keeping it at any bank. Customary and informal banking systems, such as
those utilized during the 1980s and following the rise of the Taliban in the mid-1990s, are likely
to grow, thus reversing the trend towards.

• Governance Implications

One depositor succinctly described his feelings regarding the government and the bank when
stating the following to Agency France-Press: ―The bank is finished. The government can make
assurances, but the problem is that no one here trusts the government”. The government’s inability
to contain the Banking sector crisis with re-assuring statements reflected the state’s limited
credibility among the Afghan population; however, the crisis also appears to have further eroded
the population’s trust in Afghan government officials and institutions. The bank’s former
chairman, was a close adviser to President Karzai during his re-election campaign in 2009;
Banking sector also allegedly provided as much as USD 14 million for President Karzai’s
campaign. Furthermore, with his brother being the third-largest shareholder in Kabul Bank,
President Karzai’s attempts to restore confidence in the bank and his offers of government loans
have been interpreted by political opponents as self-interested. Perceptions that corruption may
have contributed to the Banking sector crisis or had prevented a stronger government response
appeared particularly potent. While Afghans commonly express their discontentment with
corruption within the Afghan public administration, this instance seemed to be in some respects
worse given that the funds being put at risk belonged to „ordinary Afghans‟ rather than foreign
donors. The imagery of Afghanistan’s political and economic elite abusing the money of school
teachers and Afghan police and soldiers in order to fund luxurious retreats in Dubai was repeated
in a number of editorials. Summarizing a common sentiment in Kabul, TIME Magazine reported
the following: „While complaints over systemic graft have been a common refrain among ordinary
Afghans unhappy with their government, the prospect however real or distant of personal deposits
falling into jeopardy due to alleged insider dealings‟ has been received particularly emotively.

19
 • Security Implications

It remains without question that the economic and, in particular, governance implications noted
above will have an effect on security. A government which has lost a portion of its legitimacy
during the crisis and an insurgency which may receive added support will certainly have a direct
impact, which must be closely monitored, upon stabilization efforts. Given that such implications
have yet to emerge, this report will primarily concern itself with the direct and short-term security
implications of the crisis. 6

6
http://www.dab. gov.af

20
 Chapter two
Data Analysis and Finding
Topic one: characteristics of crisis effects on financial bank’s
performance

Failures in governance, especially in regard to boards of directors, have been blamed for the 2007–
2008 financial crisis. The increased public scrutiny regarding the actions and role of the board of
directors in banks, following the crisis, inspires to examine whether and to what extent the
characteristics of banks’ boards influence their performance in the crisis. Using a sample of 72
publicly listed European banks, we find that banks with more independent and busy boards
experienced worse stock returns during the crisis. Conversely, the better-performing banks had
more banking experts serving as supervisory directors. Additionally, we find that gender and age
diversity improved banks’ performance during the crisis; hence, diversity matters. We also
construct a governance quality index on the basis of board characteristics and conclude that
governance quality positively affects banks’ returns during the crisis. Overall, we find evidence
that banks’ performance during the financial crisis is a function of their boards’ characteristics.

Section One: Meeting of crises supervisory board with bank authorities

The 2007–2008 financial crisis. The increased public scrutiny regarding the actions and role of the
board of directors in banks, following the crisis, inspires to examine whether and to what extent
the characteristics of banks’ boards influence their performance in the crisis. Using a sample of 72
publicly listed European banks, we find Failures in governance, especially in regard to boards of
directors, have been blamed for that bank with more independent and busy board’s experienced
worse stock returns during the crisis. Conversely, the better-performing banks had more banking
experts serving as supervisory directors. Additionally, we find that gender and age diversity
improved banks’ performance during the crisis; hence, diversity matters. We also construct a
governance quality index on the basis of board characteristics and conclude that governance
quality positively affects banks’ returns during the crisis. Overall, we find evidence that banks’
performance during the financial crisis is a function of their boards’ characteristics. 7

7
https://www.semanticscholar.org/paper/Analyzing...

22
Sub-section one: Good corporate governance and crises bank performance

The recent financial crisis has raised several questions with respect to the corporate governance of
financial institutions. 8This paper investigates whether risk management related corporate
governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank’s
executive board and whether the CRO reports to the CEO or directly to the board of directors, are
associated with a better bank performance during the financial crisis of 2007/2008. We measure
bank performance by buy-and-hold returns and ROE and we control for standard corporate
governance variables such as CEO ownership, board size, and board independence. Most
importantly, our results indicate that banks, in which the CRO directly reports to the board of
directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less
negative) stock returns and ROE during the crisis. In contrast, standard corporate governance
variables are mostly insignificantly or even negatively related to the banks’ performance during
the crisis.

Sub-section two: supervisor board in DA Afghanistan bank

In late 2003, following the enactment of DAB Law and Banking Law, Financial Supervision
Directorate (FSD) established to discharge the DAB regulatory responsibilities. Parallel with the
growth and evolution of the activities in the banking sector, the FSD has also undergone major
growth over the last decade. In 2003, the FSD used to consist of only 12 employees most of whom
were not familiar with advanced examination. During the following years, major efforts were
exerted to increase the staff number and enhance the staff quality. A hiring program was launched
to increase the FSD staff and was coupled with an intense training program, including online
courses, on-the-job training and classroom instruction, both domestically and internationally.
Training focused on a variety of relevant banking supervision topics, including: financial analysis;
credit analysis; liquidity management; laws and regulations; asset/liability management; and
computer skills. Between 2003 and 2008, banking laws and regulations were enacted, basic bank
reporting requirements were established, on-site examinations were begun on a yearly cycle, and
a quarterly offsite financial review process was begun. Initial policy and procedural manuals were
developed for on-site examinations and supplemented with a training program. By Development
and advancement of banking facilities, Banking Supervision activities has proportionately

8
"https://en.wikipedia.org/w/index.php?title=Da_Afghanistan_Bank&oldid=1118472758"

23
expanded, as the Islamic Banking and Finance Deputy Directorate and Non-Banking Deputy
Directorate of Financial Supervision Directorate have restructured as separated Directorate in
organization chart of DAB, by directive of H.E Supreme Council.

Vision:

To have a Regulatory and supervisory framework aligned with international standards and best
practices, thus enabling effective oversight over the financial system in Afghanistan.

Objective:

To have a stable and sound financial system in Afghanistan where banks provide conventional
banking products and services according to well established policies and procedures and based on
good governance practices.

