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Financial literacy — need of the hour

Published on 5th Sep, Edition 36, 2016
Diaspora and migration

Remittances are the most tangible and least controversial link between migration and development. Diasporas of various nations are mutually beneficial to both the sending and the receiving countries. They send home the money to help their families and friends, financially. And they often acquire advanced education and technical, professional and managerial skills and contribute to solving problems in their host nations. Given the right political and policy context, the members of the diaspora can also help their countries of origin by using deep knowledge of their home countries and by offering advanced skills, experience and knowledge acquired in more developed nations.

One of the key strengths of Pakistan is the demographic bulge especially growing proportion of young adults unlike some of the developed countries which are having increasing proportion of aged citizens. Pakistan has a capacity to send across large number of young unskilled and semi-skilled people. Having over 18 million plus population in the age group of 25-35, Pakistan can put this valuable asset for the good of the country by imparting training in different technical fields to respond market needs abroad. Certainly there is no second opinion about restricting the flow of manpower to different countries as it brings both social and economic benefits to our country such as it reduces poverty and unemployment, it helps increase foreign remittances, which could be diverted to viable development projects. The returning workforce brings back the experience and knowledge that facilitate in technology transfer, skills development and knowledge exchange.

The Philippines model

Philippines has very high remittance inflows and one of the strategies they have adopted is to train and debrief the outgoing workers before they depart. In the Philippines, the training is very comprehensive and mandatory.

In Pakistan, unfortunately, people do not attend the pre-departure training conducted by the Bureau of Emigration & Overseas Employment (BEOE). 85 percent of our outgoing workers are illiterate both in terms of education and also in terms of financial literacy. This is a disadvantage relative to the Philippines but it is also an opportunity, because if we can tap them and train them properly before sending them abroad, then not only can we prevent them from using ‘hawala’ for their remittances but also give them basic financial literacy and can improve financial inclusion in the country.


Benefits of financial literacy

A large increase in home remittances is really a very good development for Pakistan, particularly at a time when exports are at a standstill and current account balance of the country is still under a great deal of tension. Also encouraging is the fact that the increase in remittances is not confined to a country or a region but has originated from almost all the countries suggesting the onset of a positive trend.

Home remittances have evolved as one of the key factors supporting our country’s economy. Hundreds and thousands of Pakistanis working overseas, open doors for foreign currency inflows in the country. It also helps bridge the current account deficit. Furthermore, inward remittance inflows provide much needed liquidity in the market and also facilitates growth in household consumption, which in turn boosts the economy. Inward remittance by migrant workers also boosts deposit base of the banking industry. Moreover, savings by the households are also channeled into the capital market providing sources of funds to the corporate sector. Home remittance is annually over $20 billion industry out of which approximately 50 percent of the remittances are coming now through the established legal channels.

Pakistan’s economy has been tested several times by domestic and global crises. Despite the global financial crisis, workers’ remittance to Pakistan is showing an upward trend. It has been observed that remittance flows to Pakistan have shown remarkable resilience as compared to foreign direct investment during and after the global crisis.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan


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