A trial that opened this week in Kazakhstan sees the government returning with gusto to the pursuit of its favorite bogeyman: disgraced banker and opposition stalwart Mukhtar Abylazov.
The special inter-district court of Almaty, Kazakhstan’s business capital, on April 3 started hearings into charges of alleged massive fraud. The anti-corruption bureau has put the cost of the alleged financial machinations while Ablyazov was head of privately run BTA Bank at more than $7.5 billion — a sharp jump from the $6 billion that has previously been cited.
Abylazov was nowhere to be seen. He did, however, post a video appeal on his Facebook page on the eve of the hearings to give advice on how to mount massive protest rallies in Kazakhstan in his absence.
“You have to choose a theme for the protests that will bring thousands or tens of thousands of people out onto the street,” Ablyazov said from an undisclosed foreign location. He suggested that land ownership issues, education and bad roads could be good spurs for rousing demonstrations.
In Ablyazov’s absence, three of his former associates are having to face the music. Zhaksylyk Zharimbetov, chair of loan committee at BTA bank and a former No.2 to Ablyazov, admitted full culpability. Saduakash Mamesh, chair of the board, and Kairat Sadykov, loans director, pleaded only partial guilt.
Tajikistan’s central bank last late week announced it was pulling the licenses of two of its troubled banks and is now trying to work out how to compensate account-holders.
That decision, publicized on February 24, comes only weeks after the National Bank committed to spending tens of millions of dollars on refinancing the lenders in question — Tojprombank and Fononbank.
Asia-Plus news website has cited National Bank representatives as saying that customers of the banks should not be concerned as they will get at least some of their savings back.
The law provides insurance of up to 17,500 somoni ($2,000) per depositor and that is, in theory, to be paid within two weeks of the announcement of the license withdrawal.
“Once the courts appoint administrators at these banks, the savings of those customers holding more than 17,500 somoni will also be reimbursed,” Asia-Plus cited the National Bank as stating.
Money will reportedly be paid as administrators go through the process of selling off the banks’ assets.
Assets on Tojprombank’s books include dozens of offices and an unspecified number of residential properties. Fonobank hold 37 items, including a main office, four branch offices and multiple residential properties.
The size of the banks’ client base is not readily available, so it is unclear how onerous a commitment all this will prove or whether the authorities are really in a position to make such guarantees given the lack of liquidity in Tajikistan’s financial system.
Neither bank has commented publicly on the developments.
Weeks after the government in Tajikistan announced an ambitious bond issue to help finance a bailout for several struggling banks, prosecutors have decided to start investigating the lenders.
The four banks being audited by the General Prosecutor’s Office are Tojiksodirotbank, Agroinvestbank, Tojprombank and state-owned Amonatbank.
Another troubled lender, Fononbank, is being spared the treatment because it was already audited last year over suspicions that it was somehow collaborating with the banned Islamic Renaissance Party of Tajikistan (IRPT).
RFE/RL’s Tajikistan service, Radio Ozodi, reported that checks on the four banks are set to last six months. A representative for the General Prosecutor’s Office, Hotam Nazarzoda, said that the operation was being carried out at the request of the government to establish that the lenders were not being “mismanaged.”
If this explanation sounds unilluminating, it may be by design. Prosecutors have refrained from explaining quite what they mean by “mismanagement” or why this should be a matter for them to investigate.
But one unidentified source told Radio Ozodi this was primarily a reference to the way in which the banks issue loans. The source explained that some banks have been known to accept doors, windows, cows and other livestock as collateral for credit, immaterial of whether the customer was ever likely to be able to repay their debt. This sort of liberal credit-giving has, in the opinion of the authorities, led to lenders being driven to the verge of collapse.
“Animals have the habit of dying, and sometimes they do it early. And there have been cases when an apartment worth $50,000 could be displayed as being worth $100,000. These is called unguaranteed collateral,” the source told Radio Ozodi.
Barely day passes at Tajikistan’s most troubled bank without some grim or bizarre news.
At the start of the week, Firdavs Berdiyev, the would-be fugitive deputy chairman of Tajikistan’s troubled Tojiksodirotbank, resurfaced to give interviews to local media about his whereabouts and plans.
As people close to Berdiyev told EurasiaNet.org last week, the banker has said he is on an international tour in search of potential investors to Tajikistan.
