DUBAI: Saudi Arabia saw a seven percent drop in personal transfers by non-Saudis in July, according to latest central bank figures, but optimism for the remittance industry is strong.
In its monthly bulletin, the Saudi Arabian Monetary Authority (SAMA) showed remittances falling from SR13.5 billion in June to SR12.52 billion in July – a drop of almost SR1 billion.
The COVID-19 pandemic that paralyzed industries and halted international travel contributed to this short-term decline, remittance expert Praveen Chandiramani said, but a rebound is expected.western union
“The remittances in this quarter – starting from July to September – is definitely going to rise,” he told Arab News, attributing it to the return of migrant workers to the Gulf.
Chandiramani, who has worked over two decades on the Gulf’s money transfer sector, added: “Expatriates who were stuck back home are slated to come back as borders reopen, and hopefully that will drive remittances.”
Global remittances in 2020 dropped 1.6 percent below pre-COVID levels, according to data from the World Bank, but experts remained optimistic about the recovery of the industry given that personal transfers provide a “critical lifeline” to families in low-income countries.
In fact, in the Middle East, countries such as the UAE and Saudi Arabia remained to be the largest sources of remittances during the year.
“The pandemic didn’t stop me from sending money to my family in the Philippines. I even had to increase my monthly transfer because I knew their situation was much worse,” a Dubai-based Filipino waitress, who wanted to stay anonymous, told Arab News.
Chandiramani said recovery in remittance flows was expected as countries slowly cope with the changes brought by the pandemic.
“The entire world felt the tremors of the pandemic – people started working from home, there were lockdowns and other knee-jerk reactions from governments, but in the end, it was important to save a life,” he said.
He added: “In spite of the fact that the salaries were a bit bad in certain cases in the initial part of the COVID-19 pandemic, over a period of time, it has just picked up.”
Future of remittance
Aside from remittance figures, Chandiramani also highlighted the ongoing developments in the Gulf’s financial technology scene – which includes innovation for the money transfer sector.
“I think in the next three to five years, blockchain is going to be the order of the day. With this technology, the settlement time and cost will come down,” he said.
His company, WorkerAppz, is already using blockchain technology in some of the markets they serve – but its real potential will rely on banks and governments joining the system.
“While some banks in the Philippines, India, Pakistan, and Nepal have gone on blockchain, you require the entire system to follow suit – that’s how it would really show the advantage of blockchain,” he explained.
The popular fintech buzzword could offer broad advantages to the remittance industry, the expert said, including the security of payments.
Industry experts said blockchain’s decentralized nature makes it “practically impossible” to hack.