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Unbanked People and How Remittance can Help Bring People to the Financial System in UAE

Dubai is a delight to the eyes and to the heart, I am sure you are nodding your head in agreement with what we have just asserted. Rich lifestyle is an attribute that is deeply entrenched in this city, not forgetting that this lifestyle is a fast-moving one which is not only allowing the city to grow but is also breeding growth in its inhabitants. The location of this city is a suitable juncture between the east and the west, which has led to its financial growth.

Speaking of UAE's financial history, it has long been intertwined in trading, predominantly oil. However, as the times are evolving Dubai has repurposed its aspiration and has decided to grow beyond fuel and has become a premier business and communications hub in the UAE.

You know the career opportunities that you are going to find in this place are unfathomable, this is the reason why most people may want to move to Dubai. Although the country has been facing some issues regarding the unbanked people, but don't you worry, it knows how to solve its problems. So, this article will explain how remittances can be used to fight poverty and increase the financial inclusion of unbanked and underbanked people. But first, let's take a quick view of the situation of unbanked people in UAE.

The Situation of the Unbanked:

The rate at which Dubai is prospering has not only attracted capital but also people from across the globe. This has led about 85 percent of the inhabitants of Dubai to be expats. Did you know that the domestic financial and business services sector of Dubai has grown by 55.6% which was only 29.35% prior to 2017?

Now, despite this growth in the financial services of the country, this is what the country is facing:

  • 60 to 65 percent of the population are either unbanked or barely banked.
  • These are the people who use one bank account for receiving salaries as well as for transferring remittances and they do this without making use of the huge world of financial services which can be very useful for them.

Now, according to an article in Gulf News, the traditional banks in Dubai offer their services to the top 30 percent earners and the others are left to make use of inefficient alternatives.[1]

The benchmarks which have been set throughout UAE to open a bank account are pretty high – to say the least – the account holders must earn a mean salary between $800 to $1300 a month. If we have a look into the statistics – it can be understood that there are 70 percent people who stand ineligible to open bank accounts in Dubai. [2]  Thus, if you are somebody who earns around $500 in UAE – there is a very high probability that you are going to be financially excluded, doesn't sound very great, does it? You will not be able to avail a variety of financial services which come in handy and speed the financial exchange procedure, otherwise.

The unbanked expats who are a part of Dubai decide to send their earnings to their home country wherein their family spends on things that they consider need the most attention. If you are one such expat – you will do the same. This will keep you from saving for the future, yours or your family's because it is not possible to stash money under the mattress all the time, right? This has led to the birth of a huge market for remittances. According to Forbes, $100 billion is sent out of UAE to countries like Pakistan, India, Bangladesh, and the Philippines. 

Financial inclusion and its perks: 

Broadly speaking, financial inclusion is the need of the hour because it allows the people to lay hands over financial services which are going to help them derive optimum levels of utility out of it.  The key behind financial inclusion is that the services that the users will be conferred must be affordable, to say the least.

Also, financial inclusion is going to impact the society that we inhabit positively. Some added perks of the financial inclusions are:

  • One of the major aims of financial inclusion is to provide better access to financial services to the unbanked and underbanked people, and this is where it brings benefits to Dubai.

  • It helps in smooth running of the day to day transactions which includes the sending of the money along with its receiving procedure.
  • It helps the household in safeguarding the savings, which means it helps in the management of cash flow spikes, plus helps in smooth consumption and build working capital.

Thus, the financial inclusion improves the overall family's welfare by providing access to bank accounts and payment services.

Remittances and its link with financial inclusion:

If we peep into the global scenario, we are going to be startled by the fact that 38 percent of the working-age adults does not have access to financial services. Devastating right? The lack of access to financial services is going to mean that the people cannot save their money in their accounts – thus, they will not be able to generate interests out of it. They cannot even lend their money out to be used for productive purposes and a lack of financial history is further going to keep them away from maintaining a record of creditworthiness in the economy.

This means that the people can either save their money by investing in durable goods or keep safe with themselves wherein their money is rendered useless unless a purchase is supposed to be made. In the case of borrowing money, these people have to resort to local lenders as well as relatives. For instance, if you are an individual who has decided to rely upon their relative to obtain money – it will not always be necessary that the required sum of money shall always be available. Also, they may charge interest rates beyond the stipulated amounts.

On the other hand, the image you are an individual who has constant access to financial services – life would be way simpler, right? Technology does have its perks to offer to all of us. You can leverage the benefits of a smooth consumption, increased investment in production purposes, increased levels of productivity because money is readily available. You can spend money on education as well as health and stay up to date with the trends of the world. Also, you can do away with any unforeseen expenses, right? The benefits that are going to be accrued for you, as an individual, are immense. All this is going to make a loop of benefits, allowing you to invest in local communities. This will lead to the growth of an otherwise impoverished household. Sounds great, doesn't it?