Speaking to Asia-Plus, Berdiyev said that he was in New York looking for people willing to put money into Tojiksodirotbank and its daughter company, the Development Bank of Tajikistan.
“It is indispensable that we attract cheap and long-term resources (ie. funds) and to settle things with our account-holders. I and (Tojiksodirotbank part owner and former chairman) Tojidin Pirzoda have already been in Saudi Arabia, China, Kazakhstan and Russia. I myself was in Moscow for a week and met with bankers there. After that I flew to Europe and from there to New York, where I am holding talks with representatives of American banks,” Berdiyev said, adding that he planned to return to Dushanbe on August 25.
Berdiyev insisted that he was allowed to leave the country unimpeded and that he informed Tojiksodirotbank temporary administration of his plans.
These remarks are transparently addressed at constantly rumbling rumors that the authorities might at some stage initiate legal proceedings against the banks’s management over its chronic insolvency issues.
There are more rumblings of discontent at Tajikistan’s doomed Tojiksodirotbank.
Online news outlet TojNews reported on August 11 that deputy chairman Firdavs Berdiyev had fled the country to Switzerland.
There are a few theories circulating about Berdiyev’s flight, according to the website. One is that he has made himself scarce for fear of being made target of criminal investigation, possibly over the bank’s slow-motion meltdown. Another is that he has left in a mutual agreement with the bank’s management.
Workers at Tojiksodirotbank, which is the country’s second largest lender, say Berdiyev was suspended from his post before his departure, TojNews reported.
Tojiksodirotbank has declined to comment on the report, leaving the banker’s whereabouts in doubt.
Meanwhile, people in Berdiyev’s inner circle have told EurasiaNet.org that he is currently in New York, supposedly in talks to drum up investment in Tojiksodirotbank and a daughter institution of the bank from New York-based Citibank.
“Berdiyev is the deputy chairman and deals with investments,” the source close to the banker told EurasiaNet.org. “In relation to this position, he has spent the last month and a half on business trips. He has been in Moscow and in European countries, and now he is in the United States. On [August] 20, he should be back in Dushanbe. If he wanted to flee, he would have taken out his family first, but all his relatives are still in Dushanbe. The rest of the management at Tojiksodirotbank is also in Tajikistan.”
Then again, what interest Citibank could possibly have in investing in a deeply indebted bank halfway across the world in the former Soviet Union’s poorest economy is anybody’s guess.
Tajikistan’s anticorruption agency says it has uncovered an alleged embezzlement scheme at state bank Amonatbank, suggesting the crisis gripping the country’s lending sectors extends beyond just the lack of liquidity.
The deputy chairman of the Agency for State Financial Control and Combating Corruption, Davlatbek Hairzoda, said last week that the scheme has cost the government 31.6 million somoni ($4 million). Four bank employees are under investigation.
The timing is unfortunate since dwindling faith in the country’s private banks in Tajikistan has been driving many people to move their money to an institution perceived as being underpinned by state support.
Amonatbank chief executive Ruhullo Hakimzoda revealed last month that the banking crisis has compelled many state and private enterprises to move their business to his bank.
In the first half of 2016, Amonatbank’s client base for salary payments and bank card services increased by 20 percent, Hakimzoda said. No surprise there since workers whose wage packets are serviced by banks like troubled private lender Tojiksodirotbank have experienced severe complications in getting hold of any of their cash.
“Besides that, Amonatbank has seen an 11.8 percent increase in deposits, which is mostly accounted for by an outflow from other banks,” Hakimzoda said.
More customers has not translated into profits. Hakimzoda said losses in the first six months of the year came in at 6 million somoni ($760,000).
Tajikistan’s central bankers have issued another round of reassurances that they are not running out of cash, but they are again lobbying International Monetary Fund for a bailout just to be on the safe side.
Asia-Plus website on July 25 cited National Bank chairman Jamshed Nurmahmadzoda as saying that the amount of cash in circulation at the moment stands at around 6.6 billion somoni ($838 million), which he said was 36 percent more than at the same period in 2015.
Apparently pointing to the success of policies such as the widespread closure of small money exchange offices and the introduction of stiff criminal penalties for unauthorized money exchange operations, Nurmahmadzoda said it had now become the norm to conduct transactions in the local currency.
