Liberia's banks take battering
2004-01-15 13:40
Monrovia, Liberia - Public confidence in Liberia's struggling banks hit a new low this week with the liquidation of the Italian-owned Liberia Trading and Development Bank (Tradevco).
Tradevco's liquidation leaves only three operational banks in the war-torn country, down from 18 in 1980.
Financial analysts attribute the collapse to inefficiency, poor management and high levels of corruption, with banks dogged by reports of forgery, embezzlement and other white-collar crimes.
Depositors, who have had millions of US dollars of depositors' money trapped in their accounts, are now simply taking their money elsewhere - including offshore.
The exodus has, however, had no notable effect on the conduct of surviving banks, which continue to be accused of unusually close ties between shareholders, board members and top management, something that has undermined the system of checks and balances which normally keeps crooked executives in line.
In addition, the civil war - which has raged intermittently since 1989 - has taken a toll. The National Housing and Savings Bank (NHSB), established by government to support the nation's public housing program, is one of the casualties of fighting in Liberia.
Most of those affected by NHSB's collapse were low-income clients.
Very sceptical about the banks
"Obviously these groups of people, who dominate the parallel and micro economy, are now very sceptical about the banks," said one former bank executive. The Agricultural, Co-operative and Development Bank, set up in 1978, also shut its doors as a result of the war.
The closure of Tradevco has affected the operations of several local and international aid organisations, as the bank was widely used by these groups, as well as by several United Nations agencies.
It has also put added strain on the Liberia Bank for Development and Investment, which is already struggling to find enough cash to pay Liberians who receive funds from abroad via the Western Union money transfer company.
While the prospects for new banking enterprises might not seem rosy at this point, Liberia's Central Bank remains optimistic following new applications for licenses to establish new banks.
However, the Central Bank doesn't appear to enjoy much legitimacy among Liberians either, with some claiming that executives responsible for problems in commercial banking have simply migrated to the treasury.
"They are the ones that are being recycled and are working at the Central Bank of Liberia. How can they meaningfully contribute to the nation's economic recovery when their hands are tainted with corruption?" said a concerned businessman, who declined to be named for fear of retribution. - Inter Press Service