PAGE PREVIOUS ISSUE

 

   

 
 
 
 
 
 
CURRENCY BUYING

SELLING

US Dollar 59.9 60
Bahrain Dinar 158 158.1
Canadian $ 50.85 50.95
Euro 70.75 70.85
Hong Kong $ 7.65 7.7
Japanese Yen 0.508 0.51
Kuwaiti Dinar 204 204.1
UK Pound 103.7 103.8
Last updated: Friday 23 Dec, 2005-12.30 P.M (PST)

MORE

 

3 DAYS FORECAST
In oC

CITIES MIN MAX

HUM%

FOR.

KARACHI
Today 12 26 38 Sunny
Tomorrow 11 27 38 Sunny
Day after 11 28 38 Sunny
LAHORE
Today 1 20 87 Sunny
Tomorrow 2 20 87 Sunny
Day after 2 21 87 Sunny
ISLAMABAD
Today 0 18 59 Sunny
Tomorrow 0 18 59 Sunny
Day after 0 21 59 Sunny
HUM%: Humidity In %
FOR.: Weather Forecast
updated: Fri - Sun 23-25 Dec, 2005

MORE

 
.

 

KARACHI         - 021 LAHORE          - 042 ISLAMABAD    - 051 FAISALABAD   - 041 MULTAN          - 061 PESHAWAR    - 0521 CANADA          - 1 KUWAIT           - 965 INDIA               - 91 IRAN                - 98 U.K                   - 44 U.A.E                - 971 U.S.A                - 1

MORE

 
  COLUMN
 
 

 

 

 

 
  ECONOMY WATCH

Selected by Zeeshan Ahmed Khan
Oct 31 - Nov 13, 2005

FOREIGN EXCHANGE COMPANIES

Foreign exchange companies are playing an important role in the country with regard to fulfilling the foreign exchange needs of businesses and individuals. In the past, lack of documentation and negligible regulations of these companies (or money changers) had created adverse effects on the economy. The slow transfer of money, difference of open market rates and comparatively more time consumption forced people to use unofficial transfers of foreign exchange rather than using official channels like banks and mainstream exchange companies. Therefore, need for institutions arise that could offer efficiency, price advantage and an extensive network to decrease time of transactions. As a result, foreign exchange companies were formed. These companies are regulated by State Bank of Pakistan and coordinated by Securities and Exchange Commission of Pakistan in the light of 1984 Companies Ordinance.

State Bank prohibit the authorized money changers and asked them to discontinue after 30th June 2004. To bring them to regulatory fold, SBP allowed Category 'B' exchange companies.

What is the difference between 'mainstream' (A-category) and 'B-category' exchange companies?

A-category exchange companies can be established with a minimum paid up capital of Rs.100 million which is to be raised to Rs200 million after three years of incorporation of business. As a measure for providing liquidity comfort to these companies against contingencies, 25 percent of the paid up capital has to be maintained with SBP as Statutory Liquidity Reserve. Exchange companies can enter into franchise arrangements with an existing entity carrying out Money Changing business or an entity formed to carryout Money Changing business for consideration of Franchise Deposit. Mainstream exchange companies can undertake electronic transfer of foreign exchange while the smaller companies cannot.

Announcing the criteria for B-Category exchange companies, State Bank of Pakistan said that a minimum of five Authorized Money Changers(AMC) could join to establish the company with an initial paid up capital of Rs20 million which has to be raised to Rs25 million by 30th June, 2005. 10 percent of the capital shall be maintained as Reserve with SBP in the form of cash or unencumbered approved government securities. The Exchange Company (B) can sell and purchase foreign currency notes and coins only.

FACTS ON EXCHANGE COMPANIES:

Statistics released by State Bank shows that there are 25 exchange companies in Pakistan, counted at the end of April 2005. These companies have 79 branches and 218 franchise agreements with exchange companies. There are total 33 Category B exchange companies working with 249 branches all over the country.

The mainstream or Category A exchange companies were holding assets of Rs.1775.6 million in 2003, which rose to Rs.2395.8 million in 2004. Thus, it shows an increase of 35% in just one year. Their liabilities changed to Rs.248 million in 2004 as compared to Rs.438.7 million in 2003. The paid up capital was Rs.2148 million in 2004, showing growth of 60% in comparison with 2003 data. The companies had earned Rs.7.8 million after tax in 2003 which changed to Rs.39.6 million in 2004.

KEY PERFORMANCE INDICATORS- EXCHANGE COMPANIES 'A'

(PERCENT)

YEAR ENDED JUNE

2003

2004

Capital to Total Assets

75

90

Growth in Assets

-

34.9

Growth in Equity

-

60.6

Income to Expense Ratio (times)

1.3

1.2

Operating Expenses to Income

77.8

79.3

Return on Assets

0.4

1.7

Return on Equity

0.6

1.8

No. of Exchange Cos.

8

13

SBP: STRICT REGULATORY BODY?

Since July 2004, SBP is deeply monitoring activities of exchange companies. SBP is keeping a strict hand and has issued show cause notices to many companies in one year, including temporary cancellation of licence of companies. It was found that most companies getting notices were not abiding by the standards and criteria maintained by the SBP for them. In August, SBP issued show-cause notice to nine exchange companies indicating violations of following rules:

* The exchange companies (B category) will ensure that all requisite support facilities are available which are necessary to carry out their business.

* The companies shall also equip themselves with necessary qualified staff to properly manage computerized reporting to the SBP.

* The companies shall fully abide by all the regulations, instructions, directives, circulars and other communications issued by the SBP. They will also subject their records and documents to the examination, inspection and supervision of the SBP.

INFLOW OF REMITTANCES AND EXCHANGE COMPANIES:

Home remittances were $3.94 billion last year. Out of it, only $235 million dollars were attracted by exchange companies. The figures are incomparable. However, government said that a remittance attracted by exchange companies in CY04 is 51% greater than that in CY03. Although the growth seems to be enormous but makes no point when judged with total amount of home remittances.

We hope that the exchange companies, which are facing new challenges since July 2004, will grow more instantaneously and shall start playing their role for which they were formed. With popularity of traditional banking system of remittances, they will soon capture a market share resulting in discouragement of 'Hundi' system.

 
 

Pakistan & Gulf Economist 2005    Privacy Policy   |   Terms of Uses