Mission:

Supervise and ensure the banking activities compliance accordance with established Law,
predominant Regulations, Circulars, Internal Policies and International Standards along with
enforcing conditions and corrective steps towards a robust banking system. These inspections are
gauged and determined with CAMEL policy and rating system, Basel principles and International
Standards.

Structure and Tasks:

The present organizational structure of Banking Supervision Department is comprised of 146

positions. The department is headed by the director general that has two deputies for the following
divisions.

1. General Supervision Division;

2. Regulatory Affairs Division.

General Supervision Division: The division is headed by the Deputy General Director for
General Supervision and covers On-Site supervision, Information Technology and system
supervision, and Off-Site analysis and surveillance.

24
 A. On-Site Supervision:

This section is comprised of seven supervisory on-site teams, which three teams curry eight
examiners, one deputy and one team leader and rest of them carry 4 examiners, one deputy and
one team leader. On-site Supervision teams assess and supervise banks according to the scope of
examination in accordance to their job description, and then rate the assessed areas and the bank
in the scale of 1 to 5 for quality of performances. The On-site Supervision involves examination
of banking operations which include evaluation of Capital, Asset Quality, Management, Earnings,
and Liquidity, along with FX Position and Interest Rate Sensitivity

B. IT and System Supervision:

This section is comprised of four examiners, one deputy manager and one team leader which
inspect and ensure the reliability of system and generated financial figures.

C. Off-Site Analysis:

This part is comprised of Off-Site analysis and surveillance, and accounting & reporting sections.
The accounting and reporting section are consisted of one section manager, one deputy section
manager and four staff members. The section receives and reviews banks financial reports on
monthly, quarterly and annual basis and chicks for conformity with the reporting format required
by Da Afghanistan Bank (DAB). In case, misreporting or material mistakes are found, then, the
section enforces charges on the violent bank in accordance with DAB laws and regulations. The
Off-site analysis and monitoring section is headed by the section manager, and consisting one
deputy manager and eight staff members. The section is engaged in analyzing and evaluating the
financials of banks and reports to the Deputy General Director of Banking Supervision
Department. The analysis took place based on the call reports and given figures and statistics by
banks, in order to make use of it in the coming On-site examinations.9

9
"https://en.wikipedia.org/w/index.php?title=Da_Afghanistan_Bank&oldid=1118472758"

25
Section two: Challenges Facing Crises Supervisory board
The global COVID-19 coronavirus pandemic creates great challenges for the management and
supervisory boards of Dutch companies and semi-state bodies. COVID-19 is set to have long-term
consequences for companies in many sectors due to a drop-off in consumption/purchasing.

reductions and limitations in workforce mobility, serious disruption to the manufacturing chain
and limited possibilities for funding, in part due to falling share prices. Many companies, as well
as their suppliers and customers (including end customers) are expected to experience financial
difficulties, and potentially liquidation, in the near future. Within these grim market dynamics,
there is an important role for the management boards of companies, being those responsible for
general and financial policy, and also for supervisory boards, in their supervision.

Adequate risk management:

The management board's most important task is to serve the company’s and its affiliated
companies’ interests. The principle that the company’s continuity is priority should be leading. To
this end, management boards are expected to demonstrate adequate risk management and take
mitigating measures in that respect, while taking into account the specific risks facing their
companies due to the COVID-19 crisis. Where liquidation potentially lies ahead, management and
supervisory boards must also take the interests of the company’s creditors into account.

Main points of focus for risk management:

The following points of focus should be taken into consideration Governance and internal
organization: in times of crisis, management and supervisory boards are expected to monitor
events very closely. It would be advisable to establish a dedicated team led by the CEO/CFO in
order to continuously monitor and mitigate the risks and developments in terms of
strategy/scenario planning in relation to the COVID-19 crisis. Increasing the frequency of
management and supervisory board meetings and consultations is also recommended, as is
communicating clearly with important stakeholders in order to keep everyone on the same page.
A well-thought-out communication plan is advisable. The works council and the general meeting
of shareholders should be consulted when important strategic policy changes are being made.
Organizing physical meetings will be problematic, which means that digital options should be

26
assessed and used creatively, and, if necessary, the possibilities of such statutory options must in
be created jointly.

Sub-section one: DA Afghanistan Bank profile

According to CM (Council of ministers) approval number 152 dated 3/2/1318 (1939) Wolesi Jirga
(House of Representatives) approval number 11 dated 19/6/1318,(1939) Meshrano Jirga(senate)
historical approval dated 12/6/1318(1939) and then-king’s approval number
1317/5280dated17/11/1318,(1939)Da Afghanistan Bank was established in capital Kabul with
initial asset of 120 million Afghanis, which, with its defined authorities and responsibilities, was
able to set up its branches and subsidiaries inside and outside the country. Foreign Bank Agency
License Foreign Bank Agency License General Department of License Monitoring Da Afghanistan
Bank Pashtonistan Wat Telephone number: 0202102206 Afghanistan Banking Law
Documentation required: 1. Application letter by the agent on behalf of the foreign parent bank. 2.
Business Plan for the applicant investor. 3. Balance sheet and income statement of the parent bank.
4. Market Survey and Feasibility of the proposed bank. 5. CV of the Chief of the proposed bank.
6. Bank Organizational chart (Tashkeel) of the proposed bank. 7. Initial capital of at least Afs. 250
million from the parent bank. A foreign investor must also have a residence visa, passport, and
Business License from AISA. The process takes from three to ten months for completion. It
requires three signatures with the final signature being that of the Chief of the Da Afghanistan
Bank. Cost (fees) 500,000Afs. = $10,000 There is no need to renew the license annually. If the
foreign bank agency commits any infraction of the law, then its license may be canceled. Step by
step process of acquiring the license. The process for setting up a foreign bank in Afghanistan is
the same as establishing a private national bank. 1. The parent bank’s application goes to the
Director General of Da Afghanistan Bank. 2. The bank’s business plan is presented to Director
General of Da Bank. 3. The Director General sends the applicant to the Bank License Department.
4. This Department provides the applicant with guidance concerning the documentation he/she
should present to Da Afghanistan Bank. 5. All documents mentioned above must be provided to
this department as well as the 250 million Afs. The initial capital must be deposited. 6. After all
the required documents have been presented to the Licensing Department, the Department prepares
the license and obtains the Director General’s signature and distributes it to the applicant or to the

27
authorized agent of the applying foreign bank. 10 Note: The amount of 250 million Afghanis is not
collected from the investor or agent of a foreign bank. It is the initial capital that the investor or a
foreign.

