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Finance (102)

Motivations to Remit

Sunday, 19 July 2015

Remittance is an oft heard word when talking about men and women moving away from their homelands to other countries for employment. What exactly is remittance? What are the motivations that drive people to remit money? What purpose do these remittances serve?

The term remittance is defined as the money sent by migrant workers to their home country or families back home.

Remittances that crossborder migrant workers send to their countries of origin are an established means of economic support to family members back home. Over the past decade or so, as the number of migrant workers has increased, remittance flows have also picked up pace.

remittance by uae exchange

For many nations, remittances are a very important source of money, more often than not making up anywhere between 5 and 40 per cent of the countryÔÇÖs GDP. These countries are highly reliant on remittances as a source of eliminating poverty and contributing to development.

As per a World Bank estimate, in 2014, remittances totalled US$ 582 billion of which US$ 435 billion went to developing countries that involved 232 million migrant workers.

According to a World Bank Report in 2014, three of the top remittance receiving countries were India, at an estimated total of 70$, China at 60$ billion, and then the Philippines at 25.4$ billion.

Why do people remit?

The motivations to remit can be explained as a combination of various economic and social factors. The scope of family support varies greatly according to culture and the economic conditions in source and recipient communities.  

Selflessness: This is considered to be the main driving force. Selflessness is the concern on the part of the migrant towards the well being of the family members still in the country of origin. This is the scenario when only one family member migrates, while spouses, children and parents are left behind in the home country. They rely solely on the support of the migrant, who dons the role of a provider.

Self-interest: This can also be a significant motive to remit. For example, the migrantÔÇÖs family may look after a property the migrant has left behind, and remitting would be a way of compensating them for this service. Also, the migrant may hope to become the beneficiary of an inheritance.┬á

Loan repayment: An inherent agreement could exist between the migrants and the relatives they leave behind. The relatives often incur the high costs involved in moving and settling abroad and the migrants repay this once they have established themselves in the destination country. This understanding can be a type of co-insurance or as an informal loan agreement.

Investment: A self explanatory term, this type of remittance is done with the intention of creating assets back in the home country. The migrants may decide to invest their savings in their home country as well as in their host country.

Whatever be the motivation to remit, the bottom line is that remittances help drive growth both at home and play a significant role in the global economy.

Currency exchange rates are not something that you consider always. It strikes you only when you have to travel overseas for business or pleasure.  But exchange rates are a source of constant concern for companies that operate in a number of countries, as currencies have a tendency to be particularly unstable. This happens because of the impact of currency fluctuations on both the top-line and the bottom-line. 

The solution to avoid any possible falls in currency exchange rates is to choose a locked-in exchange rate service. This will ensure that your currency is exchanged at the same rate, despite any factors that influence any unfavourable fluctuation.

The primary advantage of locking the currency exchange rate is that it helps manage the risk of currency fluctuations and allows you to control the costs of products and services bought abroad. 

How to Lock in an Exchange Rate by uae exchangeTrying to guess by how much a currency will fluctuate is extremely risky. The primary methods to lock exchange rates are through:

Spot Contract: A spot contract is one where you buy or sell a definite amount of foreign currency at the existing exchange rate in the market. When you do this, you have up to two days to settle the transaction. This is considered a very short-term solution for dealing with foreign currencies. 

Forward Contract: Another method to lock in the exchange rate is a forward contract. Here, you agree to buy or sell a foreign currency at a definite price at a future date. It is similar to a spot contract, but here you agree on the price and you get more time to complete the transaction. 

Foreign Currency Option: With this option you can buy or sell foreign currency at a price before or on a specific date as agreed upon by both parties. To secure this type of contract, you have to pay option money to the other party. If you decide not to execute the contract, the other party keeps the option premium. 

Interest Rate Option: This is similar to foreign currency option and you have to pay a premium to the other individual to secure the option. The only difference is that you are dealing with an interest rate contract instead of a foreign currency.

