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28 March 2024

UAE Exchange targets $18bn in remittances

In the Gulf, it is remittance that is providing far bigger business for money exchanges than foreign exchange activity. (EB FILE)

Published
By Nissar Hoath

The largest private money exchange house in the country – the 30-year-old UAE Exchange – has reached a market share of 50 per cent of the UAE's remittance market. It is set to enter Saudi Arabia and expand its presence in Africa, according to its top executive.

In an interview with Emirates Business, Sudhir Shetty, Global Operations Chief Operating Officer of UAE Exchange, owned by the Abu-Dhabi-based NMC Group of companies, said the company is set to increase its global remittance activity out of the UAE to over $18 billion (Dh66bn). The NMC Group of companies also owns Abu Dhabi's first and only pharmaceutical manufacturer, Neopharma.

Shetty also outlined the company's plans to expand and become a world leader.

How is the money exchange business faring in the country, particularly in Abu Dhabi?

Abu Dhabi is showing growth now. In the past, the emirate used to be quiet in terms of construction and infrastructure activities.

We see more activity in this regard now, which is generating positive impact for our business.

Last year on average, UAE Exchange handled about $16bn in global remittances. In 2008 we had less than that – about $14.7bn. So we have seen growth in 2009, though the growth percentage was lower than we had [in 2006 and 2007]. In sheer numbers, we have grown. This year, even if we achieve an eight to 10 per cent growth, it will be very healthy, considering various factors [affecting the economy]. This year we expect at least about $18bn of remittances [worldwide] out of the UAE.

Who are UAE Exchange's largest remitters from the UAE in terms of nationalities?

In the UAE, the largest community is from India, so naturally the largest remittance goes to India, followed by Bangladesh, the Philippines, Pakistan, Nepal, Sri Lanka, Indonesia and then other countries. About 45 to 50 per cent of the remittances go to India, as per the number of transactions and amount. Recently, Bangla?desh has really picked up, and so has Pakistan.

Pakistan has picked up because of lots of incentives their government is offering to encourage remittances through proper and official channels. We have seen considerable improvement in remittances to these countries from the UAE.

How many branches do you have in the UAE, and are there plans to open more branches?

We have 84 branches across the UAE. We are applying for more branch licences and the Central Bank is the authority to give these licences. We want to expand our network further to cater to the needs of customers and make it more convenient for them to come and do business because we have seen lots of new areas, new townships and dwelling units that come up. We are planning to do business and serve all these small communities that are coming up. We want to open as many outlets as possible.

With regard to our global operations, we are in 22 countries with 476 offices and branches and 6,800 employees. We are in the entire GCC, except Saudi Arabia. We have a huge network in India, Pakistan, Sri Lanka, Bangladesh, Nepal, the Philippines, Hong Kong, China, Indonesia and Australia. We are in Fiji. In Australia, we have 37 branches.

In Saudi Arabia, we are waiting for the right time, in terms of regulatory requirements and approval from the central bank, such as licensing formalities. We are already working on it and if everything goes ahead as planned, we should be in Saudi Arabia very soon. It is one of the biggest markets that we cannot afford to ignore. We are waiting for the right opportunity and the right time.

What will be the next region that you will be entering into?

The next region to do well in terms growth will be Africa. We already have the licence to operate in Morocco. We are also in an advanced stage to get the clearance in Kenya. We are going to Rwanda, and we are exploring the market in Egypt. Our long-term strategy is to explore as many markets as possible in Africa, including South Africa. The focus will definitely be Africa.

In your business, which of the two – remittance or foreign exchange – is doing better?

In the Gulf, it is remittance that is providing far bigger business than exchange activity. But that does not hold good for all regions. For instance, Hong Kong, Australia, Fiji, New Zealand and the UK are the markets where foreign exchange activity is strong because of they being tourist destinations. But at the same time, remittances are complementing other businesses.

When we talk about remittance, which of the two – banks or exchange houses – is doing better?

Dealing with remittance and foreign exchange are the only two activities that an exchange company can take up. So the concentration on the level of service is very high compared to banks. For banks, these are not priority products. This is one part. The other part is the reach, and the kind of network and business hours we have. For instance, our counters are open from 8am to 11pm seven days a week, making it convenient for people to remit and buy currency.

