The workers’ remittances rose nearly 21 per cent to $4.126 billion during the July-February compared to the same period during last fiscal year. In 2007, the remittances were at a healthy $6.1 billion as compared to India’s $27 billion. However, a new approach is required to increase these remittances to finance economic growth and improve peoples’ livelihood.

In other South Asian states, remittances are not only the largest source of foreign exchange but these contribute to economic development. Remittances of $1.6 billion now exceed exports and tourism in Nepal. In Sri Lanka, remittances of $2.7 billion are more than tea exports. In Bangladesh, remittances of $6.4 billion are five times the foreign assistance.

For the last two decades, remittances in Bagladesh have been around 35 per cent of export earnings, making it the single largest source of foreign currency earner for the country.

This has been used in financing the import of capital goods and raw materials for industrial development. The steady flow of remittances has eased the foreign exchange constraints, improved the balance of payments, and helped increase the supply of national savings.

The remittances also help promote access to financial services for both--the sender and recipient--- increasing financial and social inclusion. About 10 per cent increase in per capita remittances, according to some estimates, leads to a 3.5 per cent decline in the share of poor people. A striking example of the effects of remittances on poverty reduction comes from Nepal where the poverty headcount ratio has declined by 11 percentage points between 1995 and 2004 – a time of great economic and political difficulties.

In Pakistan, remittances have more than doubled over the past five years. However, remittances through ‘hundi’/money courier, friends, relatives, and parents are still high.

’Hundi’ system provides the quickest method for sending money while bank transaction requires complex paper work.

The system uses the social network of migrants with a door-to-door service. And the cost of remittance transfer through official channels at both sending and receiving ends are high. At the receiving end, the official channel costs include service charge, speed money, conveyance, etc. For ‘hundi, costs involve phone charges, conveyance, and small fees for transaction.

Normally, remittances through official channels take a week or four working days as compared to a ‘hundi’ which takes 24 hours to three days.

The government has taken steps to rejuvenate the banking system by reducing the minimum limit for the reimbursement charges from $200 to $100, converting money changers into foreign exchange companies and enhancing the bank efficiencies.

But the cost of transferring money through banking channels are still high and should be rationalised. A typical poor migrant sends about $200 or less per transaction. For sending $100, he would typically have to pay $16. Reducing remittance fees would increase the disposable income of poor migrants, as well as their incentives to send more money home. Banks tend to provide cheaper remittance services than money transfer operators. Encouraging account-to-account transfers is likely to increase savings from remittances, and will contribute to financial development of remittance recipient countries.

The transfer time needs to be minimised and the banks’ efficiency also needs are improved. The banking industry exploits different technologies to deliver financial services with the proliferation of automated teller machine (ATM) and point-of-sale (POS) network and devices.

The use of a mobile phone to conduct payment and banking transactions (m-banking) is at an early stage in a number of developing countries and is growing as mobile phone service providers are penetrating the developing markets. Some banks have started improving their infrastructure for the purpose.

A good percentage of those who are remitting money and their families are less educated, and are not familiar in dealing with formal institutions. Migrants are not aware about the need for having a bank account. But bank officials should be trained and motivated about the importance of remittance. Migrant workers should be encouraged to open accounts before their departures abroad.

The State Bank may consider allowing banks to appoint brokers/agents who help in mobilising individual remittances. This appears to be an effective tool to mobilise remittances of Bangladeshi migrants.

Both sending and receiving countries can increase banking access of migrants by allowing origin country banks to operate overseas, providing identification cards (such as the Mexican matricula consular) which are accepted by banks to open accounts, and facilitating participation of microfinance institutions and credit unions in the remittance market. These institutions can deliver remittance services in poorer communities and in remote areas. They can in turn benefit as the availability of remittance services may attract customers for their loan products.

A segment of migrants mainly send remittances through informal channels. Therefore bank procedure must be simplified for them. In Philippine, banks overseas facilitate opening of account by accepting documents other than passport.

Foreign missions can organise regular meetings with community associations to encourage official remittances. In order to design their targeted interventions, they should collect information regarding a number of migrants, their professional background and area of concentration in the receiving countries. Indian government has generated global data on migrants of Indian origin.

Bilateral agreements for training and skill development of migrants also increase the flow of remittances. A MOU on Temporary Migration Programme has been signed between Pakistan and South Korea to train and employ Pakistani workers there. Incentives shouldalso be provided to private recruiting agencies to undertake such training programmes.

Vocational training should be incorporated in mainstream primary and secondary level curricula. Even, in provinces and federal level syllabus Arabic should be treated as an international language. The migrants from India, Sri Lanka and Bangladesh in their first three months put all their efforts in GCC states to learn Arabic to get a better job.

The Bureau of Emigration & Overseas Employment says that in the last seven years, more than 271,000 Pakistanis left abroad for employment. It means that , on an average, over 38,700 Pakistani workers set foot on foreign soils every year. Officials do admit that the number is low and Pakistan needs to export at least 60,000 workers annually to compete effectively with countries like Bangladesh, Sri Lanka and the Philippines—the countries that are fast outnumbering Pakistanis in the Middle East.

In this situation, the government should take measures and equip their migrants with modern skills and needs. Philippine raised the number of nursing schools from 13 to 700 to compete the demand of hospital attendants and today nursing is a main source of remittances it receives. Now India and China are following suit. Pakistan can also learn from the experiences of other Asian countries to increase its remittances.