KARACHI: Dellsons Associates, a Pakistani consultancy firm collaborating on an incentives strategy with banks in Gulf countries, says it is working to break the hold of “hawala” money transfer businesses so the country can attract approximately $10 billion in additional remittances through official channels within a year.
Pakistan, facing a severe dollar crunch, received $31.2 billion in remittances from workers abroad in fiscal year 2021-22, with $7.7 billion from Saudi Arabia and $5.8 billion from UAE, the top contributors.
In May this year, however, inflows declined to $24.8 billion mainly due to the growing hundi and hawala informal financial networks, which work under a system that allows customers to rapidly move large sums across borders outside the scrutiny of regulators and largely without an easily traceable paper trail. Funds received through these methods are not counted toward a country’s official remittances.
Hawala, which means “transfer” in Arabic and Farsi, is widely used in parts of South Asia and the Middle East for sending and receiving remittances and other payments, including where there is poor access to banks or international money transfers are limited due to sanctions. The trust-based money transfer system has long been the banking system of choice for many people in Pakistan, but many businesses are unregulated and once the money has left Pakistan it is hard to keep track of it.
Global money watchdogs have long pushed Pakistani authorities to tighten supervision of such traditional cash transfer methods as part of a wider overhaul of financial sector regulation to stem outflows of corrupt money. US and other Western nations say hawala companies are used to transfer funds for militant groups, drug traffickers and money launderers.
“Hundi and hawala operators are offering huge incentives, including advance salaries, on the basis of past 4-6 months transactions, paying high rates to families of workers in a country,” Ibrahim Amin, chairman of Dellsons Associates, a financial digital advisory consultancy firm, told Arab News.
Dellsons had engaged with four major banks to incentivize Pakistani workers in the UAE and other gulf countries to use proper channels, Amin said.
“We have aligned UBL (United Bank Limited), HBL (Habib Bank Limited), Bank Alfalah and Dubai Islamic Bank with the plan to offer incentives, including advance salaries and loans, to families of workers in Pakistan,” he said, saying benefits would be double than hundi and hawala operators.
“We estimate that as a result of the incentives the country would be able to receive $10 billion additional remittance within a year which also includes earning through IT exports,” Amin added.
Amin, who is also the chairman of the Pakistan Freelancers Association, said young IT entrepreneurs were being encouraged to open bank accounts for documented exports, which would also add to dollar inflows.
Responding to a question, Amin said that the planned initiative would be implemented by September this year.
Pakistan receives its largest share of remittances from the United States of America, the United Kingdom, Saudi Arabia and the UAE.
Amin said focusing on these four countries meant around 80 percent home remittance would be covered.
