USAID, Treasury, and DOD’s Technical Assistance to Afghanistan’s Banking Sector
Overview
A recent report has shed light on the technical assistance provided by USAID, Treasury, and DOD to Afghanistan’s banking sector over the years. The report highlights the efforts made by these agencies to strengthen supervision efforts and develop human capacity for bank examiners.
USAID’s Technical Assistance Program (2003-2011)
USAID worked with Deloitte from September 2003 to June 2011 to build capacity at the Da Afghanistan Bank (DAB) Financial Supervision Department (FSD). The $92 million contract, part of USAID’s Economic Growth and Governance Initiative (EGGI), aimed to develop DAB’s capacity to regulate the banking sector.
Challenges
However, a weak oversight system led to missed opportunities to contain fraud at Kabul Bank, which ultimately contributed to the September 2010 crisis. USAID terminated its technical assistance program with Deloitte in June 2011 due to “changed conditions on the ground” and a desire to ensure effective assistance.
Current Status
Since then, USAID has not provided direct technical assistance to DAB FSD, citing direction from Embassy officials that future efforts would be led by the World Bank and IMF. However, USAID is willing to reengage with DAB if certain conditions are met, including:
- Commitments to achieving designated milestones
- Issuing a formal assistance request
- Reforming Afghanistan’s banking and anti-money laundering/countering the financing of terrorism (AML/CFT) laws
Treasury’s Technical Assistance Program
Treasury has been supporting DAB through the provision of a resident advisor to the Financial Transactions and Reports Analysis Center of Afghanistan, as well as an assigned resident advisor to assist with AML/CFT matters. The resident advisor helped develop examination procedures for banks and money service providers, among other tasks.
DOD’s Technical Assistance Program
DOD’s Task Force for Business and Stability Operations provided assistance to Afghan banks to increase their ability to accept electronic funds transfers and develop a retail payments infrastructure. However, neither State nor DOD provided any direct support to DAB FSD during this period.
Conclusion**
The report highlights the importance of effective technical assistance in building capacity and strengthening institutions in Afghanistan’s banking sector. As the country continues to work towards reforming its financial system, these efforts will be crucial in ensuring stability and transparency.