Pakistani banks will soon roll out a host of initiatives for overseas Pakistanis to boost remittances, curb illegal money transfers and ease financial constraints for those who are willing to explore job opportunities abroad, Khaleej Times has learnt.
Top banking officials and industry executives said the PTI-led government is finalising a new package under which banks will offer one-month salary advance to overseas workers as well as financial support to those Pakistanis who will be going abroad on job visa. The new initiatives will help curb the illegal hundi or hawala system and increase remittance inflows into the country.
Syed Irfan Ali, executive director for banking policy and regulation group at the State Bank of Pakistan, said the central bank is discussing with the country's banks to offer credit facility to regular remitters if they fall short of funds due to non-payment of salary by employer or for any other reason. This initiative will help the families of overseas Pakistanis to meet their monthly expenses.
"We will ask banks to lend money to overseas Pakistani workers because sometime their salaries get delayed. Giving one month salary as credit is a good idea because hawala operators also give people advance money to retain them as regular customers. We want to fill the interim gap so that their families don't face any financial problems," Ali told Khaleej Times on the sidelines of an event held in Dubai recently.
The remittances sent by overseas Pakistanis increased by12 per cent to $14.35 billion in the first eight months of fiscal year 2018-19 as compared to $12.83 billion for the same period last year.
Ali pointed out that around $8 to $9 billion are remitted through hundi system (illegal channels). "We are trying to address that and trying to find ways and means to bring them through legal channel."
"We are also encouraging banks to help those Pakistani who are going abroad so they don't have to sell their wives' jewelley and they can pay to travel agents as well. Once the worker is settled abroad, he can pay back the money over 2-3 years. We are talking to banks on these issues and these initiatives would hopefully be in place by June 30," Ali said.
Naeem Sehgal, head of transaction banking and home remittances for Muslim Commercial Bank, said the initiative of advance salary will put an end to hundi or hawala system.
"Products such as advance salary exist in Pakistan, hence, these can be easily extended to foreign counties like Saudi Arabia and the UAE for remittances purpose where they have good controls on salaried people. Such product is vital to finish off hawala system," Sehgal said.
He confirmed that the banks were thinking along these lines and SBP has mandated a bank to kick start product for the UAE market. "Once that is up and running, other banks will follow quickly, especially Pakistani banks operating here in the UAE. I am sure the credit facility will be very popular among expat Pakistanis."
While discussing the details, MCB executive noted that the banks could ask customers to submit post-dated cheque because the UAE has a highly efficient system in place of cheque encashment. "Risk associated with such product is very low and the benefit for Pakistan as a country is huge."
Muhammad Faraz Haider, senior executive vice-president and group chief, National Bank of Pakistan, said there are still some regulatory concerns and once the guidelines are issued by the regulator, products on the similar lines will definitely be rolled out.
"NBP is already offering advance salary to the employees in Pakistan and a similar something can be created. The central bank will sooner or later set up guidelines for all the banks and on that basis we will bring out our products," he added.
Pakistan's Ambassador to the UAE Moazzam Ahmad Khan said there are around 1.6 million Pakistanis working in the UAE, remitting around $4.5 billion annually.
He said construction, real estate and banking sectors in Pakistan are the biggest beneficiaries of remittances as most of the funds flow into these industries.
"The UAE is a vibrant economy and around 200,000 Pakistanis on average get jobs in the UAE every year," Khan said.
Zia Ijaz, head of international operations at UBL, also said that speed, convenience and advance payment facilities offered by the hundi operators are the key reasons that this illegal channel industry is thriving and called on the banking fraternity to come up with solutions to increase remittances through legal channels.
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