Foreign Currency Swaps: Here, you agree to trade equal amount of foreign currencies with another party at the existing market exchange rate. Then, at the end of the contract, you trade back and will have your original domestic currency.

Foreign exchange is complex, and there are no standard solutions. If youÔÇÖre unsure, consult a Trade Finance specialist who will help you get the most out of your money - no matter which way the currencies move.┬á

Foreign Exchange rate or Forex rate determines a countryÔÇÖs relative economic health and plays a significant role in international trade. A countryÔÇÖs foreign exchange┬árate offers a peek into its economic stability. So if you are considering receiving or sending money abroad, you should keep a watchful eye on currency exchange rates.

The exchange rate is "the price at which one country's currency can be converted into anotherÔÇØ. It may change daily based on the supply and demand of money and varies from one country to another. Therefore, it is important to understand the dynamics of what exactly determines exchange rates.

Factors Affecting Foreign Exchange Rates

Inflation Rates: ┬áFluctuation or change in market inflation affects currency exchange rates. A country with a lesser inflation rate than another will see an appreciation in its currencyÔÇÖs value. When inflation is low, prices of products and services will also be less. A country which consistently has a lower inflation rate demonstrates a rising currency value and a nation with higher inflation exhibits depreciation in its currency and most often has higher interest rates.┬á

Interest Rates: Changes in interest rates affect currency value and exchange rate. Inflation Forex rates and interest rates are all interlinked. When the interest rates increase, it causes a country's currency to appreciate because higher interest rates give lenders higher rates, which in turn attracts more foreign capital, and causes a rise in exchange rates. 

Recession: A countryÔÇÖs interest rates will most probably fall when it undergoes recession. This will lead to a decreased chance in obtaining foreign capital. Consequently, the currency weakens in comparison to that of other countries, thereby lowering the exchange rate.

Government Debt: Public or national debt held by the central government is government debt. It is less than likely that a country with government debt will obtain foreign capital. This will lead to inflation. If the market foresees government debt within a country, foreign investors will sell their bonds in the open market, thus causing the value of its exchange rate to decrease. 

Political Stability & Economic Performance: A country's currency strength is largely affected by its political state and economic performance. Foreign investors are attracted to countries with less risk for political chaos. Increase in foreign capital leads to an appreciation in the value of its domestic currency. On the contrary, a country that experiences political confusions may see decrease in exchange rates. 

Speculation: If a country's currency value is expected to increase, investors will demand more of that currency in order to make a profit in the near future. Due to the increase in demand, the value of the currency will rise. This rise in currency value increases the exchange rate as well.

All of these above mentioned factors decide the fluctuations in the foreign exchange rate. If you are someone who sends or receives money often, being up-to-date on these factors will help you assess the most favourable time to transfer money.

No matter where you live, you have probably always wished for an easier way to transfer money to another person without the hassle of paper money.┬áWay back in the 1990ÔÇÖs if you wanted to transfer money, you had to use Western Union's telegraphÔÇÖs text messaging service. With the advent of mobile money transfer all that has changed. All you need to do is simply tap a few keys on your cell phone and voila, the job is done! Now you can move money domestically and overseas without travelling to a physical location.

mobile money transfer - uae exchange

What are Mobile money transfers?

Mobile money transfers allow customers to carry out financial transactions via their mobile devices. Mobile phones can be used to send/receive money or transfer money electronically from one person to another. Mobile money transfers work for international as well as domestic transactions.

Benefits of Mobile money transfers

Using mobile phones for money transfers can offer considerable benefits. These include avoiding the risk associated with transporting large sums of cash (especially in distant or dangerous areas) and the flexibility to space transfers over time. Mobile money transfers also allow the recipient greater control over how the money is spent as he/she can keep the transfers secret. The availability of mobile devices and mobile network operation services in various locations enable widespread use and help boost economic and social developments on both micro and macro levels. Mobile money transfers offer easy accessibility and can be used by people both in rural and urban sectors alike. 