Sub-section two: performance of supervisory board toward crises

Failures in governance, especially in regard to boards of directors, have been blamed for the 2007–
2008 financial crisis. The increased public scrutiny regarding the actions and role of the board of
directors in banks, following the crisis, inspires to examine whether and to what extent the
characteristics of banks’ boards influence their performance in the crisis. Using a sample of 72
publicly listed European banks, we find that banks with more independent and busy boards
experienced worse stock returns during the crisis. Conversely, the better-performing banks had
more banking experts serving as supervisory directors. Additionally, we find that gender and age
diversity improved banks’ performance during the crisis; hence, diversity matters. We also
construct a governance quality index on the basis of board characteristics and conclude that
governance quality positively affects banks’ returns during the crisis. Overall, we find evidence
that banks’ performance during the financial crisis is a function of their boards’ characteristics.

Topic two: data analysis results

To capture the causes and impacts of crises in the banking sector, a questionnaire survey was
conducted from November to December 2011, after the descriptive investigation of the operations
of Kabul bank. Two banks and a government ministry in the Kabul city were selected for this
survey research. The survey focused on various areas and perspectives of banking operations
Loans offered to the Market, impacts of the crises on the future of the banking industry in
Afghanistan, supervision of the central bank on commercial banks and impacts of bank crises on
the economy of Afghanistan as well as on the future of the banking sector. The data collected from
the questionnaire was analyzed to show the various responses given by the respondents The
responses to each question were arranged to show the various degree of respondents. By noting

10
https://dab.gov.af/da-afghanistan-bank-committed...

28
the trend of answers, the researcher was then able to analyze each response with the conclusions
11
gathered from previous research analysis from earlier chapters.

Section one: Causes of decline in deposits and upraise of withdrawals in Kabul

Bank
Comparing the first and second quarter of year 2016 there is more than 50% decline in the quantity
of deposits to Kabul however looking over the withdrawals it is increased tremendously compare
to the first quarter of the period. When the researcher asked the causes and reasoning for the decline
in the deposits and upraise in the withdrawals; the responses were. People of Afghanistan do not
have banking knowledge and they don’t trust them much. At any time if there are negative rumors
about any bank, they believe that. More over there aren’t many publications from the central bank
about its role in the country, one of its roles is supervision on commercial banks, which keeps the
public unaware and really can’t take risk of losing their money, which isn’t the case. One other
duty of the Central Bank is lender to last resort‖, this means that when a commercial bank is
suffering, lacking adequate liquidity the central bank will provide them with cash to fulfill the
demand of the people. In addition, Media is one of the critical factors, in this particular case one
of the favorite TV channels in Afghanistan announced that the shareholders of Banking sector had
some arguments with each other’s and the central bank forced them to resign from the Chief
Executive Officer and Chairman position. This brought fear among public and caused them to
withdraw their money from the bank. The rumors about the bank insolvency and miss management
wide speeded and people’s perception of keeping money in the bank got hurt and everyone who
had even little money rushed over the bank and caused panic for the bank. During this period some
of the information about the shareholders were revealed in the media that some of the shareholders
have relations with high government officials and some of them are involved in narcotic smuggling
and some are former war lords and they don’t have good background .At the time of the rumors
when people approached Banking sector to withdraw their money, they were not given the quantity
they were requesting, e.g. a customer wanted to take 10000 AFN but instead he/she was given

11
Nazir, T. (2010), Analyzing financial performance of commercial banks in India: Application of camel model.
Pakistan Journal of Commerce and Social Sciences, 4(1), 40-55.

29
5000 AFN, this created a very negative idea among People that Banking sector has run out of
money, so more and more people starting coining to the bank for withdrawing money. 12

SPECIAL REPORT:

In September 2010, Kabul Bank, a systemic bank critically important to Afghanistan’s economic
viability, collapsed after losing a large amount to theft and fraudulent lending, and was placed into
conservatorship.1 The crisis severely stressed the Afghan financial system. At the time of its
collapse, the bank held the savings of nearly one million Afghans, totaling more than $1.3 billion.2
The realization that depositors’ money had been stolen led to a run on the bank, resulting in $500
million being withdrawn within just a few days.3 Complete failure was averted only when the
Afghan government stepped in to provide $825 million from the central bank’s reserves to cover
deposits. The aftermath of the Kabul Bank scandal revealed a complex fraud and money laundering
operation headed by the bank’s administrators, including its founder and chairman, Sherkhan
Farnood, and his head of security turned chief executive officer, Khalilullah Ferozi.
The fraud was perpetrated by the bank’s maintaining two sets of accounting systems, one
the real one and the other to satisfy regulators, and creating loan files in the names of
fake companies. In addition, millions of dollars’ worth of falsified asset purchases were
set up to embezzle funds. Other money was laundered by paying for oil and gas products
from outside the country or by paying inflated prices for goods and services. Much of the
money was laundered to Dubai through the Shaheen Exchange, which was owned and operated by
Farnood.4 Six years later the Kabul Bank crisis continues to symbolize the pervasive corruption
and impunity that have threatened the legitimacy of the Afghan government. The crisis has
shaken confidence in the banking system5 and trust in justice. The involvement of powerful
people, among them the brother of the former president Hamid Karzai and the brother of the former
first vice president, immediately drew accusations of corruption and nepotism that have never been
adequately answered. The response to the Kabul Bank crisis under the Karzai administration was
colored by false promises, deceptive actions, illegal orders, and dubious criminal proceedings. The
recovery effort, though it made significant progress, underperformed because of inability to

