The Forever Bank Wars in Sierra Leone

By Mahmud Tim Kargbo

Banking as the Soul of Governance

Bank regulation in Sierra Leone has never been a matter of sterile economics. It is about power, legitimacy, and whether the State protects the people or exploits them. Where America’s “bank wars” featured Jefferson versus Hamilton and Jackson versus Marshall, Sierra Leone’s have featured Margai versus restraint, Stevens versus accountability, NPRC versus reform, Koroma versus audit truth, and Bio versus financial transparency.

The 1991 Constitution promised that Sierra Leone’s economy would be directed to secure “the maximum welfare, freedom and happiness of every citizen”.

(http://www.sierralii.org/sl/legislation/constitution/1991/1991). But the Truth and Reconciliation Commission (TRC) concluded that “endemic corruption, the collapse of accountability, and the abuse of state resources” were among the root causes of the war.

(http://www.sierralii.org/sl/trc/report). The financial sector has always sat at the heart of that betrayal.

Just as America’s history reveals cycles of banking reform and relapse, Sierra Leone’s own path has been a long series of “forever bank wars” where new reforms are layered on top of old impunity, without ever breaking the cycle.

Sir Albert Margai and the Politics of Patronage (1964 to 1967)

Before Siaka Stevens consolidated one-party rule, the seeds of banking capture had already been sown under Sir Albert Margai’s SLPP government. Margai inherited an economy still buoyed by iron ore and diamond exports, yet his tenure became marked by a steady erosion of public trust in state institutions.

Margai increasingly used state resources, including the National Development Bank and early government credit facilities, to reward political allies and consolidate support. Opposition figures accused his administration of “turning development funds into a party purse.” Although banking institutions were still small, the precedent of linking credit to political loyalty was set in this period.

The TRC later noted that “the misuse of public institutions for partisan advantage did not begin in the 1970s, but was already evident in the mid-1960s” (http://www.sierralii.org/sl/trc/report). In fact, Margai’s attempt to introduce a one-party constitution in 1967, although short-lived, mirrored the political control of finance that Stevens would later institutionalise.

This early politicisation foreshadowed what would follow: banks drifting away from their developmental purpose and becoming tools of regime survival. It also explains why Sierra Leoneans entered the Stevens era with weakened institutional safeguards.

The Stevens Era: Bank Capture and State Decay (1971 to 1985).

Siaka Stevens’ APC government treated banks not as independent financial institutions but as instruments of political power. The Sierra Leone Commercial Bank (SLCB) and National Development Bank were directed to lend to party loyalists and regime projects, many of which failed. The TRC later recorded that “the politicisation of state institutions, including banks, created a system of impunity that destroyed public trust” (http://www.sierralii.org/sl/trc/report).

This was Sierra Leone’s equivalent of America’s nineteenth-century “wildcat banking” era, but here it was not about free competition, it was about one-party control. By the early 1980s, banks were riddled with non-performing loans to politically connected borrowers, pushing the economy towards collapse.

The result was devastating. As the TRC put it: “The mismanagement of the economy, including reckless borrowing and lending practices, created conditions ripe for violence”. (http://www.sierralii.org/sl/trc/report). Banks became symbols of decay, not development.

The Civil War Economy: Diamonds, Sanctions, and Financial Collapse (1991 to 2002)

During the war, Sierra Leone’s banks almost ceased functioning. Rebel control of the diamond fields and widespread looting made the formal banking system irrelevant to most citizens. Instead, the economy shifted to informal cash and barter transactions.

Yet banks still mattered, often for the wrong reasons. Reports in the late 1990s linked banking channels to laundering proceeds from the illicit diamond trade. The TRC found that “state and private institutions failed to regulate illicit financial flows, allowing warlords and collaborators to thrive” (http://www.sierralii.org/sl/trc/report).

Ordinary citizens, meanwhile, abandoned banks. Many lost savings in failed community banks and in the collapse of trust in SLCB. Public memory of these losses continues to fuel the preference for osusu (informal savings clubs) over bank accounts today.

This era parallels America’s financial panics of the nineteenth century, fragile institutions collapsing under crisis. But unlike in the United States, Sierra Leone’s collapse was not a financial cycle but a civil war, where banks became irrelevant to survival.

The NPRC and Early Post-War Reform: IMF Conditionalities (1992 to 2002)

The NPRC military regime and later the Kabbah government inherited collapsed banks. The Bank of Sierra Leone (BSL) was granted more independence, and donors such as the IMF and World Bank imposed restructuring conditions. Several state-owned banks were recapitalised under heavy donor supervision.

The intent was similar to America’s post-Civil War National Currency Acts, which sought to impose order and restore confidence. But in Sierra Leone, the reforms were externally driven. IMF reports of the late 1990s noted that Sierra Leone’s banking sector “suffered from chronic undercapitalisation and politically directed lending”.

(http://www.imf.org/).

The NPRC introduced some prudential guidelines, but enforcement was weak. By the end of the war in 2002, banks were still fragile, and public distrust remained. Unlike America’s Office of the Comptroller of the Currency (OCC), which gradually institutionalised supervision, Sierra Leone’s regulators remained dependent on political will and donor money.

Koroma’s APC: Expansion with Corruption (2007 to 2018)

Ernest Bai Koroma’s APC government presented banking as a symbol of modernisation. The 2009 Financial Sector Development Plan sought to expand credit, improve regulation, and promote financial inclusion. Mobile banking was introduced, with Orange and Africell leading innovations.