"Of course, this has created a great demand for the national currency and so we have accordingly increased its volumes in circulation to meet demand,” he said.
While it is hard to disprove any claims Nurmahmadzoda might care to make, it only takes a visit to one of Tajikistan’s several distressed banks to know that liquidity is far from healthy. At least three banks are teetering on the verge of bankruptcy. Some lenders have imposed withdrawal limits of 2,500 somoni ($315). And customers at the country’s largest bank, Tojiksodirotbank, are as much as it is possible choosing to move their accounts to other banks.
Nurmahmadzoda dismissed such worries, saying that Tojiksodirotbank is just suffering from management issues and that the country’s second biggest bank, Agroinvestbank, is doing perfectly fine. Even the normally circumspect IMF put lie to such brazen deception months ago.
A puppet polling organization in Uzbekistan has revealed that 98.9 percent of the population are positively disposed toward the introduction of bank cards.
The figure defies belief considering the intensely cash-based nature of the national economy.
Local media cited slavishly government-loyal polling company Izhtimoy Fikr as stating that cards are increasingly giving way to cash in retail transactions.
“Cards are very convenient, safe and reliable means of payment,” website Nuz.uz quotes 98.9 percent of people as thinking, according to the Izhtimoy Fikr research.
Banks cards were made available to local customers in Uzbekistan in 2004 as a means of reducing the public’s reliance on cash. The payment system was first introduced in the retail and catering sectors, since these are areas of the economy where the grey economy is strongest. Authorities made it mandatory for retail outlets to install payment terminals, which were imported in large quantities from abroad.
Outlets refusing to accept payment by card were subject to substantial fines, which could be as high as the equivalent of 200 times the minimum wage. Advertisements on television and radio stations publicized telephone numbers that members of the public could call to complain about retailers’ failure to accept card payments.
The drive has been largely successful in the capital, Tashkent. But paying by card is hardly convenient, as the Izhtimoy Fikr poll claims.
Tajikistan’s National Bank is once again pleading for an international bailout as the country’s lending sector remains mired in an existential crisis.
At a meeting with a visiting European Bank for Reconstruction and Development delegation, National Bank deputy chairman Jamoliddin Nuraliyev appealed for assistance to the country’s systemically important banks.
“It is necessary to carry out remedial work in some of the lending institutions,” Nuraliyev said, according to a National Bank statement. “I urge the executive directors of the EBRD during their coming board meetings to support proposals from the National Bank.”
Nuraliyev did not specify what those proposals were, but given that Tajikistan suffers from chronic liquidity problems, it is not hard to guess: Tajikistan desperately needs for its banks to be recapitalized.
The National Bank has already obtained assurances that the EBRD is to take a controlling stake in Tojiksodirotbank, the country’s second largest bank. The situation at that bank is grim. People who draw their salaries at the bank have had no joy for the best part of half a year and ATMs only began issuing money in June, after a hiatus lasting several months.
For what it’s worth though, Tojiksodirotbank chairman Tojidin Pirzoda has shrugged off talk of insolvency.
“Rumors about Tojiksodirotbank being on the verge of bankruptcy have been spread by certain people and certain interested parties,” he told state news agency Khovar back in January, without providing names or details.
It has been an open secret for months that Tajikistan’s No. 2 bank is completely broke, but the lender has finally come out into the open with a plea for international assistance.
bne Intellinews reported on May 11 that Tojiksodirotbank this week discussed a possible cash injection with officials from the European Bank for Reconstruction and Development in exchange for a 50 percent equity stake.
Tojiksodirotbank chairman Pirzoda Tojidin told the financial news website that he had already met with EBRD top brass and agreed on an assistance program.
"We have another meeting with them [on May 12], but it remains to be seen if we can meet the EBRD's conditions,” Tojidin told bne Intellinews.
This marks the first time Tojiksodirotbank has admitted to its severe liquidity problems, which has been no mystery to anybody unlucky enough to have their savings in the bank.
The lender tried in vain to downplay insistent media reports about its difficulties in March, when it issued a statement attributing interruptions in its services to a switchover in its money-processing system.
“Short-term disruptions in the functioning of bank cards are possible. We apologize for the inconvenience,” the statement said.
Countless deposit-holders at Tojiksodirotbank remain unable to get their cash to this day, however.
Negotiations with EBRD to facilitate some kind of rescue package have been in the works for some months.