12
Kabul Bank receivership, “Kabul Bank’s Assets Recovery Breakdown with Percentage” (Kabul, 2016).

30
compel repayment from some of the largest and most powerful debtors. The inauguration of
President Ashraf Ghani, a former senior official at the World Bank, and the installation of the
National Unity Government (NUG) in September 2014 brought hope that the perpetrators and
beneficiaries of the Kabul Bank fraud would finally be brought to justice. The NUG labeled action
on the fraud a “top signaling priority” and indicated that it would be a “bellwether of [the NUG’s]
credibility on fighting corruption.”6 President Ghani wasted no time moving forward. Two days
after he was sworn into office, he issued a presidential decree aimed at comprehensively dealing
with all remaining aspects of the case. The decree directed the Supreme Court to resolve the case
and ordered the Attorney General’s Office (AGO) to detain and prosecute all suspects and to
pursue requests from foreign countries to trace and recover funds that had been transferred abroad.
The Kabul Bank receivership, responsible for managing the bad assets of Kabul Bank, was ordered
by President Ghani to summon debtors, and the Ministry of Finance was directed to pursue the
privatization of the state-run New Kabul Bank which contained the “good assets” remaining
from Kabul Bank.7 President Ghani’s decree on cleaning up Kabul Bank and subsequent actions
had the intended effect of buying credibility in the short run. The December 4, 2014, London
Conference communiqué called his actions “decisive” and an “important immediate step on
corruption,”8 and President Ghani proudly stated that his actions “broke the aura of impunity”
surrounding Kabul Bank.9But on closer inspection, it is apparent that most of the progress toward
accountability for the Kabul Bank collapse under the NUG has been illusory. Despite the
appearance of early and decisive action, the Kabul Bank case has proceeded much as it did under
the Karzai administration. Criminal proceedings have been superficial, and many politically
connected actors who appeared to be involved have not been investigated. Sincere efforts to
recover funds continue to be impeded by intimidation of those attempting to do their jobs.
Structural reform has been stymied by a lack of institutional capacity and donor support.
Altogether, the challenges facing the resolution of Kabul Bank continue to epitomize the serious
challenges that face Afghanistan, such as nepotism, a weak rule of law, an ineffective judicial
system, and low regulatory capacity.13

13
Government of the Islamic Republic of Afghanistan, “Afghanistan’s Road to Self-Reliance: The First Mile
Progress Report” (Kabul, September 5, 2015), 8,
http://mof.gov.af/Content/files/SOM%20main%20paper%20with%20 annexs%20final%203%20sep2015(1).pdf.

31
Sub-section one: the effect of banking sector

The effects of banking sector situation on the future of the banking sector serving as financial
intermediation, the main mandate of the commercial banking system is to attract customers and
building up credibility and confidence among the people. A commercial bank intermediates
between people with extra funds and those who need funds, and this happens when people have
enough confidence on the banking institutions. The recent situation of the Kabul bank, the largest
private bank in the banking sector of Afghanistan, will have a negative impact on the future of the
banking system if it remains unsolved. People will lose confidence on the private banks and may
prefer to keep their money with them rather to put it in a banking institution. Consequently, the
banking system will collapse if people do not put their money in the banking sector. On the other
hand, this situation is an alarming for central bank to improve and strengthen its supervisory side.
Fortunately, the central bank of Afghanistan could manage the situation of banking sector in some
extent by taking necessary actions which assured people of their deposits with the Kabul Bank. In
the banking sector of Afghanistan 17 commercial banks are operating, which has been licensed by
the central bank. Each of the commercial bank is having various city and provincial, as well as
district level branches and they have to obtain license for each branch. Now looking over the
situation of Kabul Bank, this may make the central bank to stop issuing licenses to the potential
clients who are keen to invest in the banking industry.

Sub-section two: DAB Supervision on Commercial Bank and Reporting Cycle

This study was to explore the possible impact of supervisor on effective bank management with
particular reference to AFRI bank Plc Enugu. To guide this research the following four research
questions were formulated as thus. To what extent are human and non-human resources adequate
for efficient inspection in AFRI bank Plc, Enugu to what extent are central measures against bad
debt in the AFRI bank being achieved.14 To what extent has the bank provision against computer
fraud being achieved to what extent are the workers assured of job security and satisfaction? A
structured questionnaire developed by the researcher was administered to a total so male and

14
Financial report of Da Afghanistan Bank. (2011-205)www.centralbank.gov.af

32
female staff of AFRI bank Plc, Enugu. They were selected using the entire population for
reliability. Hence the data collected and analyzed using percentage mean and rank order. Major
finding includes

1. That male is in majority in Afribank Plc, Enugu

2. That greater majority of the staff is single.

3. That majority are HND/Degree holders.

4. That greater majority of the staff have served for 6 to 10 years.

5. Those resources are not adequate except few resource items.

6. Those computer frauds have not been experienced in the Afribank Plc, Enugu.

7. Interferences and job/position insecurity of inspectors affect objectivity report and

recommendation.

8. Bad debt occurred in Afribank sometimes. Based on the findings major recommendation made
include that

Looking over to the responses from the respondents the Central Bank (DAB) really didn’t have a
tight schedule to conduct on site supervision, they were mostly relaying on the reports there were
receiving from banks. In a society like Afghanistan where there is no strong legal frame work, real
lying just on paperwork won’t be enough to look deep into a situation or monitor an institution.
There needs to be tight and time to time on site supervision, and compare the reports with the facts
that are in the books. The table below reflects the answers from some of the respondents on the
supervision of the central bank over commercial banks and reporting cycles.

33
Table 3: Central Bank supervision and External Auditors

Question Proposed Respondent Respondent Respondent Respondent

of
Answers 1 2 3 4
the

Questionnaire

How Often Once a Once a Once a Once a Once a

Central Bank week Month Month Month Month

Supervision
Twice a
team was
Month
coming for the

on site Once a

Examination? Month

Once in

Two

Months

Once in

Quarter

34
How long were A 2 2 2 2
Ful Busine Busine Busine Busine
they l ss ss ss ss

Week Days Days Days Days

examining your

books on three

Business
one period?
Days

Two

Business

Days

One

Business

Day

Were the Yes No No No I don’t

Central Bank Know

No
Supervisor’s
professionals?
I
don
’t

Know
How Often do Weekly Monthly Monthly Monthly Monthly
you submit your
reports to Monthly Quarterly

Central Bank?
Quarterly
Supervision
Department? Semi
Annually

Annually

35
 Are there Yes Yes No No No
professionals
No
working in
Banking sector
at the
key positions?

Is there Yes Yes Yes Yes Yes

any
External No
independent
body I
auditi don
ng your bank? ’t
Know
How Often Annually Annually Annually Annually Annually
they Audit
your Bank? Quarterly

Monthly

Figure 3: Different Aspects of Central Bank Supervision and Staff Proficiency

DAB Supervision
50% 100%
75% Examination Period
100% Reporting Cycle
100%
External Auditors
100% Audit Cycle
100%
DAB Staff Proficiency
KB Staff Proficiency

