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 Najm-us-Saqib Shabbir, Head, Pakistan Remittance Initiative (PRI), State Bank of Pakistan, speaks to SouthAsia about the remittance market in Pakistan.
How important is the role of foreign remittances in uplifting an economy?
As per the World Bank, officially recorded remittance flows to developing countries reached U.S. $316 billion in 2009. However, according to the World Bank’s reports, these records still underestimate the full scale of remittances, as payments made through informal and unrecorded channels largely go unreported. Econometric analysis and available World Bank household surveys suggest that unrecorded flows through informal channels may conservatively add 50 percent (or more) to the recorded flows. Because of their volume and their potential to reduce poverty, remittances are attracting attention from policymakers at the highest levels in both developed and developing countries. Further in terms of World Bank-Global Economic Prospects 2006(GEP), an increase in migrants that would raise the work force in high-income countries by 3% by 2025 could increase global real income by 0.6 percent, or $356 billion.
How much foreign exchange in terms of remittances has flowed into Pakistan in the past fiscal year?
In terms of fiscal year performance, overall remittances received in FY10 showed an impressive increase of 14% when compared with the previous highest amount of $7.811 billion received in FY09. Similarly, the amount of $841.44 million received in June 2010, beat the previous record of $806.12 million received in September 2009.
What countries do these remittances mostly come from?
Pakistanis from almost all parts of the world contribute significantly to the Pakistani economy by sending in foreign remittances. The inflow of remittances in this last fiscal year (2009-2010) remained high from UAE, Saudi Arabia, U.S., GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries and amounted to $2,039 million, $1,918 million, $1,771 million, $1,238 million, $876 million and $252 million respectively. The remittances were not only higher by about $2. billion than the target, but also exceeded last year’s record remittances of $7.811 billion by 14 percent.
What is the source most used for sending in foreign remittances and why?
In order to provide for an ownership structure in Pakistan for remittance facilitation, State Bank of Pakistan, Ministry of Overseas Pakistanis and Ministry of Finance launched a joint initiative called Pakistan Remittance Initiative (PRI). This initiative has been taken to achieve the objective of facilitating and supporting a faster, cheaper, convenient and efficient flow of remittances. As part of our phased implementation of payment system strategy with the help of State Bank of Pakistan, PRI facilitated banks to introduce cash over the counter (COC) payments of Home Remittances. Banks being a popular mode of collecting remittances in Pakistan, have already started COC payments for remittances.
What in your opinion can be done to make these procedures more effective?
Enhancing Outreach - PRI is encouraging banks in Pakistan to enhance their outreach worldwide through new remittance - specific related arrangements. Since the inception of PRI, more than 160 new arrangements for home remittance have been facilitated between banks and overseas entities.
Incentive for the Remitter and Beneficiary - In order to support the overseas Pakistanis and their family back home, a reimbursement scheme is also being implemented whereby GOP through State Bank of Pakistan would reimburse 25 Saudi Riyal equivalent per transaction to the banks in Pakistan provided that, amongst others, the remitter and the beneficiary should not be charged any remittance fee. In turn, the banks share the reimbursed amount with the overseas entities as per the related agreements.
Incentive Scheme for Overseas Entities - In order to encourage overseas entities for making additional efforts, a performance based scheme has been introduced by PRI. As per scheme, overseas entities shall be reimbursed marketing expenses at the end of the year based upon their performance and other related terms and conditions.
Improvements in Payment System Infrastructure - Reliable and efficient payment systems are also being worked upon to facilitate delivery of home remittances securely and efficiently.
What role has Pakistan Post and the private courier services played in money transfers to Pakistan?
At the moment, all PRI efforts are aimed at bringing structural changes in the Remittance System of the country with a long-term vision about these recurring flows. It is a daunting task to introduce changes in the decades old systems and procedures with a strongly embedded particular mind-set of the stakeholders involved. The task becomes more difficult in wake of global recession, return of migrants, lack of financial literacy, perceptual barriers and volatility of exchange rates. Notwithstanding to the impediments, PRI is geared up to achieve its objective of maximizing the flow of remittances through formal channels. Pakistan Post Office is already the part of Home Remittance System in the country but still its role is limited owing to lack of requisite infrastructure and capacity constraints. PRI has already approached PPO to find ways and means and provide necessary support in enhancing its role in disbursing Home Remittances.
As far as the courier companies are concerned, their role in Home Remittances can be two-fold i.e. (i) disbursement of cash at doorstep and (ii) utilization of courier company network within the branchless banking model (subject to regulatory approvals). PRI is at the moment exploring the possibility of introducing option one in the market. 
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