A western union outlet
The US based international money transfer company, Western Union, is expanding operations in Sri Lanka and in turn expanding its share of the country’s inward remittances market.
In an interview with The Sunday Times FT, Ratheesh Kumar, Western Union’s Country Director for Southern and Eastern India, Bangladesh, Maldives and Sri Lanka, talked about Western Union’s plans for Sri Lanka.
“The focus is to reach out to more rural consumers. We are also keen to bring more technology into the money transfer industry over the coming years, like mobile money transfer facilities,” said Mr Kumar. But while mobile money transfer is still some years away from Sri Lanka, the company is already focussing on building up its market share. This week, Western Union, that previously operated in Sri Lanka through a network of agents and a consultant, opened its own office in Colombo. The company is also expanding the number of its agent locations.
“We already have 2,600 agent locations in Sri Lanka that people can use to receive money. Over the next 6 months we will increase the number to 3,000. This will increase access into formal remittances channels,” said Mr Kumar.
The company’s agent network already includes 10 state banks, Amana Investments and companies like Singer, Abans and Central Finance.
Netting informal remittances
Global money transfers are expected to hit US$ 400 billion this year, from about US$ 269 billion last year. Meanwhile, Sri Lanka’s inward remittances are expected to exceed US$ 3.0 billion, compared to the US$ 2.5 billion last year. A majority of these inward remittances are the wages of unskilled workers, like housemaids, mainly working in Middle Eastern countries. These humble housemaid send-homes, have made remittances the island’s number one foreign exchange earner, eclipsing net income from the biggest manufactured export, garments. According to the Central Bank annual report, worker remittances are estimated to have financed about 70% of the country’s trade deficit in 2007.
However, in countries like Sri Lanka and Bangladesh, the volume of informal remittances, that bypass the formal financial system, are considered to be as large as formal remittances. Western Union is trying to tap into this large unofficial flow of funds.
To do so, the company is directly tapping into potential remittances by marketing itself at the Foreign Employment Bureau. The increased awareness, generated through marketing activities at the Foreign Employment Bureau, is expected to shift more informal remittances into the formal financial network.
“The official remittance forecast for Sri Lanka in 2008 is US$ 3 billion, but on top of that there are all the unofficial transfers,” said Mr Kumar.
“People use informal systems not because it is cheaper but because they do not have access to formal channels. Therefore, we will go the Foreign Employment Bureau and share the information about our facilities with people who are planning to go abroad to work. We are far more reliable and cost effective than using informal systems. In fact, the remittance growth indicates that over the last few years people have been shifting to formal channels,” said Mr Kumar.
Emerging South Asia
South Asia has now become one of the fastest growing markets for money transfer companies.
“More people from this region are going to different parts of the world to work. South Asia is now one of the fastest growing markets,” said Mr Kumar.