Safety and Security

The growth of mobile technology has made mobile money transfers more secure. Recent Smartphone apps aid direct connection and authentication of payers and recipients. Moreover, mobile money transfers are regulated. Money Services Businesses (MSBs) must be licensed in the state(s) where they do business and must adhere to suspicious activity reporting and money laundering regulations. However, as with any other industry there are potential scammers, so it is the responsibility of each individual to know who they are transferring money to.

Mobile money transfers are already being used by mobile network operators and banks to provide many unbanked consumers a way to access and store money digitally. In developing countries, mobile money transfers are changing lives by providing consumers access to monetary services and the capability to pay and be paid electronically. For some it may even be for the first time in their lives.

Thus, low cost, real time transfers and full security of mobile money promise to transform financial transactions and make life hassle free. 

Financial identity theft occurs when an unauthorized person/party steals an individualÔÇÖs personal identity and carries out crimes that result in financial injury to the victim. Information can include the personÔÇÖs name, bank account number, credit card numbers, and other personal monetary data.┬á

Financial Identify theft

Once thieves have accessed an individualÔÇÖs information, they employ the tools that can counterfeit checks or ATM cards and clean out accounts, create cellular accounts in the victimÔÇÖs name, make purchases using their credit cards, apply for car loans, and limitless other activities; all resulting in vast debts and destroyed credit.

The mental and emotional stress of financial identity fraud can be noteworthy as well.

How Does Financial Identity Theft Occur

Though there is an increased education and public awareness about this, thieves are having exceptional success obtaining private information. Due to the ease of access through online resources financial ID theft is surely on the rise. The objective of most identity theft scams is to access your bank account information or credit card. Below are some of the methods they use to do so:

Direct Theft: An old-school method, identity thieves steal your purse wallet, or financial information from your residence. They then use the ATM cards, credit cards, checks and any personal information they find for their own personal monetary gain.

Internet: Online phishing has become very common. Identity thefts happen when you receive emails from people posing as legitimate companies/individuals asking you to share your contact or credit card details. Some will ask you to send them a check.

Records: Effective and simple, identity thieves can pay off company employees, gain access to your records, hack them through a computer, or even worse, steal the records directly from a company. Sifting/rummaging through trash or Dumpster diving is another way they can obtain access to your records or mail.

Mail: Identity thieves can effortlessly steal your mail, as well as bank, credit card statements, checks, tax information and much more. 

ATMs: Using a technique called skimming; identity thieves can capture your ATM Card information. They get your information by connecting a data storage device to an ATM machine and collect your information when you swipe your card.

Protect Yourself from Financial Identity Theft

While common sense and awareness still remain the best protection against financial identity theft, added actions you can take to reduce your risk of this type of illegal activity are:

  • Maintain a record of contact information and account numbers for each of your identities in case theyÔÇÖre stolen. This documentation should be kept separately in a safe ┬á ┬á place
  • Keep track of your bank and credit card statements. Consistently review the statements for unknown charges or errors
  • Stay clear of any promotional offer that asks for your personal information
  • Never throw out documentation with your information in the trash. Thieves often look for credit card receipts, account information, and other data in this very place. ┬á ┬á ┬á ┬á ┬á ┬á You can invest in a shredder and use it regularly
  • Use protected sites to shop online

Dubai: The proposal to impose tax on remittances is met with opposition in the UAEÔÇÖs exchange business, with money transfer operators saying that it will only discourage thousands of expatriates from working in the country.


Any additional fees imposed on remittances, they said, will not only cause negative public sentiment, it will badly affect the financial system and will be disadvantageous to the receiving economies. It will also encourage a lot of people to smuggle huge sums of cash out of the country, instead of going through proper channels, thus ÔÇ£adverselyÔÇØ affecting the money transfer business.

