COMMERCIAL BANKING SECTOR UPDATE - JUNE 2003

UNCLAS KABUL 001565 SIPDIS SENSITIVE NSC FOR ZKHALILZAD, JDWORKEN, HMANN, RHANSON, DSEDNEY DEPT FOR SA/PAB, SA/AR, EB/FO MANILA PLEASE PASS AMB PSPELTZ USDOC FOR DAS/TD MURPHY AND AFGHAN RECON TASK FORCE USDOC FOR ITA/MAC/OSAO/ADLER STATE PASS USAID FOR JPRYOR STATE PASS TDA FOR DSTEIN AND JSUSSMAN STATE PASS TREASURY FOR U/S TAYLOR, LMCDONALD STATE PASS OPIC FOR RCONNELLY AND DZAHNHEISER E.O. 12958: N/A TAGS: ECON EFIN AFIN AF SUBJECT: COMMERCIAL BANKING SECTOR UPDATE - JUNE 2003 ¶1. (SBU) In previous reporting, post has identified the lack of commercial banking facilities in Afghanistan as a major obstacle to attracting increased investment. Further, the lack of reliable banking institutions, and the resulting prevalence of NGOs and businesses having to keep large amounts of cash on hand has also increased crime rates. While the principal impediment to attracting foreign commercial banks ) the passage of the commercial banking law and the central banking law ) are still unresolved, some positive developments are expected soon. ¶2. (SBU) The Ministry of Finance has been trying ) without success - for at least the past eight months to attract two foreign banks. The Ministry of Commerce secured a visit from officials of Britain,s Standard Chartered during a visit to London in the spring of 2003. Standard Chartered is now reported to open its first branch in Afghanistan in August ¶2003. Most recently, in late May 2003, the Central Bank has invited eight Pakistani banks to operate throughout Afghanistan. ¶3. (SBU) During the past week, U.S. entrepreneur Jack Heidary visited Kabul to discuss opening a $25-$50m OPIC-financed commercial bank. Heidary met with Afghan government officials including Minister of Finance Ghani, Minister of Commerce Kazimi, Central Bank Governor Ahady, and Embassy and U.S. military representatives to assess the viability of a commercial bank. Heidary,s due diligence visit will inform a report to OPIC officials regarding the mix of services, locations and clientele for this project. Among the services contemplated are US Dollar and Afghan afghani direct deposit accounts for the Afghan civil service, NGO, and international military and diplomatic community officials. Heidary suggested bank branches may be based in Kabul and other major cities at first, and also explored the possibility of providing ATM services. HANSON