State Bank set to offer mobile remittance scheme

KARACHI: The central bank is about to launch an innovative scheme to enable foreign remittances’ transfer on mobile phones to improve financial inclusion in the country, officials said on Wednesday.

“The government and central bank have approved the rollout for the home remittances through mobile wallet accounts scheme, which will be offered by all licensed branchless banking providers i.e., banks and telecos,” an official said on condition of anonymity.

Officials said the new scheme, which is expected to be announced later this month, will allow mobile wallet (m-Wallet) account holders in Pakistan to receive remittances without a need of having conventional bank accounts. “Assuming that if only one percent of the existing m-Wallet accounts would receive home remittances with an average transaction size of $400-425 per month, this service could fetch around $1 billion in the first year,” the official said.

In Pakistan, almost 46 million people have bank accounts, but over 140 million uses mobile phones, indicating a growing demand for mobile money transfer services that experts say is one of the keys to channelising remittance flows through legal sources. Not all mobile phone subscribers have mobile wallets, but there has been a double digit growth in branchless banking accounts, up 17 percent to 13.16 million as of June-end over the previous quarter.

Currently, banks provide financial mobile applications but customers can’t open and manage their accounts via the mobile phone unless they have banking accounts. “Therefore, the new scheme is expected to help drive financial inclusion through enhanced usage in m-wallets,” the official said.

“Moreover, it could encourage remittance flows through legal sources.” The new scheme will provide branchless banking account facilitation to the unbanked masses/remittance beneficiaries and promote financial inclusion in the country, according to the officials.

“Under the service, new or existing accounts will be tagged as home remittance accounts,” the official said. “These accounts will facilitate deposit, withdrawal and transfer of funds according to prescribed limits.” Money sent home by expatriates to families in Pakistan fell 3.08 percent to $19.303 billion during the last fiscal year. In the first five months of the current fiscal year of 2017/18, remittances rose slightly 1.28 percent year-on-year to $8.021 billion.

Foreign remittance to Pakistan saw a sustained growth and increased from $6.5 billion in fiscal year FY08 to $19.9 billion in FY17.

Pakistan has achieved the highest compound annual average growth of 16 percent in remittances during 2009-2016 amongst top 20 remittance recipient countries, according to the World Bank’s figures.

Officials said anti-money laundering regulations would be applicable to check abnormal/irregular transactions under the new scheme. M-Wallet holders may earn mobile top-ups against their remittances received from abroad to make it more attractive. Banks will remunerate (on daily basis) these accounts to encourage maintaining balance in these accounts. The central bank launched ‘Asaan Remittance Account’ recently in an attempt to encourage remittance receipts through proper accounts instead of traditional cash over the counter transactions.

SBP, in collaboration with Pakistan Remittance Initiative (PRI), is working to promote convenient, but also secure remittance flow in Pakistan. The PRI introduced a scheme for reimbursement of the cost of sending remittances.

SBP has also done a lot to modernise payment system infrastructure to make delivery of remittances more efficient and secure. At present, the government through the State Bank, under PRI, reimburses 20 Saudi Riyal per transaction to the banks in Pakistan. The minimum size of the transaction should be $200 or above (equivalent in other currencies) and the remitter and the beneficiary should not be charged any remittance fee. The PRI has enhanced the domestic and global outreach to facilitate remitters and recipients of remittances.