THE word among business circles in Islamabad, Pakistan, is that all may not be well with the country's banks. Last month, Prime Minister Benazir Bhutto ordered the presidents of two of the largest banks to start investigations against officials allegedly involved in fraud involving up to 1 billion rupees ($33 million).
The money at the center of the dispute was given out to unemployed young people for the purpose of setting up small businesses. The loans were made during the time that Nawaz Sharif, the former prime minister, was in office. Under the plan, clients could borrow up to 100,000 rupees and pay back the money in up to 10 years.
''In many cases, the loans were sanctioned to the employed people and to those who were already running established businesses,'' says Malik Mohammad Qasim, a Pakistani senator and chairman of the federal government's high-powered anticorruption committee.
''We want to know if this was a deliberate attempt to keep many people out, to favor near and dear ones, or only a case of a poorly managed plan,'' says a senior official.
These charges have added to earlier troubles in Pakistan's banks. A judicial commission is still investigating the case of Mehran Bank, whose chief operating officer, Yunus Habib, was arrested this year amidst allegations that he bribed clients, including influential politicians and Army officials. In return, he allegedly amassed a fortune for himself and his family worth several hundred million rupees.
Even if these high-profile cases are resolved, much still needs to be done to improve the Pakistani banking system. The country's large, government-owned banks are burdened by massive debts running as high as 80 billion rupees.