Why are exchange houses important in the Middle East?
Currently, exchange houses hold a special place in the Middle East economy, especially in terms of remittances. After regulation by UAE authorities in 2009, the remittance industry ranked ahead of several developed and developing nations.
Exchange houses are considered important due to the following reasons:
- Economic growth through financial inclusion
As a vast proportion of the workforce in the GCC is made up of low-paid and unskilled work, many often earn less than the threshold required by traditional banks. This group of under-banked or un-banked workers, therefore rely on exchange houses to send money back to their loved ones - their only other option being informal networks such as hawala.
According to Osama Al-Rahma, Vice-Chairman of the Foreign Exchange and Remittance Group (FERG), 80% of all remittances from the UAE in 2020 were through exchange houses.
- Maintaining a vibrant economy during the COVID-19 pandemic
Exchange houses played essential roles in the Middle East during the Covid-19 pandemic by keeping the ‘remittance gate’ open. These ensured payrolls were actively created, expatriates were able to send money back home and citizens could do business and pay for utilities.
- Adhering to a clean financial system
With significant attention being diverted to exchange houses, so has an increased effort to ensure the compliance of finance services the Middle East needs. As of 2020 alone, over 9,000 workers from exchange houses were trained on compliance and other procedures to prevent fraud, money laundering, and drug and terrorist financing.