The loans will be based on 10 per cent of the total amount that is sent through official banking channels and must be repaid after five years.
Interest-free loans deal to boost UAE Pakistani expats' remittances
DUBAI// Pakistanis living in the UAE are being offered interest-free loans by their government to encourage more people to send money home.
The Pakistani expatriate community sends home about Dh11billion each year in remittances. The loans will be based on 10 per cent of the total amount that is sent through official banking channels and must be repaid after five years.
"The reason this is being done is to get more of our citizens to send remittance through official channels," said Habib Ahmad, commercial secretary at the Pakistan Embassy in Abu Dhabi.
"The key thing we wanted to do with this is to simplify the process for getting the loan to make it easier for those who wish to claim the money."
The money will be given in cash or via bank transfer and will be paid in Pakistani rupees.
To apply, the remitter will have to provide attested proof of the amount sent to Pakistan, a valid passport, a copy of the National Identity Card for Overseas Pakistanis and an undertaking that the loaned amount can be repaid at the end of the five-year period.
The scheme is expected to started in around a month.
"There is no limit to the amount of money that can be loaned out as long as it's 10 per cent of the remitted amount," said Mr Ahmad. "That means it could be based on Dh100 being remitted or Dh2 million.
"Although we do have a high level of remittance if you compare it to the Philippines or even Bangladesh it is low so we are hopeful this scheme can increase it.
"We expect this loaned amount to be used in some kind of direct or indirect economic activity," said Mr Ahmad.The Pakistan government now pays 8.5 per cent on loans taken from foreign donors inforeign currencies.
The UAE is expected to be the first Pakistan mission to approve the loan system with other embassies and consulates to follow soon afterwards.
The move has been welcomed as a way of encouraging overseas Pakistanis to reinvest in their home country.
"This is a good step for overseas Pakistanis," said Mobisher Rabbani, a diplomatic consultant based in Dubai.
"Pakistanis save a lot in general but they don't tend to do so in Pakistani banks because they are worried what their money will be worth particularly in the economic situation we have there."
There has already been a major shift away from illegal money transfers in recent years, he said.
"To be honest I think most people use the official channels now so I don't think it will have much impact on that.
"It will encourage people to invest back in Pakistan either through buying a home or investing in a business.
"Most Pakistanis here have jobs so I don't think there would be problems repaying the amount after five years."
Speaking during an award ceremony praising overseas Pakistanis for remitting back home, Pakistan's ambassador to the UAE, Jamil Ahmed Khan, said the embassy was doing all it could to encourage more people to do so.
"As a result of this approach, the annual remittances from the UAE have gone up to approximately US$3 billion and Pakistanis living in the UAE have become the highest per capital remitters in the world," said Mr Khan.