ISLAMABAD-Rashid Ashraf serves as the CEO of ACE Money Transfer, a Manchester-based online remittance provider. He has been an integral part of the team since 2002, contributing significantly to its growth and success aiming to make international money transfers more accessible and affordable for individuals wishing to support their loved ones back home. ACE Money Transfer contributes to 10 percent of remittances from Europe to Pakistan and Mr Ashraf, ACE CEO, is a key stake holder of Pakistani remittance industry and has been vocal of enhancing financial inclusion and promoting economic development in Pakistan.
We recently had an in-depth discussion with Mr Ashraf regarding foreign remittance, the depletion of foreign reserves, its underlying causes, and potential regulatory measures to address and mitigate this situation.
Why do you believe the foreign reserves of Pakistan have seen a decline in recent months?
The depletion of Pakistan’s foreign reserves is due to a range of critical factors that include persistent long-term trade deficits, inappropriate government spending, political unrest, and inefficiencies within public sector organisations. However, several other factors have also contributed to the ongoing decrease in the nation’s foreign reserves, including the underground black market trading of USD, as well as persistent concerns related to the smuggling of oil and gold. Import restrictions have also encouraged the growth of informal channels and black-market activities. Additionally, disparities between interbank and open market exchange rates have created arbitrage opportunities, attracting Pakistani expatriates to use informal remittance channels.
In your opinion, what factors contribute to the demand for black money in Pakistan?
In Pakistan, the demand for black money arises from tax evasion, corruption, and illegal activities like drug trafficking and terrorism. Another big reason is the lack of financial inclusion. Many people in Pakistan do not have access to formal financial services which makes it difficult for them to save and invest their money legally. As a result, some people may turn to black money as a way to store and transfer their wealth.
What measures should be taken to manage the decline in foreign reserves?
To protect Pakistan’s foreign reserves, a comprehensive strategy is necessary. Firstly, strengthening border security is crucial. This involves implementing advanced surveillance technology and infrastructure at border crossings to better detect and discourage smuggling activities. Simultaneously, intensifying efforts to combat smuggling, including imposing stricter penalties, and launching public awareness campaigns to highlight the risks of engaging in illegal trade are essential steps. Secondly, to ensure the legitimacy of imports, implementing a proof-of-funds requirement at ports is also important. Furthermore, airports should enhance surveillance measures to effectively address smuggling and financial crimes, and the public should be encouraged to report any suspicious activities they encounter.
What strategies can be employed to encourage Pakistani expatriates to utilise legitimate formal remittance channels?
To encourage Pakistani expatriates to use formal remittance channels, raising awareness about the advantages of formal channels, such as lower fees, faster transfers, and enhanced security, is crucial. Moreover, enhancing the convenience of formal channels is essential, which can be achieved by introducing more flexible and user-friendly transfer options and more favourable exchange rates for money sent through official banking channels.
Another effective approach is to encourage end users to receive remittances directly into their bank accounts or mobile wallets by offering transaction bonuses. Furthermore, providing incentives to expatriates sending remittances can result in a significant increase in legal channels. These incentives may include streamlined airport processes facilitated through designated booths, special rewards based on lucky draws or total transaction volumes, simplified loan acquisition processes within Pakistan, and enhanced security measures for property purchases and investments.
How do you think the State Bank of Pakistan is rectifying this issue?
The State Bank of Pakistan (SBP) has raised the capital requirement for exchange companies from Rs200 million to Rs500 million. This decision aims to ensure that such companies possess the financial capacity to handle unforeseen challenges and comply with regulatory obligations.
How does ACE Money Transfer contribute to addressing this issue?
ACE Money Transfer plays a significant role in promoting remittance through legitimate channels. Firstly, we provide free-of-cost, round-the-clock remittance services to ensure that sending money home remains affordable. Using state-of-the-art technology, we offer 7-second payment transfers even on bank holidays, making our services convenient and accessible for individuals to send and receive funds. ACE Money Transfer offers various remittance options, including payment to bank accounts, cash pickups, and mobile wallets, tailored to individual needs. We have allocated a significant budget for collaborative marketing and awareness campaigns with major Pakistani banks to promote the use of legitimate remittance channels.
We also offer a special remittance programme for overseas Pakistanis, providing benefits such as prizes for senders and beneficiaries of remittances. For example, in collaboration with Pakistani banks, ACE Money Transfer awarded six brand new Kia Sportage SUVs, brand new Toyota Fortuner, cash prizes of 10 million rupees each to overseas Pakistanis who used legal remittance channels to send money to Pakistan. Incentives like these truly make a difference.
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