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Remittances may cross $10bn in 2 years - Naveed Yaseen - 10-16-2009 07:34 AM
By Saad Hasan
KARACHI: Bankers are expecting annual workers’ remittances to cross over $10bn in the next two years as crackdown against illegal hundi transfers push people to use the formal banking channel.
As much as $3.5 billion still miss official record every year because of the illegal hundi brokers who make rupee denominated transactions here against foreign exchange received abroad, a senior banker said.
“People are scared. They have seen what happened to customers of Khanani and Khalia and Zarco,” the CEO of one of top three banks said. “I believe the fear has played its part in increasing the remittances.” The country received record remittances of $806.12 million in September, up 22 per cent from the same month last year. That was the third consecutive record amount remitted in a single month during current fiscal 2009-10.
Expatriates sent home record $7.811 billion during financial year 2008-09, beating the previous annual high of $6.451bn remitted a year before. The figure has already touched $2.33bn between July-Sep 2009. Remittances have jumped from just over $2 billion in fiscal 2001-02. Home remittances have become lifeline for the economy at a time when the country’s reliance on international lenders has increased to meet its foreign debt liabilities.
A few months back, the SBP cancelled licences of Khanani and Kalia and Zarco Exchange on charges of money laundering. Zarco with its over 660 payment locations across the country was a success story of exchange companies, which were allowed to deal in remittances in 2002.
The banker who spoke to The News said only incentive for overseas Pakistanis of using illegal Hundi and Hawala channel is convenience of fast delivery.
“A hundi broker takes the amount to the doorstep. Now banks are catching up.” Cost of money transfer is not the cause that promotes hundi, he said. “Banks have reduced their charges and in some cases the expatriates are not being charged at all.” With remittance volume expanding, the international money transfer companies have substantially scaled down their charges.
“Western Union used to charge more than $30 per transaction flat, notwithstanding the amount. That has come down to just $10.” The banks and exchange companies work in partnership with foreign money transfer agencies.
However, since action against some of them, exchange companies have lost business to banks. Pakistani banks with their 7,500 plus branch offices spanning across the country should have been the most effective source for expatriates to send remittances. But that is not happening even with incentives on remittance transactions the banks enjoy.
Banks get a rebate of 25 riyals for every remittance transaction as an incentive not to charge expatriates. But banking industry officials say home remittances are required to be filtered through too many cumbersome checks, which drive up human resource and opportunity cost of transactions.
To address some of the issues, the SBP recently launched Pakistan Remittance Initiative (PRI), a broad incentive scheme overseas Pakistanis. PRI has bound banks to transfer wired amount in account of the receiver within 24 hours.
Banks would face a penalty if they failed to comply with the deadline. Five big banks including Allied Bank, Habib Bank, MCB, National Bank of Pakistan and United Bank are part of inter-bank set-up that ensures speedy transfer of remittances.
http://www.thenews.com.pk/daily_detail.asp?id=203341