Billions of dirhams are sent every year by UAE expatriates to their home countries, which are mostly in the developing world. One UAE-based money transfer operator reported having processed $14 billion in remittance transactions in 2013 alone.

A member of the Federal National Council (FNC) proposed on Tuesday that the UAE should impose a tax on remittances to help the government raise more money especially since there has been a drop in revenues due to low oil prices.

The plan, if pushed through, is seen to affect the majority of the UAE population, 90 per cent of whom are expatriates who regularly send money abroad mainly to provide financial support to their dependent families.

Sudhir Kumar Shetty, president of UAE Exchange, noted that the expatriates, which have undoubtedly contributed substantially towards the development of the country, decided to move to the UAE due to the ÔÇ£immense opportunities,ÔÇØ including the tax-free environment, it offers.

ÔÇ£If the country decides to put tax in any form, then the advantage is lost, discouraging people from choosing UAE as their career destination,ÔÇØ Shetty told Gulf News.

Shetty pointed out that although the total volume of money transferred by expatriates from the UAE look big, most senders donÔÇÖt remit that much, sending only about $200 (Dh734) per transaction, which is one of the lowest in the world.

ÔÇ£So a tax on it may not be perceived well by them.ÔÇØ

Shetty said there is a likelihood that, to avoid paying additional fees, people will switch to informal means of transferring funds abroad, such as through hawala or hundi.

ÔÇ£This will affect the financial system adversely and will be disadvantageous to the receiving economies, which will lose out on foreign exchange. With so much at stake, tax on remittances may not be such a good idea in the UAE,ÔÇØ Shetty said.

However, Shetty said, they are confident that the UAE will not make a rush decision on the matter. ÔÇ£We are confident that, considering migrant workers are a backbone of the country, there would not be any decisive action on this thought in haste. The UAE has always held up the welfare of its residents foremost and the countryÔÇÖs visionary leadership will continue to decide on any issue relevant to the society with considerable thought on cause and effects.ÔÇØ

Sudhesh Giriyan, COO of Xpress Money, shared ShettyÔÇÖs view, saying that taxing remittances will discourage a lot of people from pursuing job opportunities in the UAE.

ÔÇ£The driving factor for people to come here in the Middle East is no taxation. But in the future, if thereÔÇÖs going to be a tax like this, people might think about it,ÔÇØ Giriyan told Gulf News in an earlier phone interview.

He said the impact will be felt strongly by the workers who barely make Dh1,000 a month but are sending money on a monthly basis to support their families back home.

ÔÇ£For the blue-collar segment, where the money they earn is very small, if they have to pay tax, it will pinch their pockets and the money they send back home will be much lesser.ÔÇØ

Expatriates interviewed by Gulf News had said that they struggle to save a portion of their monthly income in the UAE because they have families to support in their home countries. According to HSBCÔÇÖs survey, 92 per cent of UAE residents have at least one dependent.


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ÔÇ£The world is a book and he who doesnÔÇÖt travel only reads one page.ÔÇØ ÔÇô St. Augustine

protect your money while travelling - uae exchange blog
Rightly said! The purpose of travelling is to enjoy yourself, soak in the colours, ambiences and flavours of a new land. As a tourist, you are an easy target for thieves and even a small financial disaster can spoil your vacation. But with a bit of foresight and planning you can protect yourself from such outward instances.

Inform your bank: Notify the bank of your plans to travel abroad. This will ensure that debit/credit cards are not cancelled because of unusual spending patterns.

Carry an anti-theft bag: Anti-theft bags are designed especially for travel, with features such as steel-cable-reinforced, cut-proof shoulder straps, locking zippers and slash-proof fabric. Investing in such a bag would serve as a deterrent for thieves and save you money in the long run.

DonÔÇÖt carry too much cash: Needless to say, carrying too much of cash is risky. If it is stolen, it is gone forever.┬á Carry only the amount that you are comfortable carrying around. Carry just enough cash to cover costs for transport, tips, food etc.

