MCB Looking to Acquire New Kabul Bank in Afghanistan

Pakistan based Muslim Commercial Bank (MCB) Limited is looking towards acquiring Afghanistan’s, government-owned, New Kabul Bank. MCB Bank will take part in the bidding process for the Afghan bank.

Mohammad Aqa Kohistani, Treasury Director in Afghanistan’s Finance Ministry, says that “The Pakistani bank is one of two preferred bidders”. Regarding the privatisation of the New Kabul Bank, he said “Within four months, the bank will be privatized and sold to one of them.”

The competing bidder is a local Afghan company which has also vowed to invest $1 billion if it is chosen as the winning bidder. The Afghan law requires investors to place a guarantee amount in order to prove that they have enough funds. MCB Bank has placed $20 million as guarantee, meeting the minimum guarantee amount. In comparison the Afghan company has provided $168 million, said Kohistani.

The Afghan bank was defrauded back in 2010 and nationalised by the country’s government. Its former owners allegedly embezzled an amount exceeding $825 million. The bank has also lost $65 million since it was nationalised, causing US investigators to show concerns over the matter. President Ashraf Ghani has also shown concerns due to the lack of any progress during the past few years.

New Kabul Bank has 114 branches in the country and £330 million in deposits. Being an Islamic Bank, the deposits don’t pay any interest. However, being the only bank in use for Afghan Forces’ and government employees’ salaries, it has become a target for the militants.

Market analysts are skeptical about whether a Pakistani company would be able to win government’s confidence. Pakistan and Afghanistan have had troubled relations over the past few decades making it unlikely that a Pakistani firm can secure the contract. Analysts also think that Pakistanis won’t be welcomed by the Afghan consumers.

According to the Afghanistan Investment Support Agency, border skirmishes in the recent past have caused a decline in acceptance towards Pakistani goods in the country. Couple that with the fact that only 10 percent of the Afghan population holds bank accounts makes it less probable that MCB will push hard to be the winning bidder.

According to the Afghan Central Bank’s website, Habib Bank Ltd., National Bank of Pakistan and Bank Alfalah Ltd operate in Afghanistan as well and are among the 15 lenders in the country.

via Bloomberg

He is the Editor at ProPakistani. Reach him at [email protected]