Mandatory bank account for Pakistanis sending remittances home!

• State Bank of Pakistan aims to attract more foreign exchange through legal channels.

The government of Pakistan is considering a host of measures including mandatory bank accounts for Pakistanis going abroad for jobs - as well as more benefits for the remittance recipients in order to attract more foreign exchange through legal channels, a senor central bank official said.

"It will be mandatory for all those Pakistanis who are going abroad for jobs to have an account in the country. It's not compulsory now but, I think it will be made mandatory next year," said Syed Irfan Ali, executive director, State Bank of Pakistan.The Pakistani banks are also creating 'value proposition', meaning that banks will give more incentives to the remittance recipients, Ali said while speaking on the sidelines of the Pakistan Remittance Summit held at JW Marquis Hotel in Dubai on Friday.

The Summit was attended by senior officials of the Foreign Exchange and Remittances Group as well as executives from banking industry of the UAE and Saudi Arabia.

Last week, the State Bank of Pakistan launched "Asaan Remittance Account" for prospective beneficiaries of home remittances with a view to promote remittances through legal channels and improve the reach of basic financial services to the unbanked citizens of country.

As per the regulations, the account will only be used to receive remittances and the account holder is not allowed to deposit funds in the account.
VAT to boost remittances

"Remittances play a key role in the country's economy as remittances that come to Pakistan make up 6 per cent of the GDP. When you use legal banking channels, you are safe from any kind of risks. People will, certainly, be getting more when remitting through 'hawala' and 'hundi' systems, but it's illegal and unsecured."

Replying to a question about the impact of value-added tax (VAT) being introduced in the UAE and Saudi Arabia from January 1, 2018, Ali said: "VAT will be beneficial for us, because everything will be documented, so it will increase remittances through proper channel. Taxation brings more documentation and transparency, hence banking channels will be used by more people."

Pakistan last year received $19.3 billion remittances and the country can attract up to $30 billion per annum.

"From Saudi Arabia and the UAE, around $5.5 billion and $3.5 billion are remitted per annum, respectively, by Pakistanis," Ali said, adding that the Pakistan Remittance Summit will also be held in Riyadh and Jeddah next month.
Low remittance cost from UAE

Mohit Davar, chairman, International Association of Money Transfer Networks, said the UAE has one of the lowest remittances costs in the world at less than two per cent as compared to the global average of more than 7 per cent.

"When you're remitting Dh800 or Dh1,000, you pay on average Dh15 fee, which is less than 2 per cent. To some it will be higher and to others it will be lower. The global average, according to the World Bank, is around 7.6 per cent. And 3 per cent is the target set by the World Bank under G20 initiatives," Davar added.