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Join Date: 05 Mar 2015
Location:  UAEPosts: 54 |
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Money transfer industry in UAE to thrive |
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Money transfer industry in UAE to thrive
The money transfer industry in the UAE will thrive over the next few years on the back of the country's strong economic outlook supported by growing business activity, says an industry expert. Adeeb Ahmed, treasurer at the Foreign Exchange and Remittance Group (FERG), said the volume of remittances from the UAE crossed Dh70 billion ($19 billion) during the January-June 2015 period and a similar upward trend is expected to continue in the second half of the year. "Expatriates working across the UAE remitted more than Dh35 billion in the first quarter and India, Philippines, Bangladesh, Pakistan and the Middles East emerged as top five destinations. Another Dh35 billion was remitted in the second quarter, indicating a strong upward trend in the money transfer business in the country," Ahmed told Khaleej Times in an interview. Referring to a World Bank report, he said the money exchange business in the UAE has shown steady growth in 2014 as remittances rose nearly five per cent to $29 billion. He attributed the rise in remittances from the UAE to the country's strong economic growth and its continuous investment in infrastructure and development projects. "This is in direct co-relation with the international exchange business which also jumped close to five per cent last year to reach nearly $583 billion. We see durable growth potential for the money exchange industry in the UAE," he said. UAE is at the forefront Ahmed, who is also chief executive of Lulu International Exchange Group, said the UAE has been at the forefront to diversify its economy into various new sectors, including tourism, finance and infrastructure in order to reduce dependence on oil. "Apart from these ongoing projects, most of the GCC states have announced major plans for converting their countries into world-class business hubs. This will further enhance exchange business in the region." He said the money transfer business in the UAE continued to grow last year as exchange companies reported up to 10 to 15 per cent increase in transactions in 2014 compared to the previous year. He said the slight dip in some currencies in the developing world against the UAE dirham or US dollar encouraged expatriates to send more money home in 2014 as they could get better exchange rates. "Major infrastructure projects in the region linked to the World Expo 2020 in Dubai and the Fifa World Cup in Qatar in 2022 means demand is likely to grow for expatriate workers, who represent the bulk of those sending money around the world. So, remittances are going to continue strong in the coming years as well," he said. Ahmed said 139 licensed foreign exchange and remittance companies were operating 835 branches across the UAE by the end of 2014, but there is scope for exchange houses to expand their branch network in the wake of increasing number of infrastructure projects being undertaken all over the UAE. "Each emirate has earmarked separate projects in conjunction with its leader's long-term vision. The string of projects also means an increase in jobs, which means demand for expat workers, who represent a majority of those making use of the services of exchange houses, is likely to grow. "New development around the UAE is also set to give a boost to the tourism sector, which would, in turn, increase demand for currency exchange services. All in all, exchange services are set for a flourish and can aim to expand their mark beyond current numbers." He said the GCC has an estimated 15 million migrant workers, more than five million of which are in the UAE. Referring to the World Bank report, he said India, Pakistan, Bangladesh and the Philippines were top performing markets in 2014 and attracted the bulk of remittance flows from the UAE. Grey transactions, challenges Ahmed, who was recently honoured for his contribution in the banking and finance sector by Forbes Middle East, said governments are encouraging citizens to remit money through authorised channels by providing incentives and making them aware of the pitfalls of sending money through unauthorised channels. "This has resulted in a gradual decline of grey transactions over the years. In UAE, the percentage of such transactions may be miniscule as no authoritative information is available about the same," he said. Speaking on the major challenges faced by the industry in the UAE and globally, he said money laundering and keeping guard against illicit money flows in a region ensnared by sanctions and instability are some of the primary obstacles. He said stringent measures need to be taken to overcome the challenges and ensure transparency in the business. "FERG and its members along with officials at the UAE Central Bank are keen to bolster standards in the UAE to avoid the risk of regulatory violations and have been working hard towards its fulfilment. Exchange houses are taking steps for greater scrutiny on their customers and the money they handle to tackle the increasing risk for terror financing and money laundering." Mergers in exchange business Ahmed said the money exchange business is likely to see mergers in the industry this year due to the Dh5 million minimum capital requirements announced recently by the Central Bank of the UAE. "Rising capital and compliance costs has added between 20 to 40 per cent to industry costs, while some of the banks are refusing to do business with certain exchange firms, which has made it difficult to access banking services like obtaining US dollar clearing. "Local banks are also cutting risks in the region which is affecting small and medium-sized business. Adding to the above factors, the UAE market is expansive and very competitive, therefore mergers are very much a possibility." To a question about rumours that the Ministry of Finance is considering tax on remittances, he said no such information has been conveyed to money exchange operators in the UAE. "There were reports that the Ministry of Finance was considering tax on remittance. We haven't yet received any update on that front," he said. About the restriction for money transfer to Russia in the wake of sanctions, he said money exchange houses follow the central bank and the UN guidelines to remit money to any sanctioned countries. He said FERG has been advocating the transfer of money through channels that are secure, transparent and governed by strict anti-money laundering regulations as posited by the Central Bank of the UAE. He said the group is also committed to completely stamp out grey areas and unethical practices in the remittance and exchange sector. "Most exchange houses in the UAE follow a stringent and efficient Anti Money Laundering (AML) Policy, procedure and control system. This has ensured fair business practices, including rigorous compliance to global anti-money laundering standards, in the best interest of its regulators and customers and has helped control frauds and money laundering to a large extent," Ahmed concluded. Source:khaleejtimes http://www.khaleejtimes.com/business/local/money-transfer-industry-to-thrive |
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