Leaked Grant Thorton report reveals beneficiaries of BML’s risky pre-2008 lending

Additional reporting by JJ Robinson

A leaked draft of a report into the Bank of Maldives’ (BML) lending practices prior to 2008 has identified those behind potentially destabilising breaches of both BML and Maldives Monetary Authority (MMA) guidelines.

The asset recovery investigation by forensic accounting company Grant Thornton, drawing on the 2008 Attorney General’s report on BML, concludes that it would have been “impossible for the [BML] board to not have been influenced” in the granting of significant exposures in the form of credit to a select coterie of Gayoom-era affiliates.

The document reveals well-connected individuals bypassing BML rules regarding the handling of non-performing assets, with a number of large companies belonging to politically-active businessmen continuing to receive credit despite failing to satisfactorily meet previous repayment obligations.

“The large exposures that BML held, were in the main, due to members of the board or their relatives,” the report found.

“Due to the fact that the largest exposures of the bank were from Board members and/or their families, it would be unrealistic for the Board to provide any clear independent review of the banking facilities provided, and would in [our] view form conflict of interest issues for those Board Members involved,” it added.

The report names a number of individuals and business groups who benefitted from the state bank’s loan and overdraft facilities towards the end of Maumoon Abdul Gayoom’s 30 year tenure as head of state.

The government was handed a US$10million (MVR 154.2 million) invoice from Grant Thornton last year in what former Foreign Minister Dr Ahmed Shaheed told Minivan News was a penalty fee for stopping the investigation initiated under Gayoom’s successor Mohamed Nasheed.

Prior to the alleged request from the current government to halt the investigation, Grant Thornton had uncovered evidence of an alleged US$800 million oil trade involving former head of the State Trading Organisation (STO) and current presidential hopeful Abdulla Yameen. Shaheed alleged that the accounting firm was contracted to receive a percentage of any assets recovered as a result of its work.

The private parties named in Grant Thorton’s BML assessment include the Sun Group, Lily Group, Sultans of the Seas, VA Group, Afeef Group, Villa Group, Thasmeen Ali, VB Group, and Rainbow.

“Many of the above parties benefited from loans that were used to assist in purchasing leases for resorts, related tourism businesses etc, of which would not have been achieved without the connections held by certain individuals,” the report said.

The report also makes particular mention of the role of Ibrahim Gasim, both Finance Minister and non-executive BML board member at the time of the majority of cases documented within the Grant Thornton report.

Gasim, who is also standing as the Jumhoree Party (JP) presidential candidate in next month’s election, would have been responsible for the appointment of the majority of the BML board at this time.

Grant Thornton’s report revealed that Gasim’s Villa Group had been loaned MVR481,299,571 (US$37,601,520) as of October 31st 2008, representing 32.4 percent of the bank’s entire capital.

This represents one of a number of examples of such exposure featured in the report, despite the Bank’s acquiescence in 2006 to an MMA request to reduce any credit guaranteed to individual or related group borrowers to 30 percent of overall capital.

After repeated lobbying, the MMA increased this amount to 40 percent. Grant Thornton suggested that this extension request was due to the fact that a number of the groups mentioned in its report were already exceeding the original lower limit.

In rejecting one of BML’s requests for an increased credit exposure limit, the MMA wrote that “such concentration of credit is far in excess of the legal lending limits of the bank and it could seriously threaten the bank’s position, and the stability of the whole financial sector,” the leaked document stated.

Even with this increase, Sun Group is reported to have exceeded this limit after January 2008, with loans and overdraft facilities reaching  MVR 607,345,442 (US$46,879,400) as of 31 October 2008.

“This amounted to 40.8 percent of the Bank’s capital as at 31 October 2008,” the report observed.

Loans and overdraft facilities provided to Afeef Group totalled MVR 245,123,414 (US$19,150,266) as of October 31, 2008 – approximately 16.5 percent of BML’s total capital at the time.

Sun Group Chairman and majority shareholder Ahmed Shiyam’s Maldivian Development Alliance (MDA) meanwhile this week announced its decision to form a coalition the Progressive Party of Maldives (PPM), headed by former President Gayoom.

Alterations to BML’s internal loan approval mechanisms for board members in May 2007 resulted in the bypassing of the bank’s Credit Committee.

“This effectively meant that those Board Members that had applied for credit facilities were approving their own loans,” stated the draft report.

BML board members complicit in self-approving their own credit lines include Mohamed Ahmed Didi (Sultans Group shareholder), Ahmed Hamza (Director of the VA Group), and Gasim (Chairman of the Villa Group).

Director Mohamed Adil also features prominently, being cited in one particular example of a board meeting in which he approved the re-financing of the Sultan Group’s debt at the same time as being the group’s major director/shareholder.

BML’s recovery

In the intervening years, BML wrote off multiple toxic non-performing assets and returned to profitability, largely by outright ceasing to pay dividends to shareholders for almost five years.

The Bank’s board approved a MVR 50 million (US$3.23 million) interim dividend to shareholders in July 2013, the first since 2008.