15

15
Financial report of Da Afghanistan Bank. (2011-205)www.centralbank.gov.af

36
Section two: Effects of Bank Crises on the Economy of Afghanistan:
The mandate of the central bank is to foster price stability and building a robust financial system
in the country. Financial systems functions are like a heart in the economy. As the main task of the
heart is to pump blood throughout the whole body which helps parts of the body to work, likewise
the banking system channels extra funds toward investment. A sustainable economic growth needs
investment and investment needs finance. Kabul Bank, as the largest commercial bank can play a
vital role in the economic growth in the country. In figure 7 we can look over the movement in the
general reserves of the Kabul Bank. Here the researcher analyzed the data for two years of 2014
and 2015. Banking sector was one of the leading banks in the banking industry of Afghanistan; it
had almost 60% of the total deposits of the banking sector in Afghanistan. A sustainable economic
growth needs investment and investment needs finance. Kabul Bank, as the largest commercial
bank can play a vital role in the economic growth in the country. In figure 7 we can look over the
movement in the general reserves of the Kabul Bank. Here the researcher analyzed the data for
two years of the reserve that they build covers the minimum requirement percentage of assets to
be kept with the Da Afghanistan bank (DAB), which is 12% of the total asset as an obligatory
deposit. One of the main objectives of the Central Bank is Exchange rate stability. Foreign
Currency and Capital Notes auction are the tools of monetary policy through which DAB is
stabilizing the exchange rate of AFN against foreign currencies. In addition, according to Central
Bank officials ―Mandatory Reserves of Commercial Banks are not included in the CiC (Currency
in Circulation), however looking over to the decline in the General Reserves of Kabul bank, over
4.5 billion AFN is pumped to the market. It has two main effects on the economy of Afghanistan
Foreign currency auctions are held in the Central Bank twice a week, in which Foreign Currencies
are sold to the market and instead AFN are collected and are taken out of the circulation which
decreases the amount of AFN in circulation and that maintains the FX rate of AFN stable against
foreign currencies. What will happen if 4.5 billion more AFN is injected to the market? It will
definitely affect the exchange rates and it will have negative impacts on the prices of goods, and
people will not be able to buy more things on little money. Central Bank duty is to maintain a
reasonable inflation rate, pouring 4.5 B-AFN to the market will hurt the inflation rate, for which
the Central Bank has tried hard to years to keep it low. Investing in a country will definitely create
job/employment opportunities to the residents of the country. Banking sector had over 5,600
employees working in different layers. Crises that affected banking sector made them to lower the

37
number of staff. For which they have laid off 1,000 employees the job cuts directly affect their
life. Working in the Banking sector was the only means of income for them. These one thousand
people were a part of the overall Afghanistan economy, their impact was on the GDP and GNP,
which is a negative impact on the economy of Afghanistan. This August, the Interim Taliban
Administration (ITA) completed a year in Afghanistan after taking over last year. The withdrawal of
foreign troops, enabled by the signing of the Doha Peace Agreement between the United States (US) and
the Taliban ultimately resulted in the fall of Kabul. Since the disintegration of the government of the
Islamic Republic of Afghanistan, the insurgent group has been flailing to govern the country, if at all its
actions can fall under the ambit of ‘governance with the creation of the Afghanistan Reconstruction Trust
Fund (ARTF) in 2002, 34 donors came together to inject US$10 million into the reconstruction of the
country. An abrupt disruption of aid and assistance post the Taliban’s takeover, followed by the isolation
of the country’s financial institutions, and a consequent banking crisis has led to a vacuum in the economy
with people struggling to make ends meet and businesses closing their shutters. Understanding this
‘economic phase of the war’ as termed by the ex-governor of the Afghan Central Bank, necessitates an
enquiry into the banking crisis in the country which exacerbated the stat the international community is
trying hard to mitigate.

How is the Afghan economy structured?

Between 2001–2021, the country sustained itself on aid from the international community led
by the United States and its allies, Foreign Direct Investments (FDI), as well as remittances from
Afghans abroad. With the creation of the Afghanistan Reconstruction Trust Fund (ARTF) in
2002, 34 donors came together to inject US$10 million into the reconstruction of the country.
These efforts, whilst successful in making enormous strides in healthcare, education, and other
indicators, failed to permeate the deeply entrenched ‘networks of access’ that run in the country,
consequently being inadequate in stimulating domestic competitiveness or advancement of
tradeable sectors. In a ministerial conference in Geneva in November 2020, the international
community committed to giving US$13 billion in aid to Afghanistan from 2020-2024 for basic
services and sustaining the peace process. This aid amount was to be complimented by ‘domestic
resource mobilization, efforts to reduce corruption, improving governance and introducing
structural reforms.’ However, once the Republic was replaced by the Emirate of Afghanistan, all
these commitments were set aside. Historically, the discourse on Afghanistan’s economic system
has oscillated between ‘centralization and fragmentation of power’. Because of a heightened

38
sense of regional autonomy and a weak center, the state has never had effective control over the
entire country. A general acceptance of the principle of Waseta, i.e. the influence of connections
in enabling success, has also been prevalent, rendering efforts to develop a stable and equitable
economy focused on building capacity and promoting productive sectors, unworkable. Whilst
almost 80 percent of the economy is in the informal setup, there are over 700,000 private
businesses in the country, contributing to over half of the country’s GDP in 2018. The sector has
always been mired by uncertainty because of the civil war, the inability to access finance, land,
and the endemic corruption which defined public life. The drawdown in the number of troops
since 2011–12 and the consequent reduction in aid and investment led to an economic burnout.
The private sector investment also fell by 24 percent between 2011 and 2015. Failure to diversify
the economy and the non-availability of well-paid jobs in the field led to the concentration of
growth in a few centers, with poverty still pervasive. With the advent of the Taliban, these issues
multiplied with uncertainty regarding the new administration still being a cause of concern for
businesses, followed by the crisis in the banking sector, and a slump in demand. According to
the World Bank, the ITA collected AFN 100 billion in revenue in the year, but concerns about
transparency and the allocation process still abound. Inflation also skyrocketed with the year -
on-year inflation on household goods seeing a 30 percent jump since August 2021. Over the
year, whilst there was a slight uptick in the demand for labor, it was mostly seasonal with varying
rates of unemployment in each province. Businesses scaled back their operations by laying off
employees, cutting down salaries and relying more on cash (57 percent) and hawala transactions
(31 percent) with the percentage of firms depositing money in banks dropping to just 12 percent,
as opposed to 82 percent before August 2021. Only a few sectors like agribusiness, wholesale,
and retail trade showed more resilience. The construction and services sector faced the biggest
pushback as a corollary to its high reliance on donor and governmental support. Whilst
businesses tried to engage in a dialogue with the Taliban to address some of these concerns, an
inability to comprehend and resolve the issues escalated the situation.

