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Monday, October 13, 2014

How to Rob a Bank in Bangladesh

Tahmima Anam

In Bangladesh, we sometimes play We Also Have. This is a parlor game in which we can say, with pride, that we now have the things that could previously be found only in other countries.

In the 1990s, it was satellite television (we also have MTV!); in the 2000s, it was shopping malls and high-rise buildings and multiplex cinemas. This year, it was a Hollywood-style bank heist.

In January, a man going by the name of Sohel and his accomplice Idris successfully stole 169 million taka (about $2.2 million) from a branch of Sonali Bank in Kishoreganj, 70 miles north of the capital, Dhaka.

Although “Sohel,” later identified as Yusuf Munshi, his brother Idris Munshi and a number of other accomplices were arrested within days of the robbery, it was all anyone could talk about for weeks afterward. We devoured the details of the heist: how Mr. Munshi had plotted for two years to rob the bank, how he had rented a house next door and dug a 30-foot tunnel to reach the bank’s vault.

It was even reported that he had had an affair with a bank employee as part of his scheme. Social media exploded with comparisons with Hollywood movies such as “The Bank Job.”

It appears Mr. Munshi has started a trend. In March, 3 million taka (about $40,000) was stolen from Sonali Bank’s Adamdighi branch in Bogra, when thieves used the same technique — digging a tunnel into the vault from a nearby furniture shop. And last month, criminals made away with almost 20 million taka ($260,000) from a Brac Bank branch in the small town of Joypurhat by boring a hole from a neighboring building. When renting the office next door, the robbers had claimed to be starting a nonprofit agency called Poor Development. Oh yes, in Bangladesh, we also have irony.

But while our attention is drawn to this proliferation of movie-style heists, the larger irony is that Mr. Munshi and his copycat criminals are not the real bank robbers. No, the bigger thieves are hiding in plain sight, and sanctioned by the banks themselves. They are the loan defaulters: people and businesses who borrow money from banks with no intention of repaying the debt.

The problem, it seems, is the way Bangladesh’s banking sector is organized. There are broadly two types of banks: private banks, which are overseen by the central bank, and state-run commercial banks, which fall directly under the aegis of the Finance Ministry. While private banks have had their share of loan defaulters (sometimes those who sit on the boards of these banks), it is overwhelmingly the state-run banks that have allowed bad loans to multiply to an unsustainable degree. The international standard for loan defaults is currently at about 2 to 3 percent. In Bangladesh, it is over 12 percent. In a recent study conducted by the Bangladesh Institute of Bank Management, the percentage of nonperforming loans in state-run banks is as high as 29 percent.

The situation is only getting worse. The World Bank’s 2013 Bangladesh Development Update states that “weak internal controls, poor corporate governance, and slackening of credit standards resulted in irregularities in loan approvals,” which caused state-run commercial banks to classify more than half a billion dollars’ worth of loans as “nonperforming.” In the past six years, the four major state-run banks have seen sharp spikes in defaulted loans; the total amount of credit in default held by these four banks is about $2.45 billion (not including nearly $2 billion already written off).

This means that an enormous amount of capital is taken out of the banking system, and banks must compensate for this loss by keeping interest rates high. Currently, Bangladeshi banks’ interest rates range between about 9 percent and 16 percent, while deposits earn between 6 percent and 12 percent.

There is much talk about the government’s attempting to crack down on defaults. The new chairman of Basic Bank, one of the worst culprits with outstanding loans of over $1.45 billion, has publicly named and shamed a list of the top 100 loan defaulters. The bank has attempted to recover some of the bad debt, but has thus far been largely unsuccessful. Ultimately, there appears to be little legal recourse because the justice system is overwhelmed: There are more than 800,000 cases against loan defaulters pending in the courts.

The only way to alter this broken system is for the state-run banks to come under the control of a single body that is entirely separate from the executive branch of government. Having a set of banks that are controlled by political appointees, which report directly to the Finance Ministry and run no risk of being audited by impartial agencies, will always result in a corrupt system.

When the rather terrifyingly named Rapid Action Battalion recovered the money that the Munshi brothers had stolen from Sonali Bank, about 20 million taka was missing. Yusuf Munshi claimed to have spent the money buying a truckload of rice for a local religious leader. That money was never found.

Since the Munshis’ heist, the Bangladesh Bank has suggested that banks beef up their security, and yes, it sounds as though their vaults could use some more cement. But while we can barricade bank branches themselves, we need to step up efforts to stop those who steal from within, the sharp-suited businessmen who raid our banks in broad daylight.

First published in International Herald Tribune, October 10, 2014

Tahmima Anam, a writer and anthropologist, is the author of the novel “A Golden Age.”