Reiterating the fact that financially excluded are migrant workers as well the families that they have back in their home countries. Globally, this segment of workers account for a remittance transfer from host countries to home countries worth $430 billion yet this segment has not been tapped. The financial sector out there is either not being able to comprehend the needs of this sector or is not being able to understand how to cater to their needs. Once complete sense or a better understanding of this segment is made – it would become easier to benefit the home countries and their respective infrastructures. Alongside, the financial sector is bound to get better.

Given the huge bandwidth that remittance flows are capable of scaling – its recognition will lead to development as well as the financial inclusion of the people. It is necessary for the governments as well as the private sector to formulate models as well as policies which are going to maximize the utility that will be driven out of remittances.

What should be done?

According to the operational demographics throughout Dubai, we understand that the financial institutions have little regard for people who earn below the mean salary. However, at the end of the day, the flow of remittances will allow an integration between the commercial interests of the financial institutions with the needs of the senders and receivers of the remittances. How is it that remittances can fetch a sustainable financial service to the migrants?

1. If a proper channel of communication is forged between the senders, recipients, as well as the financial system – remittances, can help mend a long-term relationship for the financial institution and the clientele of the institution is bound to increase by multiple folds.

2. A remittance receiving family would prefer saving over spending, given the benefits they can leverage once they have availed the financial service. This will help in generation of the creditworthiness of the account holder.

Furthermore, the financial institutions are not only going to benefit from the transaction fee of the said remittance – but they are also going to generate revenue streams once the people begin to save. The financial institutions will then be able to mobilize the savings of the people and be able to give out loans at a greater rate. This will aid the economy to tread on its path of growth.

A symbiotic relationship is; thus, going to be established between the system and the person so concerned. At the end of the day; however, it remains for the financial institutions to recognize this opportunity that they have in hand.

Another formula that the financial institutions can make use of by means of the range of services that they have got to offer is that home country banks can attract the savings of the migrants in their country of origin. On the other hand, host country banks that have foreign ties with migrants' country can help enhance the saving procedure by formulating strategies which are going to benefit on a huge scale.

Banking the unbankable using other alternatives:

No tables must be left unturned, whatsoever. Given the immense number of people who are financially excluded – it becomes imperative to open up other means by which there is a sure shot at the financial inclusion of the people. Technology has opened up various means for us to do so. We no longer are dependent upon traditional financial institutions alone – we are also open to the use of mobile wallets.

The fintech boom is all over the world but it is a slow-growing procedure in the middle east. People are yet to explore the possibilities but this does not mean that Dubai is going to be left behind. Interestingly, Dubai is known as "the city of gold" because of how it shifted from being a sleepy Gulf port to being a hub for all the businesses to hone into. Living up to its name – people based in Dubai are trying to do away with the traditions and trying to introduce fintech to its marketplace.

People in Dubai have not budged from the idea of a fintech start-up, and you can see this through various initiatives. Mobile wallets are now popping up into the market of Dubai and are also gaining importance because of their increasing emphasis on financial inclusion. As you have observed a high maintenance financial infrastructure in Dubai – the mobile wallets tend to serve as a cost-effective method in this case. It is the mobile payments which help resolve issues which pertain to the operation of an informal economy and help provide financial services to small size businesses or the users who cannot be included in the financial institution so operative in Dubai.

Financial inclusion is not an easy procedure and is bound to take a lot of time. We, as a whole, are yet to take many steps which are going to allow a global outreach of financial services for everyone. Nonetheless, steps to achieve this in Dubai are being taken place at a fast pace in tandem with start-ups like RemitNow, C3, and Mint.

However, we must not forget that financial inclusion needs to be implemented properly and must be custom-made for each segment of the market – especially the migrants or the people hailing from a rural region who are unable to gain access. Microfinance services, low-cost transfers, and other such services are going to help in the overall social development. No matter what, we must not forget that we need to take measures to ensure the security of each individual who is to be included.

Also, you must not lack information about such initiatives to ensure you can leverage financial inclusion in a financial hub like Dubai. Also, policy changes and intervention are a must so that an incessant number of people can be included in this bracket so that people like you and us can work towards our personal financial goals. 


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Khalid Chami

Khalid Chami



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24 Dec 2017



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This post is from a series of posts in the group:

Financial Inclusion

The financial services industry has much to contribute to the UN and World Bank goal of full financial inclusion by 2020. This group will focus on industry contributions, ideas, barriers and enablers.

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