The licenses of over 356 moneychangers for operating
money exchange business will be expired on June 30, 2004 and there would
be no further renewal of these licenses by the State Bank of Pakistan.
Under the policy these moneychangers would now be
working under the title of a foreign exchange company for which the
State Bank has so far issued 16 licenses for major moneychangers and
NOCs issues to another 9 mini exchange companies in 'B' category of the
foreign exchange companies.
According to SBP, after incorporation of these
companies with the Securities and Exchange Commission of Pakistan (SECP)
it would issue licenses to these companies to start their business
So far 80 money changers applied for getting licenses
of mini exchange companies out of which NOC were issued for 9 mini
exchange companies which were collectively sponsored by 56 money
The State Bank has sounded a note of warning that all
moneychangers who are currently authorized to deal in exchange business
would cease to function beyond June 30, 2004 on expiry of their
The money changing business would be operated through
exchange companies (both mainstream exchange companies and mini exchange
companies or exchange companies in 'B' category, in addition to the
Out of the total licenses issued to 16 foreign
exchange companies in category 'A', 12 have already gone into business
and the remaining 4 are about to go into operations.
Those who have started business as foreign exchange
companies are including H & H Exchange Company, Khanani & Kalia
Inernational (KKI), NBP Exchange Company, al-Sahara Exchange Company,
Data Exchange Company, Glaxy Exchange Company, Dollar East Exchange
Company, Zarco Exchange Company, Wall Street Exchange Company, PICIC
Exchange Company and Pakistan Currency Exchange Company.
As earlier stated over 356 moneychangers were engaged
with the exchange business throughout the country so far. Since the
minimum paid up capital requirement for setting up an exchange company
in category 'A' was set at Rs100 million, obviously a large number of
moneychangers may not have financial strength of that level.
Consequently, only 16 major exchange dealers registered themselves in
category 'A' while 80 after pooling their financial resources have
applied for mini exchange companies. The minimum paid up capital
requirement for setting up mini exchange company was Rs20 million.
The NOCs issued for applying licenses for mini
exchange companies in category B are including Money Masters Currency
Exchange Company, Sky Exchange Company, World Wide Exchange Company,
Overseas Exchange Company, Rajgan Exchange Company, Great Union Exchange
Company, United Exchange Company, and Union Exchange Company.
Besides the provision of mini exchange companies, the
exchange companies in category A have also been allowed to extend
franchise to smaller dealers to carry on exchange business on behalf of
companies in category A. This would facilitate to accommodate smaller
business into the exchange business besides brining them into a national
network of exchange business in Pakistan. These 'A' category companies
would also be allowed to install their both at strategic points such as
five start hotels, airports and ports to cater to the exchange
However, with the introduction of the new rules aimed
at restructuring of the exchange business to have an effective check
over gray areas like laundering of the ill gotten money from different
sources. The step of streamlining the exchange business would certainly
help bring clarity and transparency into this sensitive business to a
great extent, yet there are apprehensions of developing under ground
exchange market to deal with illegal transactions.
The exchange business in Pakistan has taken a quantum
jump due to various reasons including a sense of insecurity prevailed
after the events of 9/11 and the non-resident Pakistanis instead of
keeping their money abroad preferred to send it back to their homes. The
exceptionally well-managed exchange rates, which brought unprecedented
stability between, open and bank rates also encouraged the workers
abroad to use official or banking channels for their home remittances.
Another important reason for growing size of the home remittances was
the campaign of the government to bring a culture of documentation in
every steps of the economy. All these efforts produced positive results
in giving a healthy look not only to the average home remittances which
created a history in the financial year 2002-03 by growing to the level
of $4.2 billion and against crossed the target set at $3.4 billion for
the year 2003-04, but helped the reserves managers to reach a new height
of foreign exchange reserves which have also set a landmark in the
foreign exchange reserve history of this country. According to financial
analysts, if the trend continues our reserves may soon hit the mark of
$20 billion and the target seems to be not too far to achieve.
The cash flow from external resources seems to have
assumed a sustainable direction and hopefully the trend would further
improve with the streamlining of the exchange business in Pakistan, the
financial analysts observed.