Business News
UAE currency exchanges confront remittance drops
Abu Dhabi: Remittances from the UAE this quarter could drop by 20-25 per cent from a year ago as job losses and salary cuts take their toll.
“Remittance transactions in the first-half of April witnessed a 30 per cent decrease; however, this drop reduced to around 15 per cent by the third week and improve as we get closer to the end of the month,” said Rashid Al Ansari, CEO at Al Ansari Exchange.
The World Bank has projected global remittances to drop by 20 per cent this year, with the Middle East and North Africa expected to see falls by 19.6 per cent to $47 billion. “The drop has been across-the-board and represented through the demographics we have in the UAE,” he added.
There are a number of reasons for this, including exchange houses being closed in the receiving country, as well as many residents saving money…
“The World Bank’s forecast is pretty much in line with what we seen so far and it’s going to continue that way at least until the second quarter. We haven’t seen the end of it.”
Declines across the board
Remittance declines were also reported at LuLu International Exchange, as well as at other exchange companies. “March was business as usual, but as we entered April the impact definitely started to be felt,” said an associate at one of LuLu’s main branches.
“There are a number of reasons for this, including exchange houses being closed in the receiving country, as well as many residents saving money to be able to sustain themselves during this time as their own salary situation has been affected. And others have just lost their jobs.”
Going cashless at low costs
Al Ansari said UAE regulators need to step in and make it less costly for exchange houses to transition to cashless and digital payments.
“For example, remitting Dh1,000 using a debit card will cost a typical exchange company between 2-2.5 per cent resulting in a Dh20-Dh25 fee. When you are charging the customer Dh16 for the transaction, there is no way the exchange company can absorb this cost.
“Although there are alternative methods like UAE Payment Gateway System, not all banks are members and is not as user-friendly compared to using a debit card.
“I urge the relevant authorities to tackle this major hurdle in digital payment fees. This could be by introducing a local scheme with a cap on the fees per transaction like in Saudi Arabia and Kuwait. K-net in Kuwait charges a fixed fee of less than Dh1 regardless of the amount, which is easily absorbed by the merchants including exchange companies.”