Yet scandals soon followed. The Ebola epidemic of 2014 to 2016 exposed deep dysfunction. Audit Service Sierra Leone found that 18 million US dollars in Ebola funds could not be properly accounted for, much of it mismanaged through banks (http://www.auditservice.gov.sl/). Donor audits also revealed misuse of Global Fund money.

At the same time, commercial banks continued to process unauthorised government payments. The ASSL 2019 report found Le140 billion in undocumented payments through banks.

(http://www.auditservice.gov.sl/).

Case Narrative: The Hidden Debts of SLCB

The Sierra Leone Commercial Bank became the poster child for impunity. A 2016 review by the Audit Service discovered off-balance-sheet debts that had never been disclosed to the public. These included loans to politically exposed companies, some of which had defaulted years earlier. Senior officials quietly rolled these losses into new government guarantees, masking the scale of the problem. Citizens only became aware through leaks to local newspapers, which detailed how SLCB had essentially become a slush fund for the regime.

Case Narrative: Collapse of First International Bank (FIB)

The fragility of the sector became even clearer in 2014 when First International Bank (FIB) collapsed. The Bank of Sierra Leone revoked its licence after regulators accused it of manipulating liquidity ratios and granting reckless loans. Teachers, school boards, and small traders who had deposited their money suddenly found their funds inaccessible. Many described it as a second betrayal, recalling earlier experiences of bank failure during the war. The government provided no compensation, and the collapse hardened the public’s distrust of banks as safe custodians of savings.

Afrobarometer surveys reflected this mood. By 2018, a majority of Sierra Leoneans identified corruption as one of the country’s three most pressing problems.

(http://www.afrobarometer.org/). Banks were seen not as neutral institutions but as partners in state impunity.

Bio’s SLPP: Transparency Promises and Forex Wars (2018 to Present)

When Julius Maada Bio’s SLPP came to power in 2018, it pledged a “New Direction” with financial transparency as a pillar. The “Big Five Game Changers” emphasised digitisation and accountability.

But the Bank of Sierra Leone soon became mired in controversy. Foreign exchange auctions were criticised as opaque, with allegations that political allies benefited disproportionately. Civil society groups claimed that well-connected importers consistently received preferential access to scarce dollars, while ordinary traders were left struggling to purchase foreign currency. The ASSL’s 2020 report confirmed gaps in the accounting of these transactions, noting that records were incomplete and reconciliation weak.

Case Narrative: The Politics of Forex Auctions

Investigative reporting by Africanist Press in 2021 revealed that beneficiaries of foreign exchange auctions often overlapped with political donors and firms linked to ruling party elites. In one case, a construction company with no import-export licence was allocated millions of dollars in foreign currency. Small business owners, meanwhile, described the process as “a rigged game where the poor pay in inflated prices while the connected collect windfalls.” The forex market became a battlefield of access and exclusion, fuelling resentment among traders and consumers alike.

At the same time, microfinance institutions and community banks began collapsing, leaving rural populations without savings. The Financial Intelligence Unit (FIU), established in 2012, was supposed to combat money laundering, yet Sierra Leone remains on the FATF grey list for weak controls (http://www.fiu.gov.sl/).

Case Narrative: Mobile Money Fraud

The rise of mobile money was hailed as a leapfrog innovation. By 2020, millions of Sierra Leoneans were using Orange Money and Afrimoney to save and transfer funds. But soon, fraud cases emerged. Customers reported double debits, unauthorised withdrawals, and collusion between rogue agents and insiders. In one widely reported case, an Orange Money customer in Freetown lost his entire trading capital overnight due to system manipulation. The FIU issued alerts, but prosecutions were rare, and companies often treated the losses as “customer error.” This lack of accountability undermined confidence in what was supposed to be a new financial frontier.

This mirrors America’s 2008 financial crisis, where opaque practices and regulatory capture fuelled collapse. In Sierra Leone, however, the stakes are survival. Farmers, traders, and families who lose savings in collapsed banks or mobile money fraud have no safety nets.

Cross-Cutting Themes: Silence, Capture, and Impunity

What unites these episodes is not progress but repetition. Each government adds new institutions such as the FIU, Anti-Corruption Commission (ACC), or recapitalisation rules, but without accountability. The TRC’s warning of “cycles of impunity” (http://www.sierralii.org/sl/trc/report) has proven prophetic.

Audit Service Sierra Leone continues to expose scandals, but Parliament rarely enforces its findings. Afrobarometer continues to record distrust, but governments recycle the same rhetoric of reform. Like America’s “institutional layering,” Sierra Leone’s banking reforms pile new structures onto rotten foundations.

Breaking the Forever Bank Wars

In America, the battle lines were drawn between Jefferson and Hamilton, the populists and the bankers. In Sierra Leone, the battles are between Margai and restraint, Stevens and accountability, Koroma and audit truth, Bio and financial transparency.

Unless Audit Service reports are acted upon, unless TRC recommendations are finally implemented, and unless banks are insulated from political patronage, Sierra Leone will remain trapped in its own “forever bank wars.”

In this struggle, the stakes are not abstract. They are existential. Banks in Sierra Leone are not just financial institutions; they are symbols of whether democracy itself can function. If they remain captured, the people will always lose.