KUALA LUMPUR: Malaysia is one of the few countries in the world that have already succeeded in achieving United Nation’s Sustainable Development Goals (SDG) target in bringing down cost for cross-border remittances for non-bank services providers to three per cent by 2030.
However, data provided by Remittances Prices Worldwide’s (RPW) noted that as of December 2017, the current cost of global remittances is at 7.09 percent, which is 236 per cent more than the UN’s target of three percent.
Bank Negara Malaysia director of Money Services Business Regulation Department Nik Mohamed Din Nik Musa said Malaysia's cost for cross-border remittances has now reached about three per cent, way before the target.
"Our cost for cross-border remittances was at around 12 per cent in 2006, it has now reached about three per cent as of last year and this was on the back of multiple factors,” he said in a media briefing at the Global Forum on Remittances, Investment and Development 2018 (GFRID18).
"Competition in the remittance business plays a big part of this. Another is digitisation where people are transferring money through apps, and this create transparency as well as comparison of cost between remittance service providers.”
Going forward, Nik Mohamed believes the cost would go down even further but have no in-house set target, given that Malaysia have already achieved the target set by SDG.
"I believe that further digitisation of the industry will further push the cost down, but as of right now, there's no target.”
As of the end last year, there's a total of 344 money services companies that are licensed to do remittance business. Collectively, these money services companies boast 2,979 branches.
“Out of the 344, a total 34 are direct remittance service providers and out of this 34, 17 can remit digitally. This is a jump into digitisation as only four remittance service providers could do this in 2012,” said Nik Mohamed.
Malaysia also currently leads in remittance outflows in Southeast Asia and third in overall Asia with a total of RM33 billion remitted last year, and that figure is expected to grow by the single digits this year.
Nik Mohamed said there is no concern in the ringgit leaving the country as the remittance business is part of the country's overall financial inclusion segment.
“There are a lot of misconceptions that by indulging in remittance, we are losing out money but this is not true at all as remittance is big business to us,” he said
“What we gain in legal remittance business is that the government will be able to charge the six per cent goods and services tax (GST) as well as corporate tax. The total remittance business last year was RM33 billion, so imagine how much the government gains in tax from that. When this industry grow, the spillovers will also benefit services and additional revenue, directly to the Malaysia economy.”
Another benefit of the remittance business, according to Nik Mohamed, is the ability for the central bank to harvest data with each transaction which could help maintain the tightness of the framework and help cost low.
GFRID18 expects to see the participation of over 400 participants from all over the world across three days of conference.