Booming trade with China is helping currency-exchange houses to offset what was a rapid decline in remittances from foreign construction workers.
The use of currency exchanges to settle bills and order stock between importers and exporters will boost the amount of money transferred abroad this year, said Mohammed al Ansari, who is the chairman and managing director of Al Ansari Exchange, one of the biggest providers of exchange services in the Emirates.
Foreign breadwinners were likely to send more cash home this year as the UAE economy improved, he said. Increasing amounts of cash transferred to China and other fast-growth markets for commercial trade was also bolstering the exchange industry, said Mr al Ansari, who also chairs the Foreign Exchange and Remittance Group in Abu Dhabi.
"We should have reasonable growth of between 10 per cent to 15 per cent this year," he said.
"A big part of our business relates to the service sector. New hotels and other projects are coming up, especially in Abu Dhabi, and they will need workers."
Widely regarded as a shadow sector to banking, money transfer enables migrant workers to send, or remit, some of their pay to their families, who can pick up the funds at post offices and other money-transfer agencies.
The service is also used as an option for businesses to pay invoices or transfer earnings to offices overseas.
The volume of funds transferred usually closely reflects what is happening in the economy. Job losses in the UAE as a result of the financial downturn led to a drop of between 10 per cent and 15 per cent in remittances in 2009, compared with 2008. Many of those laid off were construction labourers who were regular users of the service.
Initial fears about a further drop in remittance flows last year proved unfounded as the economy stabilised. Transfers grew 10 per cent to 15 per cent to reach Dh120 billion (US$32.66bn), said Mr al Ansari.
His business experienced growth of more than 15 per cent last year, he said.
India, followed by the Philippines, were the largest markets for Al Ansari. Jordan, Syria, Egypt and other Arab nations were also important transfer destinations.
But China was also one of the fastest-growing markets, with an expansion of 5 per cent last year over the year before.
Transactions to China, however, were driven by commercial demand rather than expatriates transferring money home, said Mr al Ansari.
Instead of obtaining letters of credit through banks to pay for goods in China, companies in the Emirates were sending money through exchange houses, he said.
"Some companies decide not to follow the traditional banking corridor due to the [slow] speed," he said. "To make it faster, they send money to have the goods shipped in faster."
It is possible for money sent through exchange houses to be collected by the recipient the same day, whereas it could take up to two days to transfer cash via banks, he said.
Growth in tourism is another reason for optimism within the exchange industry. Expansion in tourism brings more expatriate workers to the Emirates to build new projects and work at them when completed.
The increasing number of tourist attractions and flights to the UAE is also likely to lead to growth in the number of visitors using exchange services in airports, shopping centres and other locations to exchange their holiday money, Mr al Ansari added.
