The State Bank of Pakistan (SBP) has informed the exchange companies that the Central Bank will not be issuing permission to them in response to their applications for giving franchise to a third party. The central bank fears that exchange companies are facing difficulties in monitoring and supervising their franchises. However, permission to open more branch offices will be given as per existing rules to exchange companies in accordance with exposure limit fixed by SBP. We hope that this temporary suspension of giving NOCs will be overcome anytime soon and rules and regulations will be drafted to ensure compliance of SBP's instructions.
Exchange companies have for years been requesting the SBP to expedite their applications for more franchised-outlets for convenience of the general public. SBP needs to understand that opening branch offices of exchange companies is quite limited since their scope of services is also limited compared to banks that provide dozens of other services to their clients. Therefore, a proper business plan needs to be devised, after due interaction with the stakeholders that would make exchange companies viable in the commercial sense.
Withdrawal of a given facility is very difficult. This is human nature. Therefore, laws are made accordingly. At present, there are two exchange companies owned by banks. They can be used by SBP as an effective check on other competing exchange companies, provided they are staffed by people trained in foreign-exchange businesses and can provide services, after office hours as well. The SBP-licensed exchange companies can be used as effective competitors against those who are indulging in the illegal hundi/hawala business. The reason why people in general opt for hundi/hawala, despite their poor rate of exchange, is because of a high incidence of illiteracy. They hesitate to visit a bank branch as they are frowned upon due to their attire and demeanour; plus convenience and speed of delivery. SBP appears to have a perception that there may be leakages in transactions conducted by exchange companies compared to banks because of poor compliance. This can be effectively handled with better inspection and monitoring by SBP's relevant departments.
While banks do not generally confront a shortage of manpower; exchange companies do. However, exchange companies also need to improve the quality of manpower by better training and infusing discipline into their workforce. They also need to improve the education level of their staff; make them familiar with SBP's rules and regulations and also opt for higher induction of technology, provided they make profit. Collecting fees from franchises should not be the sole objective of an exchange company; they need to improve their brand image as well. There are two other issues that we need to deal with: first; 100 percent compliance with international anti-money laundering laws. And, second; enhance the ability of authorities to follow the money trail and apprehend those who are financing non-state actors or terrorists. Pakistan has grossly suffered due to the proxy war, on our turf, between Saudi Arabia and Iran. Sectarian divide can be very unsettling for our country's stability. Pakistanis need to be more tolerant and the state needs to avoid taking sides in sectarian squabbles. Whether it is the Hazara's killings in Balochistan or sectarian clashes in the North or central Punjab - the spillover of the sectarian infighting could adversely affect the entire country. We need to overwhelm the enemy within before we can fight the enemies outside. SBP also needs to reconsider paying the success fee - paid to banks of 25 riyals per 1000 dollars of remittance - to the exchange companies as well on the amount surrendered by them to SBP. This will create an even playing field between them and banks.
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