ECONOMYNEXT – Sri Lanka is reducing cross-border transaction costs for expatriate workers and making formal channels more competitive with a new money transfer app, Central Bank Governor Nandalal Weerasinghe has said.
Sri Lanka’s central bank is promoting the use of technology in the banking sector to cut costs and online usage is on the rise, Governor Weerasinghe said at an event to promote Lanka Remit, a mobile application expatriate workers to send money home more easily.
Using Lanka Remit will help track remittances and claim tax-free and other government-provided benefits, Foreign Employment Minister Manusha Nanayakkara said.
In many countries, financial start-ups, telecommunications companies as well as the banking industry were transforming the industry and reducing the need for customers to physically visit banks. In Sri Lanka, government-linked entities such as Lanka Clear helped reduce transaction costs.
However, cross-border transaction costs remained high, Governor Weerasinghe said at the launch of Lanka Remit developed by Lanka Clear, Sri Lanka’s leading clearing house for domestic transactions.
There were many reasons why people turned to unofficial channels like Undiyal and Hawala.
These include the inability to obtain foreign currency through official channels for otherwise legal transactions, as well as illegal acts and under-invoicing, Governor Weerasinghe said.
High transaction costs were also a reason.
In the case of Undiyal-style transactions, recipients sometimes received the money at home and they also enjoyed a better rate.
However, the Lanka Remit app would make it easier for expatriate workers to send money home.
Unofficial channels were based on trust and carried risk, Governor Weerasinghe said. But systems like Lanka Remit were regulated.
Sri Lanka lost official remittances to unofficial channels as the central bank printed money to trigger unsustainable credit and imports, causing currency shortages – a problem associated with loosely pegged central banks .
Governor Weerasinghe, after taking office, allowed interest rates to rise, which severely limited money printing as well as domestic private credit, which is the channel through which printed money is pushed to the balance of payments, according to analysts.
Already, economic activity and outflows have slowed and banks’ net open positions have improved.
Parallel exchange premiums were also declining.
The Lanka discount app It can be easily downloaded from places like Google Play.
Dinuka Perera, chief operating officer of Lanka Clear, said expatriate workers would need a debit or credit card to use the app.
However, efforts were underway to allow cross-border account-to-account transfers.
Lanka clear was working with Asia Payment Network which operated 11 countries
“We are also considering forging remittance partnerships with a Middle Eastern network,” Perera said. ”
“We will be able to facilitate account-to-account transfers.”