Holiday makers are pleasantly surprised to find Pakistanis settled across Europe, North America, the Middle East and even Africa. There are some 7 million of them out there, working in and out to support their families at home by way of sending back their savings.
Remittances are often the backbone of an economy; and for Pakistan it is even more crucial in todays fiscally constrained times.
According to central bank figures, remittances sent home by overseas Pakistanis averaged about $5 billion in the last five years. Whats more, an additional $7-10 billion is also transmitted back through the traditional "hundi" system.
Recently released figures from the State Bank of Pakistan reveal a marked increase in home remittances in March to $763 million. That number is about 30 percent higher than what was received in February. Similarly, in the nine month period ending in March, remittances were up 28 percent over the corresponding period last year.
When the remittance numbers peaked in September last year, a number of media reports cited increasing inflows from the Middle East owing to a slowing regional economy. While there might have been some truth to that logic, credit should also be given to structural changes taking place during that time in Pakistan.
Pakistan Remittances Initiative - a joint-venture between the SBP and the Ministries of Overseas Pakistanis and Finance - was launched in October last year, in an effort to increase the flow of remittances through formal channels. This initiative has been taken to achieve the objective of facilitating, supporting, faster, cheaper, convenient and efficient flow of remittances.
Putting the initiative into action, the central bank launched a Real Time Interbank Settlement System (RTGS). This drastically reduced the time it takes for funds to be settled between the many banks in Pakistan.
National Bank of Pakistan, the countrys largest commercial bank had virtually no system for remittance handling until June 2009. Thats when Mr. Khalid Bin Shaheen, armed with many years of experience in remittance operations at Habib Bank, was brought in to launch PakRemit - NBPs internet based home remittance service.
By reducing the time to channel remittances, from 3-15 days to almost real time, NBP grabbed a 10 percent share in the remittances pie. It also rose to the top stop for settlements through RTGS in 2010, with a 32 percent share.
What it really means is that proper infrastructure and people with expertise are the recipe for turnarounds in relatively short periods.
Opportunities abound for financial institutions as around half of the total worker remittances are still handed down informal routes. Financial institutions could do well by facilitating workers abroad and by addressing the cultural tendencies to trust informal networks. Doing so could potentially double their income from remittances scheme.