Why remittance is Vital
Remittances, also known as the funds transferred by individuals residing in a foreign country to their home country, constitute a crucial income source for millions of families globally.
The United Nations’ Sustainable Development Goals (SDGs) identify remittances as a lifeline for many struggling families and communities in developing countries. Remittances are directly used to provide food for families, access health services and quality education, as well as clean water and sanitation. This is especially beneficial for expats who have families in rural and remote areas, where access to other income sources is limited.
Remittances can be instrumental in starting or expanding small businesses, creating employment opportunities, and driving local economic growth. In fact, some experts believe that remittances may be even more effective at reducing poverty and promoting economic growth than foreign aid.
According to the World Bank, remittances to low- and middle-income countries (LMICs) grew an estimated 3.8% in 2023 to reach $669 billion as resilient labor markets in advanced economies and Gulf Cooperation Council (GCC) countries continue supporting migrants’ ability to send money home.
Navigating Challenges and Seeking Solutions
In the UAE, where approximately 2.2 million blue-collar workers made up about 52% of the nation’s workforce in 2023, a significant portion of this demographic faces challenges due to their earnings falling below the threshold required by traditional banks. As a result, they lack access to conventional financial services, especially digital banking solutions. Consequently, they rely on exchange houses to send money to their families overseas, which involves additional costs such as transportation expenses, long queues, and high fees.
Additionally, the absence of bank accounts among this segment means they have no access to formal lending systems. Without a credit history or financial records confirming their creditworthiness, they are more susceptible to exploitation by informal lenders who employ aggressive collection practices and charge exorbitant interest rates, also called ‘loan sharks’.
According to The National, incidents like a borrower in Dubai allegedly being beaten by three men over a Dh500 debt that had grown to Dh6,000 in interest, and a Filipino engineer being fatally stabbed in Abu Dhabi in 2009, highlight the significant risks associated with alternative lending sources. These cases underscore the dangers faced by borrowers who turn to informal or illegal lenders, exposing them to physical harm and extortion in pursuit of debt collection.
This underscores the urgent need for accessible and inclusive financial solutions to empower underbanked workers and protect them from financial vulnerabilities.
Empowering the Underbanked
Providing affordable, equitable, and secure financial services to those who lack access to traditional financial institutions is not merely a strategic business move; it’s a moral imperative that aligns with our core values and societal responsibility. We are providing millions of individuals with access to legal lending solutions and protecting them from predatory lending sources.
Our commitment to financial inclusion goes beyond profit margins; it’s about empowering individuals and communities by giving them the tools and resources they need to manage their finances effectively. By bridging the gap between the unbanked and financial services, we aim to create a more inclusive and equitable financial ecosystem where everyone has equal opportunities to thrive.
