015 - Rahmat, Q.

Qudratullah Rahmat:

The Impacts of Kabul Bank Financial Scandal on the Trustworthiness of Afghan Banking Industry

 

Abstract

Private banking in Afghanistan is very young compared to many other countries in the region. The whole history began when the banking law was passed by a presidential decree in September 2003. Among 15 commercial banks in Afghanistan, Kabul Bank was one of the largest private bank with a total asset share of 34% of the whole banking industry. Fraud and misconduct of shareholders were the primary reason for the depositors run in this bank. To study the impacts of the Kabul Bank run on the confidence of people in private banking, we randomly selected 103 customers of private banks in Mazar-e-Sharif for interviews. Using dichotomous dependent variable of the probability to trust or not trust banks in a logistic model, it was found that individuals with deposits at Kabul Bank at the time of the run, have  more trust into banks than those who did not have an account at this bank. According to this analysis, the respondents level of education and deposit insurance positively, and age and worsening security conditions negatively impact the trustworthiness of banks. Meanwhile, gender, individuals’ income, number of branches of banks, and the amount of deposits have no statistically significant effect on the confidence of respondents.  

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