There is also competitiveness in terms of pricing, and networks with banks worldwide. We have technology that has helped us manage the volumes and make the process quick and error-free. [This is why] people patronise exchange houses more than banks when it comes to remittances.

What is UAE Exchange's share in the local market?

We have almost 110 exchange companies operating in the UAE and the amount of remittances they handle is about $25bn to $30bn going out from the UAE annually. I think our share is over 50 per cent. This is our 30th year of operations in the country. We have been adapting the new technology, and basically listening to customers' requirements and delivering what they need. Gone are those days when [it was sufficient] to say that I have a product. We go to the customer to ask what he needs and tailor-make products that suit them. This is how we made a mark in the market.

Is hawala – the practice of unregulated and unofficial transfer of money to the Subcontinent – affecting your business?

Traditionally, for the past 10 to 15 years, and even before that, hawala had been operating well because of two reasons. It used to be faster than the formal system and cheaper. But today, formal channels that we are adopting are as fast as hawala. You pay here, and the same minute it is ready for delivery on the other side. In terms of prices, we are as competitive as they are.

What has happened over a period of time is that people who were opting for hawala have moved to official channels because of the swift services and the expanded network of branches, even in remote areas, set up by companies like ours. Of course, hawala operators are still in business, but most people have moved to us and to banks now. There has been a big shift from informal to formal channels in the recent years due to government intervention and better services by money exchange houses and banks.

Hawala thrived because of its door-to-door remittance services and its presence in the most remote and isolated areas. Now, for example, in India, we have the Reserve Bank that has allowed banks to appoint individuals, post offices and small businesses such as grocery shops to represent them. And this is also happening in Pakistan. These transactions are also being connected through internet banking as information technology is fast reaching the remotest areas of these countries. Central banks in countries like India and Pakistan are allowing banks to engage the last mile access to the customer who comes from the remotest area of the country.

We have seen this happen in the recent past. Earlier, around 50 per cent of remittance used to go through informal channels, but today 90 per cent go through official channels.

What impact has the ongoing global recession had on your business?

The ticket size, the amount per transfer, has dropped. This is probably because some companies have reduced salaries or some others who were revising the payscales upwards every year [have stopped]. When an increment does not happen and when the cost of living goes up, that puts pressure on savings. Because of this, the amount that has been remitted also got affected. So we see a slight reduction in the amount per transaction.

However, we see a lot of infrastructure coming up in the region, especially oil-related investments and infrastructure developments such as mass transport projects, railway networks and metros. When we see the Vision 2020 and 2030 of Abu Dhabi and other emirates, and the region, we see growth. This is good news, not only for the remittance industry but also for all.

As the global recession affects all industries across the globe, it has naturally had an affect on the Gulf as well. But in terms of the intensity of this impact, it is far lower in this region compared to the rest of the world. For instance, the European and American markets will take longer to come back to normalcy, whereas the GCC has the capacity to bounce back sooner because of oil prices being at very encouraging levels and governments continuing to spend on developing infrastructure. Here we are seeing both local and foreign investments coming in. So the numbers and amounts we now see dipping in a small scale will definitely pick up. It is only a matter of time.

Is the scenario you have given across the board – has spending in all the industries and sectors been affected because of this?

Not really. When I say the industry is affected, the food, health and remittance activities are the least hit because these are mandatory provisions one has to keep.

Normally, people go for a wait-and-watch approach when it comes to luxury items or expenditures that they can postpone. But these [food, health and remittance] cannot be postponed. Especially when it comes to remittances, there is a family back home waiting for money. People come to us every month and remit money as long as they get salaries.

If you look at middle and high-income groups, when there is an element of uncertainty even these people who have the capacity to spend do not do so. This results in slowdown in the economic activities. But now, slowly, that confidence [of spending] is increasing. So I hope to see reverse [of a slowdown] happening.

Profile

Sudhir Shetty is the COO, Global Operations, UAE Exchange. He has worked in several audit firms in financial management, and has a decade's experience in income, concurrent and statutory auditing for various banks and insurance companies. In the late 1980s, he set up his independent auditing practice.

In 1990, Shetty joined the NMC Group as internal auditor and in 1991 he was promoted to the position of head of UAE Exchange.

Born in 1959 in Mangalore, in the southern Indian state of Karnataka, Shetty has a bachelor's degree in law and an additional degree in commerce from the University of Mysore in India. He did the Key Executive Programme from Harvard Business School in 2000.