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Ambassador promises UAE Pakistani expats: Send money home, get interest-free loans

By Majorie van Leijen Published: 2013-05-29T02:42:00+04:00

Pakistani expats in the UAE will have the opportunity to take up loans free of interest when they send money back home.

This was announced by the Ambassador of Pakistan to the UAE Jalil Ahmed Khan.

Although the scheme is yet to be fine-tuned, the Ambassador promised that his countrymen would be able to take up a loan that equals 10 per cent of the remittance that is made.

"For example, if a person sends an amount of PKR100,000 [Dh3,726] he will be offered a loan of PKR10,000, which will be paid out in local currency," explained Habib Ahmed, commercial secretary at the Pakistani Embassy.

There will be no minimum or maximum to the amount of the loan, and any applicant making a remittance is eligible for the loan. "The eligibility of the applicant is based on the remittance only. To apply he will have to show evidence of the remittance made, in addition to a passport copy.

The loan has to be returned within five years."

The scheme is developed by the Ambassador to the UAE as an incentive to increase the volume of remittances from the UAE, while at the same time stimulating investment in the local economy.

"If you compare Pakistan to the Philippines, you see that the income of remittances from Philippine expats in the UAE is much higher, although Pakistani expats are more in number. This scheme should encourage Pakistani expats to make more remittances," said Ahmed.
 
Returns of the loans are expected to stimulate the local economy, especially in the construction sector. "The Pakistani expat population in the UAE is largely made up of low and middle class citizens. These people would likely invest in the renovation, equipment, or building of houses in Pakistan," explained Ahmed.
 
"I would definitely make use of the opportunity," said Uthman Khan, a Pakistani resident in Dubai. "A free loan, that sounds very interesting. I send money back home every month, so this is good news for me."

According to Ahmed the application may only be made when the remittance is sent through the legal channels, which include banks as well as exchange houses. "The source of the loan does not depend on the channel used, as long as this channel is a legal one.

"The initiative should also discourage the use of non-banking channels."
 
Remittances form a significant share of the Pakistani economy. According to local media, more than half of the yearly export earnings come from remittances sent from Pakistanis working abroad.

From the UAE, where the Pakistani expat population amounts to 1,2 million residents, a total of $2.89 billion was sent in remittances last year.

Ahmed explained: "Currently Pakistan pays 8,5 per cent interest on loans to donor agencies, and this interest is paid in foreign currencies. According to this new scheme banks will pay 10 per cent to lenders but in local currencies, and with the promise of increased remittances. Furthermore, the money will be returned."