HOME remittances have risen at an average annual rate of 19.4pc in the last four years, mainly owing to increased export of manpower and helped along by the Pakistan Remittances Initiative, launched in 2009.

Remittances rose from $8.9bn in FY10 to $15.8bn in FY14, as the estimated number of expatriate Pakistanis, according to government officials, jumped from 6.3m to 7m.

This increase in remittances is attributed to both migration of many Pakistanis to the US, UK, Canada, Australia and New Zealand, as well as the hiring of our doctors, engineers, accountants, teachers and other professionals in Middle Eastern and some European countries, plus Malaysia and Japan.

The incentives offered under the PRI improved remittance collection by banks, in collaboration with money transfer organisations. And the government and the SBP also made bold moves to ensure the routing of remittances through official channels, instead of the hundi/hawala system. This facilitated the growth in remittances through banks.

Whereas bankers say the double-digit growth in remittances can be maintained without making any special effort other than exporting more manpower abroad, exchange company executives say they could bring in more inflows if they are provided a level playing field

The biggest increase in the last four years was seen in remittances from the UK and the GCC states. In case of the UK, the rise in inflows from just $876m in FY10 to $2.18bn in FY14 is more due to an increase in disposable income of Pakistanis living there after some recovery in the British economy.

And remittances from GCC countries surged as Pakistan handled the regularisation of migrant workers’ drive better than other countries, while the initiation of physical and social infrastructure projects in Saudi Arabia and the UAE created room for exporting more manpower. In FY10, total remittances received from both Saudi Arabia and the UAE stood slightly over $3.9bn. The amount doubled to $7.8bn in FY14.

But whereas bankers say the double-digit growth can be sustained without making any special effort other than exporting more manpower abroad, executives of foreign exchange companies say certain steps must be taken to maintain the growth momentum. They say the true potential of the remittances market is no less than $30-32bn — or almost double the current inflows. They claim that banks and forex companies together can help boost remittances to at least $25bn in three years if the latter’s grievances are addressed immediately.

Currently, the bulk of remittances — more than 85pc — come via banks, and forex companies bring in less than 15pc. This is so because only banks can issue a legally valid acknowledgement, called a Proceed Realisation Certificate (PRC), to remitters. This stance of regulatory authorities is also applicable on forex companies that are owned by banks themselves.

Since forex inflows unaccompanied by PRCs are subject to domestic taxation, it is a big disadvantage for forex companies. They have long been demanding that they too should be allowed to issue PRCs, but to no avail. Exchange company executives say if this demand is met, they can mobilise large additional amounts of remittances.

But sources close to the SBP say this demand cannot be met because unlike banks, forex companies’ operations are not regulated under the internationally benchmarked criteria under ‘know your customer’ and anti-money laundering regimes. Forex companies claim, however, that their operations are in conformity with these regimes.

Forex company executives also demand that like banks, they, too, should be given monetary incentives for handling foreign exchange sent back home by overseas Pakistanis.

“Banks receive an amount equal to 25 Saudi riyals per transaction of remittances if the transaction is worth more than $100. We don’t get it,” complains Malik Bostan Hoti, president of the Exchange Companies Association of Pakistan.

To add insult to injury, exchange companies are also not allowed to collaborate with any money transfer organisation (MTO), except for two: Money Gram and Western Union. Banks, however, are free to strike deals with any MTO from amongst the over 300 working across the globe. Exchange companies complain this is also limiting their scope in mobilising remittances.

Bankers say one of the reasons why remittances have been growing constantly since FY10 is that banks have gradually reduced the time taken in realising their proceeds. People whose relatives send foreign exchange back home also generally agree with this.

“A couple of years ago, when my father used to send money from Saudi Arabia, we would get it in three working days. Now, our bank [one of the top five local banks] gives it to us within 24 hours,” says Syed Anisuddin, a resident of Gulistan-e-Jauhar, Karachi.

Besides, monetary incentives under the PRI have helped banks to provide better services to overseas Pakistanis, and some of them offer their service without any fee if the amount of remittance is above $100.

The National Bank of Pakistan is one of them. Pak Remit, the NBP’s facility for remitters, has proved instrumental in mobilising large amounts of remittances from Saudi Arabia, in collaboration with Xpress Money and Western Union.

HBL’s Fast Transfer also provides free-of-cost remittance service through a number of collection points in the UAE, Saudi Arabia, Oman and Bahrain.

Published in Dawn, Economic & Business, July 21st, 2014