Arab Monetary Fund, SBP in talks to integrate cross-border remittance platforms

KARACHI: The Arab Monetary Fund (AMF) and the State Bank of Pakistan (SBP) are engaged in technical-level talks to integrate their payment systems and facilitate cross-border remittances between the Arab region and Pakistan, the deputy governor of the SBP said.

The chairman of AMF and the governor of Pakistan’s central bank signed an agreement last year to establish a framework of cooperation between Buna, a cross-border payment system operated by Arab Regional Payments Clearing and Settlement Organization (ARPCSO) and owned by AMF, and Raast, a Pakistani instant payment system for real-time settlement of small-value retail payments, including inter-bank peer-to-peer and person-to-merchant transactions.

Technical talks are now on to integrate the two systems and facilitate millions of Pakistanis living in the Gulf region by enabling them to send remittances in real time at a lower cost. The integration will also benefit businesses through instant, safe and cost-effective cross border payments and aims to strengthen economic, financial, and investment ties between Arab countries and Pakistan.

“After signing the MoU, the negotiations are on with the technical teams, and at the technical level, the modalities and the developments needed at the end of Buna and at the end of Raast, they are being worked out,” Saleem Ullah, the deputy governor of the State Bank of Pakistan, told Arab News on Wednesday.

After the completion of the technical level talks, details would be shared with the vendor for execution, he added.

“Fortunately, the vendor is same for Buna and Raast. Once we are able to finalize the requirements, then those would be shared with the vendor, and then the vendor would be able to give us the timeline within which that development would be possible,” he added.

He said the execution of the project would take at least a year “but it would depend on the vendor estimates with respect to the developments that are to be developed for the purpose of developing this interface.”

Financial experts believe the initiative would benefit about five million Pakistanis living in the Gulf region and help Pakistan boost its remittance inflows through legal channels.

“The benefit for 5 million plus Pakistanis living in the Gulf would be lesser hassle in remitting money to Pakistan because the dependency on other international similar platforms see longer transaction turnaround time as these platforms either exist in the US or other markets,” Danish Kazi, financial and political analyst based in UAE, told Arab News.

Kazi said both affordability and access for common Pakistanis to encourage remitting through legal channels would increase with the new initiative.

“This would also help business transactions which means more export opportunities for Pakistani goods and services in the region,” he added.

The aim was to regulate remittances through State Bank of Pakistan instead of them moving via non documented sectors.

“Further, these remittances through Buna to Pakistan may also assist SBP to raise funds from Gulf markets using these as collateral or toward payments of such financing via commercial or government banks,” Kazi said.

Islamic finance

The central bank’s deputy governor said Islamic finance will help achieve the goal of wealth creation in Pakistan, and the banks need to take this mission on.

Saleem Ullah told the NIEF-2024 that the interest-based banking system is a kind of exploitation that enables the lender to unfairly profit from the pressures placed on the borrower. To create wealth in society, the deputy governor pushed Pakistani banks to take up this task.

According to him, the Islamic banking system would promote the cause of wealth creation in Pakistan. “It is unfortunate that our business community after keeping their profit-making businesses secret from the State Bank approaches the banks for making them partners and seeking loans for their loss-making ventures,” he said.

He encouraged the nation's philanthropists, who felt that they should donate their wealth to worthy causes, to use Islamic banks for their financial services.

Saleem Ullah assured the audience that the SBP was fully committed to the cause of financial institutions adopting the Islamic banking system by the end of 2027 as per the Federal Shariat Court directives. He said that some 180 meetings had been held with the different stakeholders to achieve this cause.

He said that religious schools and seminaries should impart financial and economic education to their students.

He informed the audience that the Islamic banking and financial system had come a long way in the past 20 years but this mission should continue further.

According to him, there are up to 75 percent of Pakistani farmers lack access to the banking system, even though all citizens ought to have equal access to it.

Renowned religious scholar and NIEF Patron-in-Chief, Mufti Muneeb-ur-Rehman, complained that the Islamic banking system had been progressing at a snail’s pace.

He said it seems unrealistic that the deadline set for the year 2027 could be achieved in this regard.

He said that the issuance of Sukuk after mortgaging the immovable assets in the country could never prove beneficial for the national economy. He said the incoming elected rulers in the country would have no option but to approach the International Monetary Fund to secure further foreign financial assistance.