➢ The status of Afghanistan’s forex reserves

Post coming to power, the Taliban placed its functionaries most of whom were under US
sanctions in the top echelons of the government. In response to this, the US along with its allies
stopped the inflow of aid to the country, preventing the disbursal of US$2 billion provided by

39
the World Bank to pay salaries through the ARTF. Other international organizations also
followed suit. The decision to isolate the Afghan central bank, the Da Afghanistan Bank (DAB)
from the international banking system, the financial community and other countries’ domestic
banks was one of the most consequential actions of the Biden administration. This policy
practically barred the DAB’s access to approximately US$9 billion of foreign exchange reserves
which it had deposited in international banks with the majority amount in the US Federal Reserve
bank of New York. This decision is more prominent now than ever, with the Taliban and US
officials engaged in an on/off dialogue to decide the future of those reserves and their utility in
easing the hardship of the people. The decision to isolate the Afghan central bank, the Da
Afghanistan Bank (DAB) from the international banking system, the financial community and
other countries’ domestic banks was one of the most consequential actions of the Biden
administration. The debate over the disbursal of these funds raises several questions. The
decision to engage with the insurgent group to find a solution would indicate granting of de facto
legitimacy to a terrorist organization. However, choosing not to, can in turn exacerbate the
hardships of the Afghan people. The situation becomes more complicated as it also involves
16
questions on the applicability of US domestic laws.

Figure 4: Banking Sector Data end of FY 2015 (Million USD)

1800
1600
1400
1200
1000
800 Other Banks Data
600 Kabul Data
400
200
0
Total Cash and Loans and Total
Assets Bank Advances Deposits
Balances

16
Ministries of Economy, Finance and commerce of Afghanistan.

40
As stated above that Banking sector was holding almost 60% of the Market data, which has
created job/employment opportunities for many people. Banking sector is also counted in the top
3 tax payers to government, every year it was paying almost 1.5 million USD to government.

Sub-section One: Regression Analysis

Table 2.5: Regression Analysis for dependent Variable Return on Equity

Variables Coefficients t-value p-value

(constant) 1.284 3.852 0.000
BED 1.002 .648 0.020
SSBS 1.073 2.723 0.009
BC 1.070 0.698 0.048
F-value 3.369 P-value(F) 0.004
R 0. .538 R2 0.289
DW 1.910
Note: BED, SSBS, BC,
R, R2 and DW denote
Board Education
Diversity, Sharia
Supervisory Size, Board
Committee, correlation
coefficient, coefficient of
determination and
Durbin Watson.

Sub-section Two: A turbulent time for the financial sector

Afghanistan’s financial sector is facing dire challenges. The challenges include changes in the
regulatory environment and the shift in the business landscape. In addition to the regulatory
environment, the central bank’s capacity, which was already hit hard due to disastrous policies of
previous DAB management, remains largely constrained. DAB’s recent decision to restore some
qualified and competent staff who were sidelined during the former management of the Bank is a
positive step but is insufficient given that female employees are currently not allowed to work.

➢ Recent developments in the commercial banks

Afghanistan’s commercial banks remain highly stressed as many of the banks face a challenging
condition dealing with the systematic run. Most of the banks now virtually operate as narrow banks
or even as de-facto receivership offices, providing limited withdrawal services only, and even that
is subject to the availability of cash. The expected resumption of limited ATM services does not
seem to alleviate the burden on the branches. Apart from limited remittances, deposits by
41
humanitarian agencies, and domestic transfers, there is hardly any incoming new flow to the banks
despite exempting new promises from the limits on withdrawals. Banks are reportedly discouraged
from opening new accounts to prevent multiple weekly withdrawals by the same depositors. Banks
have resorted to cost-reducing measures to lower the cost of operation as they have lost most of
their interest and non-interest income. Unsurprisingly, despite these measures, most banks
continue to incur losses. With the central bank and the government unable to inject liquidity or
bailout, many weak banks are destined to an inevitable uncertain future. Below is a brief picture
of major financial indicators, including assets, liabilities, and liquidity in the sector.

➢ Assets and liabilities

With the continued systemic run-on banks, major components of the bank’s total asset portfolio
including claims on DAB, have been declining. There is a significant deterioration of loan quality
with the highest concentration of bank credit in the trade, service, industry, and construction
sectors most affected by the collapse of the government, there is a significant increase in
nonperforming loans. All categories of loans have been adversely affected. However, given the
situation, a de facto moratorium on (freezing of) enforcement of many regulatory requirements
related to loan review, classifications, and provisioning has been put in place. At the same time
given the unprecedented recession in the property market, liquidation and realization of collateral
are further complicated. The total deposits of the banking sector, which exceeded 95 percent of
total liabilities before August, have been declining. Continued withdrawals drive the decline by
panicking depositors with almost no incoming deposits due to the de-facto ban on opening new
accounts. The weekly withdrawal limits that remain in place have, in a way, forcefully flattened
the demand curve for withdrawal. This may have temporarily stabilized the fragile situation, but
the underlying causes of the crises continue to remain unaddressed. In the meantime, these weekly
limits had reportedly created excessive rent-seeking opportunities, which prompted DAB to
minimize these opportunities. As indicated earlier, the asset-liability gap in several weak banks
reportedly continues to widen as they incur system maintenance and operation costs despite losing
most of their income. With the value of liabilities in some banks exceeding the value of their assets,
they are moving towards becoming non-going concern entities, legally requiring the central bank
to initiate receivership proceedings against concerned banks. The central bank has already taken
steps to overtake the control of the operation in one private Bank. The question now is how to

42
resolve this bank. While the conservatorship option seems unlikely, putting the troubled bank
under receivership comes with challenges, including paying depositors’ claims and generating
moral hazard risks.

➢ Liquidity crisis

The central bank’s failure to meet commercial banks’ liquidity demand even before mid-August
was the main trigger for the current liquidity crisis in the banking sector, which peaked in the
aftermath of the fall of Kabul, compounded by the total meltdown of the depositors’ confidence
The problem began after DAB, unlike in the past, failed to receive USD banknote shipments from
the Federal Reserve Bank. Despite this, DAB continued its cash USD sales in its biweekly
auctions, drawing on commercial banks’ funds held in their current accounts with DAB. As the
demand for liquidity built up, DAB imposed weekly cash withdrawal limits. 17

With the fall of Kabul, the United States froze Da Afghanistan Bank’s accounts, affecting, among
other things, DAB’s ability to transfer funds to commercial banks’ correspondent bank accounts
the ambiguity around the scope of sanctions in the first few weeks affected the flow of remittances
and commercial banks’ ability to process import-related payments in the context of a crippling
humanitarian crisis. Later, the US Treasury issued a series of General Licenses, authorizing the
flow of funds related to humanitarian and several other civil businesses.

