Public confidence in Liberia’s banks appears to be at a new low, with many people now opting to keep their money elsewhere -‒ some in foreign accounts.
The latest blow to the banking sector came with the liquidation of the Italian-owned Liberia Trading and Development Bank (Tradevco), which reduced the number of banks in the country to three.
A total of 15 commercial banks have shut their doors since the military coup of 1980 in which Samuel Doe unseated William Tolbert. This left millions of US dollars of depositors’ money trapped in their accounts.
Financial analysts have attributed the banking collapse to inefficiency, poor management and high levels of corruption. The institutions have been dogged by reports of forgery, embezzlement and other white-collar crimes.
Banks have also been accused of allowing close ties to develop between shareholders, board members and top management staff -‒ 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 its toll. The National Housing and Savings Bank (NHSB), established by government to support the nation’s public housing programme, is one of the casualties of fighting in Liberia.
Most of those affected by NHSB’s collapse were low-income individuals. “Obviously these groups of people, who dominate the parallel and micro economy, are now very skeptical about the banks,” said a former bank executive. The Agricultural, Cooperative 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 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.
“There are positive signals. We have received several applications for licenses to establish new and credible banks,” said a source at the Central Bank.
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?” a concerned businessman asked. – IPS