Use travellerÔÇÖs checks: A safer bet than carrying cash is to use travellerÔÇÖs checks. They are prepaid cards that are available in many currencies. Moreover, travellerÔÇÖs checks are convenient, easy to use and are accepted at certain bank machines.

DonÔÇÖt keep all your money at one place: If you have all your cash in your bag, and the bag is stolen, itÔÇÖs all gone. Instead, a wise decision would be to carry a combination of cash and card. Keep the cash and credit cards in various places. You can carry some in a bag; some in the suitcaseÔÇÖs secret compartment or leave some in the hotel safe. If youÔÇÖre travelling with someone, each of you can hold a portion of the money.

Be cautious with conversions: When converting currency choose a bank or exchange booth with a better rate. Avoid converting currency at airports as they will have higher fees. Stay clear of any local who says he/she can help exchange your money for you, as it is in all probability a scam. Also, ensure that youÔÇÖre aware of what the actual conversion rate is.

Contingency planning:
        * Make copies of all your credit and debit cards. Keep  set at home and carry a set of copies
        * Stay away from ill-lit areas and those places where thefts occur
┬á┬á┬á┬á┬á┬á┬á * DonÔÇÖt hang bags off the back of chairs or leave them on the floor
        * Be aware of your surroundings

When you travel you are susceptible to theft. It's easy to get lost in your environs and misplace things. But with some added safety measures, you can protect your money and have fun on your trip.

Weak economic growth in Europe, deterioration of Russian economy to weigh down on money flows


Remittances from the UAE and around the world to India, Philippines and other countries will continue to grow this year but not at the same pace as the previous years.

The number of expatriates working overseas is still growing and migrants are still sending a portion of their incomes to their  home countries, but some exchange houses said they are already seeing a slowdown in money flows during the first three months of the year.

The World Bank has forecast that remittances to the developing world will reach only $440 billion this year, an increase of 0.9 per cent over the previous year, which is the slowest since the global financial crisis in 2008-2009.

The slowdown will be due to weak economic growth in Europe, deterioration of the Russian economy, depreciation of the euro and ruble and decline of oil prices.  Remittance flows to countries in East Asia  and Pacific region, in particular, will increase by just 2.8 per cent this year, a marginal growth compared to the previous years.

"The moderation in the growth of remittances will be hard on many poor people. The affected countries may have to consider creative ways of smoothing the shock," said  Dilip Ratha, lead economist, migration and remittances, at the World Bank's Development Prospects Groups and head of the Global Knowledge Partnership on MIgration and Development.

Sudhesh Giriyan, COO of Xpress Money, said the remittance growth from the UAE has already slowed down, but he pointed out that there has been no de-growth.

"Looking at the World Bank's assessment on a slowdown in remittances because of the lack of major investments in the last one year, from the time oil prices started declining, we do agree that the remittance growth has also slowed. We may not see the same growth as compared to previous years, but we see a marginal growth," Giriyan told Gulf News.

Other money transfer operators, however, maintained that remittances from the UAE remain unaffected.

Ashwin Shetty, senior vice president for treasury operations at UAE Exchange, said they saw a 10 to 13 per cent increase in outbound remittances in the UAE during the first quarter of the year.

"Weak economic growth and fall in the euro and ruble has certainly affected the European economies and remittances from Europe to other countries will be affected and there will be a fall. In the case of the UAE or largely GCC, the oil price plunge may not affect remittances to Asian corridors," said Shetty.
"The remittance industry in the UAE is not dependent only on oil prices but on the versatile business models that drive the economy. Some key investments in Abu Dhabi will add to the momentum of growth."

"There may have been variations in remittances to Asia, largely based on the Indian rupee fluctuations," he added.

Giriyan also pointed out that the UAE is now the third-largest source of remittances after United States and Saudi Arabia, and still enjoys huge financial surpluses which were amassed over the past years when oil prices were still rising.