➢ High-risk jurisdiction

The outlook for Afghanistan’s anti-money laundering and counter-terrorist financing regime
remains complicated. The Financial Action Task Force (FATF), the global watchdog and standard-
setter on money laundering and terrorist financing, expressed its concern about Afghanistan’s
current and evolving AML/CFT risk environment. At the same time, the Egmont Group
disconnected the Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA)
from the Egmont Secure Web (ESW) immediately after the Taliban’s takeover of Kabul. The
Asia/Pacific Group on Money Laundering has also reportedly stopped formal contacts with the

17
https://link.springer.com/book/10.1057/9780230518629
https://link.springer.com/book/10.1057/9780230518629

43
Center. The significant trust deficit between the interim government and the international
community will continue to overshadow future relations with these multilateral agencies. Against
this backdrop, Afghanistan is vulnerable to a potential FATF classification which means that the
country faces a potential risk to be added to the list of high-risk jurisdictions subject to call for
action, known as a blacklist. Once on the blocklist, Afghanistan will be declared and treated as a
threat to the integrity of the international financial system. Consequently, the entire banking and
non-banking financial sector will lose all sorts of correspondent banking relationships. This will
significantly disrupt financial services and cross-border flows, including flows related to import
payments and remittances. Unless there is a dramatic change in the political and regulatory
landscape, it will take several years of genuine reforms and concerted efforts to exit from the list
and restore relations with the international financial system.

➢ Collapsing banks and Afghanistan’s rescue and resolution capacity

Constrained by its severe shortage of US dollars, DAB appears to be little more than a semi-
insolvent central bank, unable to repay commercial banks’ foreign currency claims held in the
banks’ current accounts or for reserve requirements with Da Afghanistan Bank. Similarly, as the
risks of financial instability loom large, DAB cannot provide a lender of last resort support or help
bail out a highly stressed and largely illiquid banking sector. Closing the potentially troubled banks
without covering the depositors would complicate the situation in the other banks and might trigger
a complete meltdown. In the meantime, printing new banknotes, which was halted on August 15,
looks very unlikely in the near future, and it is not clear whether the General Licenses issued by
the US would cover it. Growing complaints about the circulation of old and almost unfit banknotes
indicate DAB’s inability to replace unfit banknotes with new ones.

➢ The rise of the Hawala system

During the past two decades, Afghanistan made notable efforts, albeit with limited success, to
expand access to formal financial services and bring the informal Hawala system under its
regulatory perimeter. As a result, major money service providers and FX dealers in urban centers
were required to operate under central bank licenses and provide regular reports, including large
and suspicious transac03/01/2022tions. The overall strategy was to consolidate money service

44
providers into a few fully regulated institutions with corporate licenses issued by Da Afghanistan
Bank. However, with the recent developments casting doubt on the very survival of some of the
commercial banks, there is a dramatic shift in the financial market landscape in favor of money
service providers and exchange dealers. Commercial banks continue to downsize and close branch
after branch, greater opportunities are created for the hawala system to expand and fill the vacuum
created by the commercial banks’ retreat. Reports from within Sarai Shazada, Afghanistan’s
biggest foreign exchange market, suggest the activity within the center and the whole Hawala
business across the country is at record levels, indicating that the Hawala system is about to reclaim
the unrivaled dominance and importance it enjoyed in the 1990.However, there are also indications
that DAB will pursue the consolidation strategy. If implemented, this would be a highly ambitious
but essential goal that the central bank in the republic era pursued with limited success. In the
meantime, this will be a good demonstration of DAB’s decisiveness and effectiveness, given that
the uncontrolled Hawala system is something that former large donors and many of Afghanistan’s
neighbors were not happy about.18

18
Asian Development Bank, 2005: A Private Sector Assessment for Afghanistan.

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Finding:
• I find that the causes and impacts of crises in Afghanistan banking sector The survey
focused on various areas and perspectives of banking operations, Loans offered to the
Market.
• I find that the impacts of the crises on the future of the banking industry in Afghanistan,
supervision of the central bank on commercial banks and impacts of bank crises on the
economy of Afghanistan as well as on the future of the banking sector.
• This study finds that Causes of decline in deposits and upraise of withdrawals in Kabul
Bank, a questionnaire survey was conducted from November to December 2011, after the
descriptive investigation of the operations of Kabul bank.
• I also find out that lack of professional staff influences on the banking operation.
• Two banks and a government ministry in the Kabul city were selected for this survey
research.
• The data collected from the questionnaire was analyzed to show the various responses
given by the respondents. The responses to each question were arranged to show the
various degree of respondents. By noting the trend of answers, the researcher was then able
to analyze each response with the conclusions gathered from previous research analysis
from earlier chapters.

46
Conclusion:
Two sectors are highly developed and still needs to be developed in Afghanistan, Banking, and
Telecommunication. We have 17 commercial banks operating in Kabul with branches across the
country that moves millions of USD around. People are feeling much secure to move their money
from one point to another, in spite of not have a security in all over the country but still banks are
very helpful in the case, comparing to history that people were transporting cash in bags around
the country for business/investment purposes, which involved high risks such as robbery, theft or
even death. This paper describes a case study of bankruptcy that highly affects the Banking Sector,
Peoples’ Trust and above all the Economy of the country. Looking over to the responses from the
participants, we find out that the Central Bank officials were going for site examination once a
month, and at the same time Commercial there are other Islamic countries in which scholars have
justified it and their nation takes benefits from both the conventional and Islamic banking. So this
issue needs to be addressed at priority by the scholars of Afghanistan. Banks are sending their
reports once a month. The period of examination is only two business days, looking over to the
complexity of the operations of a bank, two business days won’t be enough to cover all the different
aspects of the operations, that are very critical and risky which can make the bank fail.
Shareholders are working in the key positions of the management of the bank; this will have very
negative influence on the operations of the bank. There is no clearly defined structure for the bank,
if look over from the legal point of view. Right now, the people of Afghanistan do not have enough
knowledge about banking and they don’t feel secure about their money when the deposit it in the
bank. On the other hand, most of The Afghanistan people think that banking is not Sharia
compliance. However, there are many other issues that covered Banking sector that is violation of
laws, un-transparent banking activities, interference of shareholders in the operations of the bank
and many more. To avoid such risks the following recommendations are required and necessary
to be considered by the government of Afghanistan (Da Afghanistan Bank) and the commercial
banks.

