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M-Wallet – a partnership of banks with Telcos

With the growing influx of remittances, now touching US$2.5 billion per month and COVID-19 still hindering movement of people, there is a need to further improve delivery system. One of the reasons people has been using Hawala or Hundi system was speedy delivery of money at the homes of recipients, particularly in the rural areas.

The COVID-19 pandemic has placed unprecedented restrictions on travel, trade, and economic activity, triggering a global economic crisis. As a result, remittances to developing countries were expected to fall sharply. Families of the overseas workers, many solely dependent on the remittance flows sent from abroad, were expected to suffer acutely. For the families, remittances offer much needed income to support consumption, access to healthcare, and education. In Pakistan remittances represent a sizeable portion of financial inflows which support macroeconomic stability. In the post-pandemic environment, where economic recovery will be the priority but there will be fewer remittances to support it, there is urgent need for exploring ways in which the development impact of remittances can be magnified. This could come from financial innovation, education and digital services.

Enhancing the collection and quality remittances data is imperative for evaluating and monitoring policy decisions related to the economic impact of remittances. This will be crucial for government to design effective policy that mitigates large and sudden shocks, whether that is macroeconomic, financial sector or social protection policy.

The main source of remittances data is Balance of Payments (BoP) data, which is compiled by financial institutions like national central banks and the IMF. These datasets include aggregate information about remittances inflow and outflow, and analysis of remittances trends and projections.

Remittance records of financial institutions capture only a portion of the actual remittance flows. This is primarily because remittances are often sent through informal channels, such as in-person transfers and because formal transfers are not always recorded as remittances.

In addition, the diversity and complexity of migration-related financial transfers raises many questions about which transfers should be regarded as remittances. Aggregate data are also subject to the variations of compilation on a national basis. Concepts and methodologies are not applied uniformly.

Home remittances are a major source of income for families of expatriate Pakistanis and contribute significantly towards country’s economic activities. Moreover, these are a vital source of foreign exchange for the country. To accelerate the inflow of home remittances through banking channels and facilitate expatriates with a reliable, swift and cost effective conduit to transfer money to Pakistan, State Bank of Pakistan (SBP) has launched an M-Wallet Scheme for the promotion of Home Remittances. These M-wallets are specifically called Branchless Banking Home Remittance Accounts (BB-HRA).

Under the scheme, banks in partnership with telcos have introduced new, or tag the existing, M-wallets for home remittances. Users of these M-wallets will be able to receive home remittances in their accounts and use them when needed to withdraw cash or transfer funds, make purchases or pay bills. Every USS equivalent of money received in these accounts will also be provided with an airtime of two rupees equivalent in their mobile phones.

Accounts may instantly be opened/activated at a bank branch or a branchless banking agent with minimum documentation through biometric verification. Already opened M-wallets (Branchless Banking Level accounts) may also be designated as BB-HRA through an easy registration process.

On receiving home remittances in BB-HRAs, free airtime will be extended in the SIMs registered against these accounts. For example, on receiving USD 100, the cellular number will receive free airtime of Rs200 on the registered SIM.

Home remittance can now be received directly in M-wallets and there is no requirement to visit a bank branch, fill forms or stand in a queue to receive the remittance.

Remittances received in M-wallets may be withdrawn from branchless banking agent network throughout the country. One can also withdraw cash from an ATM by using ATM cards issued against M-wallets.

Funds from M-wallets may be transferred to any other branchless or conventional banking account for easy payments to friends, family or anyone.

M-wallets can also be used for payment of electric, gas, telephone and mobile phone bills or top ups.

Banks will remunerate the balance available in M-wallets as per their policy and guidelines.

This account is meant for beneficiaries of home remittances i.e. individuals having Pakistani nationality only. Individuals can open these accounts on singular basis. One CNIC holder can open only one M-wallet (BB-HRA) in a bank.

These M-wallets can only be fed with home remittances i.e. money sent from abroad. No local deposit is allowed.

One can keep a maximum balance of PKR. 1.5 million in the account.

There is restriction on receiving home remittance on a daily basis (subject to maximum balance limit). One can withdraw cash up to Rs50,000 per day and up to a maximum of Rs500,000 in a month.

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