November 2018 was a bad month for remittance inflows; the month clocked in poor year-on-year growth of only 2 percent. In light of recent developments, however, some industry players believe the full year FY19 government target of $21.2 billion may well see the light of the day – the five-month growth is already at 12.6 percent.

In a circular released to banks, microfinance banks and exchange companies earlier this week, the central bank has announced a performance-based scheme encouraging them to increase their marketing, promotional and awareness efforts for home remittance products and services. The scheme is essentially financed by the government of Pakistan with the amount to be reimbursed at the end of the year against the evidence of these marketing and promotional efforts.

Under this scheme, remitting institutions will receive one rupee per incremental dollar mobilised over and above 15 percent year-on-year growth in FY19 compared to the amount they mobilised in FY18. Had this incentive been offered on corridor-wise growth, it may have been more effective, considering that total remittance growth has been rather sticky in the last three years averaging just 2 percent. Even the targeted growth in total remittance this year is 8.2 percent if we are to take government’s forecast of $21.2 billion, and barely 4.6 percent if we take the average of SBP’s forecast range of $20-$21 billion. Memo: FY18 total remittance was $19.6 billion.

Ergo, pegging the incentives after the banks/etc meet nearly twice the growth targeted by the government itself, is asking a little too much. But opinions in the remittance market are divided, with some market players saying this incentive will help growth; others being cautious. And as things go in this business, it’s too early to say, although, since half the fiscal year is already over, don’t be surprised if 15 percent plus growth isn’t met.

Anyhow, these incentives are over and above the increase in subsidy (from Re1 per dollar remitted to Rs2 per dollar) offered on remittance mobilisation through branchless banking. The move is aimed at increasing financial inclusion so that people send through mobile wallet instead of cash counter. The government of Pakistan is also offering air time worth Rs2 per dollar remitted through mobile wallet – the move is aimed to switch remittance business from hawala operator to formal channel.

In another interesting development, sources in banking industry say that Standard Chartered Bank, which has already partnered with Ant Financial to be the core partner bank for its new blockchain cross-border remittance solution across OBOR countries, is soon to launch a low-cost instant remittance transfer through blockchain in Malaysia-Pakistan corridor. The SCB didn’t comment by the time of writing this note but the market sources say the product may be launched as soon as next month. Whether or not these developments will help grow remittance beyond 15 percent come June, it seems there isn’t any option but to wait and see.