Steady remittance flows to fuel the next stage of socio-economic growth in India
Exchange houses are optimistic of healthy outflow of remittances to India from UAE in 2022
Despite disruptions in economic activities, employment and travel-related restrictions, remittance flows worldwide remained stable during the pandemic. Officially recorded remittance flows to recipient countries reached $540 billion (Dh1,983.1 billion) in 2020, just 1.6 per cent below the 2019 total of $548 billion, according to the World Bank’s Migration and Development Brief.
At a time when the world is going through several challenges, of which increased household and public expenditure is a reality, the increased inflow of remittances will be a driving factor in the recovery of the Indian economy.
The main drivers for the steady flow in the past two years included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates, the report states.
With global growth expected to rebound further in 2022, remittance flows are projected to increase by 2.2 per cent to $565 billion this year from $553 billion in 2021. Flows to India – the world’s largest recipient of remittances – reached $87 billion last year, with a significant chunk coming from the UAE.
“The Indian corridor has continued to perform well despite the pandemic. However, with the Indian rupee getting stronger as compared to the last quarter of 2021, we are seeing consumers adopting a wait and watch approach,” says Richard Wason, CEO, LuLu International Exchange. “This has resulted in a natural drop in remittances, although, we expect this to be made up for in the near and mid future. For us, 2022 will be an extension of 2021, with the Indian corridor registering strong growth.”
India retained its position as the UAE’s top remittance corridor last year. The volume of money transfers to India increased during the period due to the currency fluctuations we witnessed over the past few months.
For Al Ansari Exchange, the overall remittance level in 2021 rebounded from 2020. “Our outward remittances grew over 5 per cent last year following the reopening of the national economy and the ease of restrictions globally,” says Rashed A. Al Ansari, Chief Executive Officer at Al Ansari Exchange.
“India retained its position as the UAE’s top remittance corridor last year. The volume of money transfers to India increased during the period due to the currency fluctuations we witnessed over the past few months,” he adds.
Al Ansari expects the growth momentum in remittance outflows to continue through 2022. “The resumption of international travel despite the Omicron variant, along with stronger oil prices and the pick-up in economic activities, has also contributed to the remittance industry’s steady recovery.
“We are confident of more vibrant remittance flows this year as the positive trend in economic activity continues.”
Economic recovery
Experts believe that the increased flows of money from UAE-based NRIs will play a significant role in fuelling socio-economic recovery post-pandemic.
“At a time when the world is going through several challenges, of which increased household and public expenditure is a reality, the increased inflow of remittances will be a driving factor in the recovery of the Indian economy. The inflow will increase the purchasing power of families and businesses, playing a crucial role in shoring up the economy at both the regional and central level,” says Wason.
Meanwhile, exchange houses in the UAE have rapidly accelerated their digital transformation to support the market’s changing expectations and needs.
Going digital
“Innovative tools have reduced the time it takes to remit money, from days to minutes, and have effectively lowered associated fees. This has helped the cost of remittances in the UAE, the world’s second top-remitting country after the US, to be at half the global average, as per the World Bank,” says Al Ansari.
He adds that Al Ansari Exchange will continue to enhance its digital channels. “The percentage of our customer base using the Al Ansari Exchange mobile app is growing exponentially. It now accounts for more than 15 per cent of our total transactions.”
Lulu International Exchange also noticed a strong uptake of digital services. “The inclination among UAE consumers for digital payments is showing an upward trend and we are seeing many new players evolving through attractive fintech propositions. As a leading financial services provider in the UAE, we are constantly assessing consumer behaviour, and brought in new payment modes in our digital offering – LuLu Money – to adapt to these changes,” says Wason.
With the increasing technological developments, more focus is on how quickly and seamlessly money can be transmitted across geographies. That said, it is essential to focus on security aspects as well, says Wason. Through its ongoing enhancement in technology, LuLu International Exchange is looking to reduce turn around time or TAT for remittances to its major corridors to 15 seconds.
“Once completed, this will be an industry milestone,” says Wason. “Furthermore, our internal exercise to convert our physical branches into consumer engagement centres, as well as the planned rollout of digital kiosks in some of our branches, will provide convenient touchpoints for existing and new users in their transition to digital payments.” ●