The global pandemic and the escalation of the exchange rate of the US dollar against the Sri Lanka Rupee has placed tremendous pressure on our chief source of foreign exchange – remittances from expatriate workers.
Remittances from workers abroad heads our top foreign exchange sources, together with income from our exports and in bound tourism. But tourism was nearly crushed to near zero levels and export income dipped dangerously low with the frequent lockdowns during the height of the pandemic disrupting normal production and services.
Macroeconomic instability due to COVID-19 pandemic created economic turmoil exerting pressure on the domestic financial sector.
Our economy therefore became more dependent on our earnings from expatriate workers during these past few years.
A considerable portion of our expatriate foreign exchange income however was being chanelled to the country through informal sources like Hawala.
World Bank predictions that South Asian countries dependent on expatriate worker remittances as their chief source of foreign exchange would see a decline of more than 20% in income from this source, has not held true for Sri Lanka. In fact, on the contrary our income from worker remittances increased from US dollars 6.8 billion in 2019, to US dollars 7.2 billion in 2020.
The main reason for this increase was the fact that the informal channels our expatriate workers use to channel their earnings to Sri Lanka were not operating in 2021 due to the frequent pandemic driven lockdowns experienced worldwide.
The pandemic created heightened uncertainties in the global economy and the financial markets leading to a recession in global activity.
However, with global economies returning to pre pandemic economic activity, worker remittance has once again slipped back to US dollars 5.1 billion.
In a wide-ranging interview with BMD, BOC’s AGM International, Mr. Ranjith Ruwanpathirana, discussed the importance of capturing more foreign exchange remittances through the official channel of the commercial banking system. He spoke of the Bank’s recent series of initiatives to attract more foreign remittances to the Bank of Ceylon (BOC) through attractive incentive schemes.
He also spoke of several awareness programs run by the bank to educate workers’ families on the importance of saving in foreign currency, by maintaining savings and fixed deposits with the bank.
Excerpts from the interview:
Q: What are the recent initiatives the BOC has introduced to capture a higher level of worker remittances to your bank?
A: We have introduced three types of incentives. We pay RS. 2 per dollar for all worker remittances to our bank. We also paid Rs. 2 per dollar for currency conversions to Sri Lanka Rupees. This includes all foreign currencies including the dollar, euro, pounds, yen and all middle eastern countries etc. In addition, we reimburse the remittance charge upto Rs. 1000 for every currency conversion transaction of over Rs. 20,000. This means that for example if a person remits funds of over Rs. 20,000, five times in a month they are entitled to a reimbursement of Rs. 5000.
Q: What are the bank’s immediate measures to tap into the informal channels of worker remittances?
A: We have launched various competitions/draws with some attractive, valuable prizes which have definitely lured some workers from informal channels of remitting their salaries to BOC.
The Banks’s “Pita Pita Rata Thagi” now in its third season was very successful in attracting more worker remittances to our bank. In the first season 100 scooters were gifted to each of the lucky winners. In the second season we offered a Toyota Wigo as the grand prize draw.
From the success of the past two seasons, we expect even greater participation and an overall increase in our foreign remittances in the third season which begin on April 1st and end March 31, 2023.
Q: What measures have you taken to enhance your relationship with correspondent banks and exchange houses?
A: Our strong relationship with correspondent banks and exchange houses is a key aspect of our drive to expand our foreign exchange portfolio of worker remittances.
We have launched a scheme called BOC Thagi Waram, where each year we identify and work with some of these agencies to bring our expatriate workers enhanced benefits of remitting their salaries through these exchange houses. This year we are working with Western Union and Moneygram where our workers are eligible to receive spot gifts when transferring money though these agencies and be eligible for the grand year end draw with 10 gold sovereigns and many Rs. 25,000 and Rs. 10,000 worth gifts.
We work with around 800 correspondent banks worldwide which are the backbone of our trade finance operations.
Q: Does the bank have a business plan to increase their share of foreign exchange remittances in the long term?
A: We are in the process of increasing our number of Business Development Officers stationed in key overseas destinations where worker remittances are high. These officers assist and educate workers to remit their earnings through formal banking channels. At present we have 25 such officers in the Middle East and South Korea and we intend to increase them to 35 by the end of the year.
We also are addressing the importance of educating workers families on the advantages of saving in foreign currency with a long-term view of building up a valuable investment from their monthly income earned in foreign currency. The tendency and practice with many expatriate blue collar workers are to send their earnings through informal channels which would give them a higher conversion rate for the Sri Lanka Rupee. The funds reaching their families each month would be spent on household and other expenses. Hardly anything or nothing at all would be saved as a security for their future when the breadwinner returns home at the end of their employment.
We are working together with the Foreign Employment Bureau to hold a series of awareness programs at provincial level where families of expatriate workers are given the options of saving the income sent by expatriate workers and using only part of it for their living expenses.
Q: Does the bank offer any other special benefits or concessions to expatriate workers who remit their money through BOC?
A: We have introduced a pre departure loan scheme for all Sri Lankans working abroad on employment visa, between the ages of 18-50 years, holding a valid Sri Lankan passport. The purpose of this special loan scheme is to meet expenses, such as airfare, SLBFE registration fee, visa fee, medical expenses and acceptable incidental expenses. Maximum loan amount varies according to deployed country such as Rs.1,000,000 for Israel Rs.850,000 for Japan, Rs. 600,000 for South Korea and Rs.500,000 for any other country. This is a guarantor loan scheme and repayment period will be decided based on the probable tenure of employment abroad up to 20 months. We have also introduced a special pre departure loan maximum amount of Rs.1.5M for Israel as a property back loan.