Tajikistan: Former head of liquidated bank under arrest

The former head of a bank in Tajikistan that collapsed under the weight of bad loans has been arrested on suspicion of various illicit financial machinations.

Asia-Plus news website cited unnamed sources on April 25 as saying that Jamshed Ziyoyev, ex-chairman of Tojprombank, is being kept at a holding cell in the capital, Dushanbe. 

Prosecutors are reportedly pursuing investigations into whether Ziyoyev illegally granted loans and misspent Tojprombank funds.

Tojprombank is one of several lenders in Tajikistan that have been crushed by a policy of profligate lending, often to close business associates of the bank itself or to politically well-connected individuals. 

The National Bank declared Tojprombank insolvent in February 2017 and has since been ostensibly administering the process of paying out depositors.

Initially, the state-run Savings Deposit Fund paid out 17,500 somoni (around $2,000) to each customer, but little else. Almost 700 customers say they have still to see the bulk of their money — a total of around $11 million.

Tojprombank had over the years accumulated a number of high-stakes delinquent debtors. 

One such person, Jamshed Abdulov, a businessman involved in the cotton industry, was detained by authorities over unpaid debts. Two companies belonging to him – Cotton Textile and Olim Textile – collectively owed Tojprombank 39 million somoni ($4.4 million). After paying off his liabilities in the form of solid assets, Abdulov was released on bail.

Sources familiar with the situation have told that companies affiliated to Ziyoyev and his son owed another $13 million to the bank.

Tojprombank also has liabilities before the state — $13 million with the Finance Ministry and another $15 million with the National Bank. Under Tajik law, the bank is required to settle its debts to the state before it pays out retail customers.

Tojprombank was founded in October 1995 as an all-purpose retail bank. The controlling shares of the company were held by Ziyoyev. Signs the lender was in distress began to emerge in 2015. In the middle of 2016, Ziyoyev was removed as head of the bank, which was placed under administration. In December that year, the National Bank declared it was refinancing Tojprombank to the tune of 450 million somoni ($56 million) and reappointed Ziyoyev to his old job and ordered him to restore the lender to health. The bailout money was raised through the emission of somoni-denominated sovereign bonds that were converted into liquid cash by the National Bank.

But then two months later, the National Bank performed yet another about-face and decided to shutter Tojprombank, together with another recipient of bailout funds, Fononbank.