"The apprehension may be, that these surplus funds will deplete ove rthe years and if the low oil prices continue, investments in new projects could suffer, which will curb the job market that will have a direct impact on migration and remittances," said Giriyan.


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Budgeting ÔÇô An overview

Friday, 22 May 2015

Manage your spending by creating and sticking to a budget. - Alexa Von Tabel

Budget planning

In ordinary terms, a budget is a plan for likely income and expenses for a given period. A budget provides an easily understandable breakdown of how much money is coming in and how much is being spent. Creating a budget does not mean that all your money troubles will be sorted out, but it is an important step to determine your financial health and create financial stability.

Advantages of Budgeting

Careful budgeting can vastly affect your financial situation. Frustrating, as it is to create a budget, adhering to it is even harder. But truth be told, the advantages of budgeting are manifold. 


          * Helps develop a money spending plan 

          * Allows you to always have enough money for the things that are important to you and things you need

          * Helps identify any wasteful expenditure if any

          * Is a sure fire way to work your way out of debt if you are currently in debt or better still, stay out of debt.

          * Decreases stress

Preparing a budget

Some major categories that you will have to include in the budget are housing, utilities, food (groceries and dining out), insurance, travel, clothing, entertainment, and miscellaneous. Keep in mind that you will need to budget for some expenses that will not occur every month. More importantly, your budget should allocate some amount towards personal savings like retirement savings, an emergency fund, or any other savings goals you may have. Set aside money for your savings first.

Tracking the Budget

It is important to track your expenses either on a weekly or monthly basis. This will help to see if you are actually adhering to the budget. You can track your spending on an ongoing basis via an Excel spread sheet, an online service or a personal finance program. Tracking your spending is a tedious task, but is essential to find out exactly where your money is going. When you track the budget, you may notice certain areas where changes have to be made. Consider all the available alternatives before make changes to the budget. 

Create a budget, track it, adhere to it and see the difference when you make your hard earned money work for you.  


Saving for a Rainy Day

Thursday, 21 May 2015

ÔÇ£Save for a rainy dayÔÇØ. Many of us have heard our grandparents or parents say this. What this adage essentially means is to put away money when times are good, so that it can be used at times when financial situations are not all that great. Planning for an emergency is the key to dealing with the many challenges that life throws at you- especially unplanned reductions in income and unforeseen emergencies.┬á

A rainy day fund goes a long way in developing and maintaining financial security. It also keeps you well prepared to tackle any monetary crisis that may occur. Lack of rainy day funds create ÔÇ£financial stressÔÇÖ and also lead to debt.┬á

There is a difference between a rainy day fund and an emergency fund. While a rainy day fund is meant to cover one-time events, emergency funds are designed to cover all living expenses for about three to six months. A rainy day fund can be converted into an emergency fund if not used.

* Build a money plan that shows you all sources of funds, and where your money goes each month. Then break that plan into common expense categories like education, food, housing, transportation, etc. Based on your money plan, you can then decide how much can be directed into the fund on a rainy day fund monthly basis.

* Start saving right way! There is no time like NOW! Promise to save at least a minimal amount of your paycheck. Begin by putting aside small amounts into the rainy day fund and then look at increasing it. Something is better than nothing.

* Track your spending and maintain a file of all your receipts, however small they might be. Review your expenses at the end of the month, identify any unwanted/uncalled for expenses and reduce spending in those areas. If you have spent, less than you budgeted, deposit the excess in the rainy day fund.

* Make saving for the rainy day automatic, by putting aside a part of your paycheck towards the rainy day fund. You can set up automatic transfers into your savings account.

          * Revisit your money plan on a frequent basis and look for opportunities to save.

┬á ┬á ┬á ┬á ┬á * DonÔÇÖt stop once your rainy day fund is fully funded.

Protect yourself against lifeÔÇÖs calamities by having a rainy day fund. ┬áWith a little bit of planning and foresight you can weather an economic storm when it occurs.



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