Money transfer operators remain sub-optimal after six-day holiday

LAHORE: Money transfer operators (MTO) like Western Union and Rapid Money that opened after six days of Eid holidays were not fully operational on Monday, making the families dependent on remittances to run from pillar to post to get their money.

Most MTOs claim fund transfer in minutes from anywhere in the world. However, a visit to at least nine different MTOs revealed the frustration several customers had to face due to delay in transfer, lack of cash in the braches, and other technical and non-technical issues.

A customer argued with Muhammad Jabir, the branch head of an MTO on Davis Road for not making payment of his remittance. Jabir said the customers came to the branch early in the morning when cash was not available. He said since the branch opened after a week, the funds were not available, and the head office in Karachi was scheduled to transfer funds at noon.

The customer then was given a similar treatment at the large government owned bank across the street. Here the bank official apologised that the person dealing in money transfer of the MTO was absent and directed to go to a Sindh-based bank on the same road. There the customer was told they did not have the password and it would take time to receive another password that would be emailed from the United States.

The next stop was at a domestic Islamic Bank. Here too the excuse was that the branch had lost the password and the new password would be available later in the day.

When the same customer went to the National Bank branch opposite Queen Marry College, there the excuse was that the person dealing in remittances was absent. The ordeal became more interesting when the Pakistan Post branch officials at Edgerton Road said they were short of cash and their landline telephone was out of order. They said it would take a long time to bring cash from their head office.

All the proceedings at these outlets were recorded and can be verified by the regulators. Finally the remittance was honoured at the outlet of an MTO located adjacent to the Punjab Bank, Edgerton Road. The whole proceeding was completed in less than five minutes. The efficiency was sharply in contrast to the lethargy shown at other outlets.

The commercial banks opened on Saturday, July 9 to facilitate depositors, whereas the MOTs not only remained closed for 6 consecutive days, their operations were sub-optimal even on Monday, July 11, 2016.

The MOTs are one of the major sources of remittances that the overseas Pakistanis send to their dear ones living in the country. Remittances are the major source of foreign exchange earnings of the country. Last fiscal, Pakistan received remittances of over $19 billion that were much higher than the $12.5 billion textile exports; and only $4.5 billion less than the total exports of $23.5 billion.  

According to a study by the International Growth Centre, costs differ across countries and remittance corridors. Generally, the remittance services offered by formal MTOs and banks are more expensive than informal remittances. Costs of informal channels are estimated to range between two percent -5 percent. The cost goes up to 15 percent through official channels.

However, after facilitations announced by the State Bank of Pakistan, the cost of remittances through official channels came down 5-10 percent from 15 percent. In terms of speed, MTOs and informal channels also have an advantage over bank channels because banks do not always have direct links to every country and thus involve intermediate banks. As a result, bank transfers may take some time, whereas money sent through an MTO may be collected by the recipient within a few minutes.  

The regulators should appreciate that the trend to send remittances through formal MTOs is on the rise, though remittances through unofficial channels are cheaper. However, if the recipients are treated shabbily that trend would shift towards hundi and hawala. The regulators should conduct periodic checks to ensure that recipients are facilitated and not discouraged.