Illegal remittances ‘highly unlikely’
Xpress Money country manager says legal channel convenient and cost-effective.
KARACHI:
Recent calls by the opposition parties to abandon legal channels for the transfer of money from foreign countries seem to have fallen flat, according to industry officials.
Speaking to The Express Tribune, Xpress Money Country Manager Rizwan Hamdani said it is highly unlikely that a person will ever remit money illegally after experiencing the convenience and cost-effectiveness of the legal channels.
“There is simply no impact,” Hamdani said while commenting on the flow of remittances after Pakistan Tehreek-e-Insaf Chairman Imran Khan urged overseas Pakistanis to send money home via hundi, which is the illegal way of transferring currency across international borders.
Xpress Money is one of the top three international money transfer companies operating in Pakistan, Hamdani claims, with the company handling roughly 15%, or $1.5 billion, of the total remittances Pakistan received in 2013-14.
Xpress Money has partnered with 13 banks and two mobile operators in Pakistan. “In terms of the value of remittances, Pakistan is our biggest market in South Asia. Its reasons include better incentives extended by the central bank and the competitive foreign exchange rates that we offer to our clients,” Hamdani said.
Indeed, the rebate facility offered by the State Bank of Pakistan (SBP) under the Pakistan Remittance Initiative (PRI) is noteworthy. Under the PRI, neither the remitter nor the beneficiary is supposed to pay any remittance fee to the money transfer company.
The SBP reimburses the Pakistan rupee equivalent of 25 Saudi riyals to banks upon each remittance of $100 or more, provided that senders and receivers do not have to pay any remittance fee.
Banks are then free to share the rebate with their respective money transfer companies as per their mutual understanding.
Overseas Pakistanis remitted $15.8 billion in 2013-14, which was up 13.7% from the remittances amounting to $13.9 billion received in 2012-13. In the first month of the current fiscal year, the latest 30-day period for which data is available, overseas Pakistanis sent home $1.65 billion, which was 17.4% higher than the amount they remitted in the same month of 2013-14.
While no remittance fee is charged to the sender or receiver of the remittance of $100 or more, Hamdani says foreign exchange rates offered by Xpress Money are ‘highly competitive’.
“Let me be clear that it is not commission. It is the exchange rate difference. At times it is simply the inter-bank rate because we are competing against hundi, which offers people the open-market rate,” he said, noting that the exchange rate difference typically ranges between five and 50 basis points.
Discriminatory rebate?
While the rebate facility is commended by foreign money transfer companies and their partner banks, foreign exchange companies say the practice is discriminatory as well as costly.
“I think the rebate facility should end permanently. Otherwise, foreign exchange companies should also be allowed to claim rebate on remittances to create a level playing field,” Forex Association of Pakistan Chairman Malik Bostan told The Express Tribune.
Both banks and exchange companies have an approximate share of 40% each in the total remittances received every year, Bostan said. “Exchange companies bring in $4-$6 billion every year free of cost while remittances through banks cost the exchequer about Rs12 billion per annum in rebates,” he said.
Bostan noted that the rebates received by banks on remittances have quadrupled since 2004, but the corresponding increase in the remittances remains relatively miniscule.
Taking advantage of people’s lack of information, many banks and money transfer companies claim rebates from the central bank while charging their clients a money transfer fee at the same time, he claimed.
“Some money transfer companies are also involved in overstating the number of transactions by breaking down one remittance in several small chunks in order to receive the maximum number rebates,” Bostan noted.
Published in The Express Tribune, September 9th, 2014.
Recent calls by the opposition parties to abandon legal channels for the transfer of money from foreign countries seem to have fallen flat, according to industry officials.
Speaking to The Express Tribune, Xpress Money Country Manager Rizwan Hamdani said it is highly unlikely that a person will ever remit money illegally after experiencing the convenience and cost-effectiveness of the legal channels.
“There is simply no impact,” Hamdani said while commenting on the flow of remittances after Pakistan Tehreek-e-Insaf Chairman Imran Khan urged overseas Pakistanis to send money home via hundi, which is the illegal way of transferring currency across international borders.
Xpress Money is one of the top three international money transfer companies operating in Pakistan, Hamdani claims, with the company handling roughly 15%, or $1.5 billion, of the total remittances Pakistan received in 2013-14.
Xpress Money has partnered with 13 banks and two mobile operators in Pakistan. “In terms of the value of remittances, Pakistan is our biggest market in South Asia. Its reasons include better incentives extended by the central bank and the competitive foreign exchange rates that we offer to our clients,” Hamdani said.
Indeed, the rebate facility offered by the State Bank of Pakistan (SBP) under the Pakistan Remittance Initiative (PRI) is noteworthy. Under the PRI, neither the remitter nor the beneficiary is supposed to pay any remittance fee to the money transfer company.
The SBP reimburses the Pakistan rupee equivalent of 25 Saudi riyals to banks upon each remittance of $100 or more, provided that senders and receivers do not have to pay any remittance fee.
Banks are then free to share the rebate with their respective money transfer companies as per their mutual understanding.
Overseas Pakistanis remitted $15.8 billion in 2013-14, which was up 13.7% from the remittances amounting to $13.9 billion received in 2012-13. In the first month of the current fiscal year, the latest 30-day period for which data is available, overseas Pakistanis sent home $1.65 billion, which was 17.4% higher than the amount they remitted in the same month of 2013-14.
While no remittance fee is charged to the sender or receiver of the remittance of $100 or more, Hamdani says foreign exchange rates offered by Xpress Money are ‘highly competitive’.
“Let me be clear that it is not commission. It is the exchange rate difference. At times it is simply the inter-bank rate because we are competing against hundi, which offers people the open-market rate,” he said, noting that the exchange rate difference typically ranges between five and 50 basis points.
Discriminatory rebate?
While the rebate facility is commended by foreign money transfer companies and their partner banks, foreign exchange companies say the practice is discriminatory as well as costly.
“I think the rebate facility should end permanently. Otherwise, foreign exchange companies should also be allowed to claim rebate on remittances to create a level playing field,” Forex Association of Pakistan Chairman Malik Bostan told The Express Tribune.
Both banks and exchange companies have an approximate share of 40% each in the total remittances received every year, Bostan said. “Exchange companies bring in $4-$6 billion every year free of cost while remittances through banks cost the exchequer about Rs12 billion per annum in rebates,” he said.
Bostan noted that the rebates received by banks on remittances have quadrupled since 2004, but the corresponding increase in the remittances remains relatively miniscule.
Taking advantage of people’s lack of information, many banks and money transfer companies claim rebates from the central bank while charging their clients a money transfer fee at the same time, he claimed.
“Some money transfer companies are also involved in overstating the number of transactions by breaking down one remittance in several small chunks in order to receive the maximum number rebates,” Bostan noted.
Published in The Express Tribune, September 9th, 2014.