The foreign exchange and remittance sector witnessed a global drop in 2020 due to mobility restrictions and other limitations enforced to combat COVID-19 pandemic. According to World Bank’s recent report, the global remittance inflows recorded a 2.4% decline in 2020 compared to a 3.7% increase in 2019.
The value of the annual remittances of expatriates in the UAE to their home countries was Dhs156.8 billion in 2020 compared to Dhs165 billion in 2019. The outward remittances in the United Arab Emirates declined by 5%, or Dhs8.3 billion in 2020, according to the Central Bank of the UAE’s Annual Report 2020.
Despite this, the country still outperformed the World Bank’s initial prediction of a 20% decrease in remittance level this year by registering only a 5% drop. Later on, the World Bank adjusted its projection to a 7% decrease in remittance for the year.
Out of Dhs156.8 billion, a total of Dhs113 billion was remitted last year in the country through exchange companies, while Dhs43.8 billion was transferred abroad via banks, which shows that 72% of these remittances are completed by exchange companies transfer, while banks implemented the remaining percentage.
India ranked number one on the top three destinations for outward personal remittances accounting for 33.6%, followed by Pakistan at 11.9% and the Philippines at 6.7%, according to the Central Bank of the UAE. The CBUAE reported a decline of 15.6% of remittances to India and a 15.3% to the Philippines last year due to job losses and salary cuts induced by the pandemic.
“The pandemic is not over, but we are optimistic that the money exchange sector will witness around 2.4% growth this year due to several factors, including the gradual lifting travel restrictions, which we expect to continue with the rollout of the vaccine; the return of spending levels to normalcy; and the growing economic activities fueled by the implementation of key domestic projects and investment initiatives. These projects and new investments will result in a rise in demand for workers and in turn increase the requirement for remittance services,” said Rashed A. Al Ansari, CEO of Al Ansari Exchange.
“Expo 2020 is expected to drive the country’s foreign exchange and remittance sector further with foreign investments and capital flows into the local market. The amendments to the commercial companies’ law are also a positive development for the economy as a whole and our industry in specific, as promoting 100% foreign ownership onshore will drive new investors and investments into the country. These initiatives, developments and projects will be a catalyst to drive economic growth and accelerate the recovery from the downfall caused by the pandemic,” Rashed added.
He said, “We had a positive remittance performance in 2020, the company transferred a total of Dhs40.2 billion and gained a 36% market share among other exchange companies. It is worth noting that the outward personal remittances transferred via banks in the UAE reached Dhs43.8 billion combined. We accounted for 26% of the total remittances sent from the UAE during the period. For 2021, we expect to grow by 2.6% similar to the growth projected by the World Bank to Low-and Middle-income countries. Remittance is typically more resilient as it’s an essential service for individuals and corporates especially in today’s world, where cross-border trade is in its prime.”
About more exchange houses consolidation, Rashed said, “This may be the scenario for affected small businesses, as they struggle to comply with the Central Bank’s newly issued standards and regulations, which came into force in early 2018, to control and further streamline this sector. In 2020, the number of registered exchange companies in the UAE dropped to below 90 from 140 in 2017, due to various reasons such as the inability to meet the licensing and compliance requirements set by the Central Bank of the UAE. With the emergence of the pandemic and the difficult global economic conditions, we expect more of the smaller exchange firms to close, and possible acquisitions to take place among the medium and larger exchange companies.”
Rahed said, “We hope to see faster adaptation of regulatory requirements, to keep up with the fast pace of change happening locally and around the world. We also call for lowering the cost of using cards to make purchases, in general, and remittances in particular. Currently, the cost of using a debit card in the UAE is around 2-3 % which is very high.”
Mohammad Bitar, Deputy CEO of Al Ansari Exchange said, “ the company saw a significant surge in our digital transactions in 2020. The customer base across our digital channels increased by more than 212% compared to 2019, with our mobile app accounting now for more than 14% to our overall remittance transactions. we expect to see increased digital transformation activities within the industry in 2021 and beyond. we remain steadfast in our commitment to making investments in and launching digital initiatives that meet our customers’ future requirements.”
Mohammad Bitar concluded, “Al Ansari Exchange has 36% of the UAE’s market share among exchange companies and 26% of the the UAE’s market share of total remittances. we are always considering opportunities for growth and expansion that complement our strategic objectives.”
Source : www.gulftoday.ae