“This marks the end of a painful and challenging journey that began in 2009 when the bank reported record level non-performing loans. However, in recent years Bank of Maldives has reported record level earnings and operating profit and the company returned to profit in 2012,” read a statement from BML.

BML’s former CEO Peter Horton, a UK banker appointed in February 2011 with extensive experience tackling distressed portfolios and problem lending across Africa as part of Barclay’s corporate turnaround team, resigned in August 2013 to head up Bermuda Commercial Bank.

“The profitability and dividend payment will be sustainable going forward,” said Horton in the bank’s July statement. “This is an interim dividend and at MVR 9.29 [a share] for the half year places us in a strong position to pay the highest full year dividend in the Bank’s recent history at year end”.

Download the leaked GT report

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16 thoughts on “Leaked Grant Thorton report reveals beneficiaries of BML’s risky pre-2008 lending”

  1. With the departure of Peter Horton, BML will fall under the Gasim, Koli, Afeef or some other tycoon's empire and will return to "business" as usual.

    Most people seem to have also forgotten the "loans" given by Gayyoom to his friends and family which started the changing of the Male skyline forever. It also indebted the rest of the Maldivian population on these select few individuals forever.

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  2. Once the presidential election is over we will have to wait and see who sits on the board of Bank of Maldives.

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  3. 1. Chinese saying ' a fish rots from the head'. When you see the MBL chairman conducting scout camps on TV, speaking half the sentence in English (at leat what I saw on Eid day), you know the National Bank is in wobbly hands.

    2. The long queues of BML have become long and legendary. It would be nice if the the bi-lingual preaching Dr. Shiham is there to correct it.

    3. Despite all these the BML makes profit. How? By SERVICE FEES, not by actual banking. You request to know hoe much you have in your account, boom, they charge you 100 RF. No choice.

    4. When you see all the young uniformed ladies of the BML, you do not need to be a genius to know that a) so much staff are not required. b) Some one is hiring on a favor basis.

    BML needs moral leadership. Not Bad Leadership

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  4. So this why the bank of Maldives stopped giving loans to build our homes at the time. they should have renamed the bank The Maumoon Friends and Family Banking Corporation.

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  5. No body have mentioned the fact that the money received as Tsunami aid from Europe to the tune of 76 million Euros also was used by none other than the same clique of Gasim, Sun travel Shiham, Thasmeen and Hamza. Can we trust any of them holding a top post in Maldives.?

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  6. This report had tried very hard to twist some of the facts about the bank.

    1. Afeef group : They have been granted 19 million dollars . This is not huge amount and this report ahd failed whether Afeef group is performing or not ?Whether Affeef had any default payment . If Afeef is paying the loan, then this is good and bank will be earning huge profit out of this.
    2. Afeef had never defaulted any payment and he is paying promptly.
    3. VA group: This belong to Nasheed family relative of Ali Shiyam. These loans were non performing loans and this should have been highlighted.
    4. Gaasim. :May be the exposure is little too high but still this guy is paying the loans.
    5. Sultan group - THis is Thasmeen and this is non perfuming loan and Nasheed should have sold the mortgage assets to recover the money.
    6. Lily Group: They are also paying loan ? So whats the big deal here.
    7. Sun Travel - They are also paying loan? What is the big deal?

    I am surprised that Universal has not taken any loan from BML and yet one comment is made saying that they will be hijack the board to manage the Bank to get money from this Bank?

    When they have not taken a any loan from BML during Maumoon hay days, why would they now do it.

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  7. When BML gives loans only the top 5 business man in Maldives, there is no more money to give loans to others.

    No wonder the 5 players (Thasmeen, Afeef, Shiyam, VA group and Qasim) tries to control politics.

    No bank in the world is a toy of the richest businessman except the BML

    BML needs democracy before the Maldives.

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  8. bank ok. Change most senior executives. Either related to the big boys or connected in some way. Universal don't need bml because bml not maintain confidential. all secrets know everybody.

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  9. If Gasim or Yamin is President forget about Maldives bank. Maybe jangiya will be CEO ? Or Abdulla faiz, nafaa naseem or mma Gafoor ?

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  10. you need to separate fact from fiction.

    Afeef gp exposure is small and is definitely within Single borrower limits. - surprised that the bank does not have a greater exposure as this is one of the few honaourable gps to bank in the Maldives barring Universal.

    Villa - all loans are hardcore. they cannot pay so they have ODs paying only interest. no other banks are willing to touch them. they are having major issues.
    MAin reason of Gasim running this time is that this is the only way he can save his companies by coming into power and abusing the system. don't be surprised if the Ministry of Finance issue a sovereign guarantee or better yet loan treasury funds to gasim to run his company.

    Sun travels / VA / Sultans - all basically rougues and defaulters. epitomizes the defunct nature of all maldivians.

    I think if the government is serious there are one or two independent CEO's in the Maldives that they should approach rather than going overseas.

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  11. If Gasim not elected this time and if he cant control govt and bml funds, he will be bankrupt.

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  12. @snowdon
    Very true- Qasim will come tumbling down like Humpty Dumpty if election is lost. Preapare to buy Villa assets cheap after the election

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