Remittances sent by Pakistani expatriates in the UAE could soon be delivered to the homes of the recipients, as per a new system proposed to counter the hawala one, which is an informal and unregulated way of remitting money.
Addressing the Resilient Remittances (RemiLink23) conference in Dubai on Thursday, Usman bin Raees, chief operating officer, Instant Cash, said the scheme would see money home-delivered to recipients instead of them having to stand in queues as is the practice currently.
This will help people living in the remote areas of the South Asian country where access to the banking system is limited. Currently, the hawala system, also known as hundi, is popular because cash is delivered to the doorstep of the recipient within hours.
“Talks are underway with the State Bank of Pakistan. This proposal is on the table of the central bank and they’re considering it, which is very encouraging,” bin Raees told Khaleej Times on the sidelines of the conference at the Pakistan Association Dubai.
However, he added that it is not yet clear when this proposal will be approved.
Imad ul Malik, joint treasurer at the Foreign Exchange and Remittances Group (Ferg), said people involved in the hundi system not only deliver money to the doorstep of the recipients, but also offer advance money services to people who need it - which is big incentive for expats. “We should also have microfinance on remittances whereby funds are delivered in advance and people pay a month later,” he said.
Osama Al Rahma, advisory board member of the Ferg, proposed that with the existing infrastructure in the South Asian country, funds can also be delivered to the people through digital means as well.
Remittances on the rise after crackdown
Pakistan received $27 billion in remittances in the 2022-23 fiscal year, slightly dropping from the previous year. However, Faisal Niaz Tirmizi, Ambassador of Pakistan to the UAE, said that since the government has taken tough measures of late, the flow of remittances is returning to normal.
Pakistan's government launched a massive crackdown against foreign currency smuggling, which supported the rupee against the US dollar and provided much-needed liquidity in the market.
“[The Pakistan] government has introduced whistle-blowing policy also to share information against illegal channels," he said.
The ambassador added that there is a potential to reach $50 billion in remittances this year.
Usman Bin Raees confirmed the big increase in remittances from the UAE after the crackdown, which resulted in a gap between the official and open market rates, which had widened by nearly 8 to 10 rupees, narrowing substantially
Osama Al Rahma said remittances to Pakistan have been impacted due to high inflation and currency devaluation.
“In the last two months, we have seen good improvement. It is because mainly on the part of awareness of remitting parties and [the] Pakistani government initiative [to] eliminate unofficial channels.”
Pakistan Central Bank also increased the rebate for stakeholders from 20 to 30 Saudi rials, which is good for all the remitting stakeholders. This rebate has been offered to exchange houses as they were accepting remittances.
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