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Recommendation:

• This paper describes a case study of bankruptcy that highly affects the Banking Sector,
Peoples’ Trust and above all the Economy of the country. Looking over to the responses
from the participants, we find out that the Central Bank officials were going for site
examination once a month, and at the same time Commercial Banks are sending their
reports once a month. The period of examination is only two business days, looking over
to the complexity of the operations of a bank, two business days won’t be enough to cover
all the different aspects of the operations, that are very critical and risky which can make
the bank fail. Shareholders are working in the key positions of the management of the bank;
this will have very negative influence on the operations of the bank. There is no clearly
defined structure for the bank, if look over from the legal point of view. Right now, the
people of Afghanistan do not have enough knowledge about banking and they don’t feel
secure about their money when the deposit it in the bank. On the other hand, most of the
Afghanistan people think that banking is not Sharia compliance. However, there are other
Islamic countries in which scholars have justified it and their nation takes benefits from
both the conventional and Islamic banking. So, this issue needs to be addressed at priority
by the scholars of Afghanistan. There are many other issues that covered Banking sector
that is violation of laws, un-transparent banking activities, interference of shareholders in
the operations of the bank and many more. To avoid such risks the following
recommendations are required and necessary to be considered by the government of
Afghanistan (Da Afghanistan Bank) and the commercial banks:
• Central Bank Supervision I recommended to CBS should assure the people that it has
improved its functions, in addition DAB must introduce the shareholders who violate the
laws and regulations and causes the bank failure to the public and hand them over for legal
proceedings. DAB should have a well power for confronting any misconduct in the
banking system; also, it should take reinforcement actions and tighten the supervision
schedules on the commercial banks. Moreover, the Central Bank (DAB) should have a
training center where these commercial banks officials should be trained and educated.

48
• Public Outreach Programs I recommended to There should be regular public awareness
programs that could be communicated through different mediums e.g., newspapers, TV
channels, magazines, broachers or any other means of media. This will help people
understand about the banking and specially the role of the central bank in the country. Right
now, the people of Afghanistan do not have enough knowledge about banking and they
don’t feel secure about their money when the deposit it in the bank. On the other hand,
most of the Afghanistan people think that banking is not Sharia compliance. However, there
are other Islamic countries in which scholars have justified it and their nation takes benefits
from both the conventional and Islamic banking. So, this issue needs to be addressed at
priority by the scholars of Afghanistan.
• Existence of a Strong Legal Framework I recommended to the current banking law needs
to be reviewed and should address all the details about the shareholders involvements, bank
structure, investment of the banks, power of shareholders and extraordinary punishments
for those who violate the laws and regulations. The current penalties stated in the banking
law is nothing but cost of business. The activities of the banking should be addressed in
BOLD that what activities banks can perform. Currently the banking sector in Afghanistan
is involved in many un-transparent activities such as lottery draws, bank affiliate
companies and subsidiaries. Da Afghanistan Bank should be able to facilitate a secure legal
framework for the banking industry where the operations of the banks are clearly defined
and are strictly being monitored in order to avoid RUN on BANKs.
• Security and economy are like two sides of a coin; a country will develop its economy
only when there is proper security, otherwise nothing will move. Commercial banks that
are investing their money a big portion of that goes out of the country, because here there
aren’t enough opportunities to invest due to the lack of security. And that is why the
economy is totally dependent on foreign countries, any movement there affect directly the
life of people here, and we have a very clear example of Kabul Bank. The shareholders
invested much of its money out of the country, and when the financial crises affected those
countries, the direct impact was also on Afghanistan and caused people to rush on the bank
and take their money out of it. So, for secure banking, investment, the government should
first create a secure environment.

49
• Hiring Professional Staff, I recommended to the purpose of the Banking Institute that was
established in Afghanistan was to train and educate and develop the potential employees to
work in the banking sector. However, that was only for the central bank employees because
at that time there weren’t comprehensive laws and regulations, so that everyone could study
there. After the collapse of Taliban regime, the banking institute became vast and every
one with high school education can apply and study there. So, there is an excellent
opportunity for the banks to hire professional staff that has banking knowledge. Currently
the hiring is mostly done due to having relations with the management, which has a
negative effect on the operations of the banks. Central bank should also conduct time to
time staffing supervision as well, and make sure that bankers work in the banks not ordinary
people.

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References:

1. Adam Pain, 2004: Understanding Markets in Afghanistan: A case study of financial crises in
Afghanistan banking sector. Afghanistan Research and Evaluation Unit.

2. Anna Paterson, 2005: Understanding markets in Afghanistan: A study of the market for banking
Afghanistan Research and Evaluation Unit.

3. Antonio Giustozzi, 2005, Understanding Relationships between Businessmen and other Power holders,
Afghanistan Research and Evaluation Unit, (in draft).

4. Asian Development Bank, 2005: A Private Sector Assessment for Afghanistan.

5. Sarah Lister and Adam Pain, 2004, Understanding Markets in Afghanistan:

6. Sarah Lister and Tom Brown, with Zainiddin Karaev, 2004: Understanding Market sin
Afghanistan: A case study of the raising investment in banking sector. Market.

7. Financial report of Da Afghanistan Bank. (2011-205)www.centralbank.gov.af

8. Ministries of Economy, Finance and commerce of Afghanistan.

9. Boissay, F., Collard, F. and Smets, F. (2013).” Booms and Systemic Banking Crises”. European
Central Bank. 1Working Paper NO.1514. https://www.researchgate.net/publication/327931434...

10. Grauwe, Paul De (2008).” The Banking Crisis: Causes, Consequences and Remedies”. Center for
European Policy Studies. No.178. https://financial-dictionary.thefreedictionary.com/Banking+crisis

11. Ali, K., Akhtar, M.F., Ahmed, H.Z. (2011), Bank-specific and macroeconomic indicators of
profitability-empirical evidence from the commercial banks of Pakistan. International Journal of
Business and Social Science, 2(6), 235-242.

12. Anbar, A., Alper, D. (2011), Bank specific and macroeconomic determinants of commercial bank
profitability: Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139-
152.

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Website
1) www.centralbank.gov.af
2) https://www.researchgate.net/publication/327931434...
3) https://financial-dictionary.thefreedictionary.com/Banking+crisis

4) https://www.semanticscholar.org/paper/Financial...
5) https://ideas.repec.org/a/eco/journ1/2018-01-30.html
6) https://www.journalijar.com/article/28475/a-study...
7) https://www.investopedia.com/terms/f/financial-crisis.asp
8) https://www.readkong.com/page/financial...
9) http://www.dab. gov.af
10) https://www.semanticscholar.org/paper/Analyzing...

BY:

Ehsanllah (Yaqubi)

A synopsis Submitted to Jahan Institute of Higher Education, Kabul

Partial Fulfillment of the requirement for degree of

BBA

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