A few leading money exchange houses in the UAE have increased remittance fees by between seven and 10 per cent to “cope with the rising cost” of doing business.
Fee for remittance below Dh1,000 has been increased by Dh1, up from Dh15 to Dh16, and for amounts above Dh1,000, to Dh22 from Dh20, Rajiv Pancholia, CEO of Orient Exchange of Dubai, said.
Pancholia, who is also treasurer of the Foreign Exchange and Remittance Group (FERG), said the rate hike, effective since April 5 for Orient Exchange, was in consideration of escalating costs of operation resulting from rent and salary hikes.
The decision to increase fee was taken by some of the major exchange houses on an individual level and not as a group under FERG, industry sources said.
Promoth Manghat, CEO of UAE Exchange, said the fee hike — effective from April 15 for his firm — was kept at a nominal level at less than seven per cent for amount below Dh1,000, so that it will have little impact on blue-collar remittance.
“However, despite the latest slight increases, the UAE still has the world’s lowest remittance rate at 2.5 per cent compared to the global average of 7.5 per cent,” Manghat said.
According to the World Bank’s latest Remittance Prices Worldwide report, the global average fee remained stable at 7.45 per cent in first quarter 2017, compared to the 7.40 per cent recorded in fourth quarter 2016.
In first quarter 2017, a total of 77 per cent of all services recorded in RPW were below an average cost of 10 per cent.
Annually, the amount of money that UAE expatriates send to their home countries is estimated at above $20 billion.
The 2016 World Bank migration and remittances fact-book ranks the UAE as the fourth top remittance-sending country in the world. The aggregate outflows represent 4.8 per cent of the UAE’s gross domestic product. The six GCC countries accounted for $98 billion in outward remittance flows in 2014.
According to industry sources, cost of remittances is one of the major hindrances in the flow of money across borders. “It impacts the low-wage earning blue-collared workers, who might reduce the frequency of sending money for family maintenance in the home country. Or it could encourage them to switch to informal means of sending money home, which is not a healthy practice as it affects the receiving economy’s foreign exchange reserves adversely and could create trigger unhealthy practices affecting the socio-financial fabric,” one analyst said.