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A growing share of Qatar’s wealth is staying inside the country, rather than being sent abroad by expats, an analysis of government data shows.

Each year, the country’s foreign workers send billions of riyals in remittances back home. After a minor dip in 2012, remittances climbed 8.34 percent last year to QR40.55 billion (US$11.14 billion), according to newly released figures from Qatar Central Bank.

However, as a share of Qatar’s rapidly expanding economy, the amount of money leaving the country has declined over the last five years.

Graph – remittances & remittances/GDP 2013

Peter Kovessy

Figures published by QCB and the Qatar Statistics Authority show that remittances totaled 5.48 percent of nominal GDP last year – roughly on par with 2012, but down from 7.26 percent in 2009.

While remittances are an important part of the economy for receiving countries, observers in sending countries often view such monetary outflows as a missed opportunity to grow the local domestic economy.

“Remittances (are) nothing but disposable income made in Qatar and spent outside in another economy,” researcher Engy Ziedan told Doha News earlier this year following the release of a Cost of Living Reports Middle East publication.

As such, the reduction is likely to be viewed as a positive development within Qatar.

Local spending

There are likely several reasons behind the decline in remittances relative to nominal GDP. For example, even though the local economy is growing, the salaries of many expats has remained largely the same.

This could be because the large numbers of Indian, Bangladeshi and Nepali citizens willing to come to Qatar as laborers reduces the pressure on local companies to raise compensation rates.

Additionally, Qatar’s rising cost of living means that residents are spending more money on housing and other essential items.

Graph – Remittances & population growth 2013

Peter Kovessy

The declining share of remittances could also signal a demographic shift in Qatar’s expat population.

While the country’s foreign workforce is still dominated by men who come to the country alone, some have suggested that it’s in the country’s economic interest to allow more families to move to the country.

This, in turn, would lead foreign workers to spend more money on goods and services locally, rather than sending their earnings abroad, especially as the number of retail and leisure offerings in the country increases.

Gulf comparison

According to separate data, Qatar ranks in the middle of its Gulf peers in terms of the amount of money leaving the country as remittances.

Figures published this month by the World Bank state that the largest outflows in the region come from Saudi Arabia, where remittances totaled US$34.98 billion last year. The second-highest figure was Kuwait, at $15.24 billion.

The World Bank added that outgoing remittances in Qatar totaled $11.28 billion last year, a slightly higher number than the figure published by the Qatar Central Bank.

Photo for illustrative purposes only.

Duncan Smith/Corbis

Photo for illustrative purposes only.

While the World Bank did not publish any 2013 figures on Bahrain, that country’s remittances were likely the lowest in the GCC. In 2012, the country’s foreign workers sent $2.07 billion abroad.

Notably, such statistics only capture the amount of money sent through official channels. The World Bank has previously suggested that foreign workers may pursue other means of moving money abroad to avoid paying transfer fees, which average 7.9 percent globally.

Remittances are an important source of income and foreign currency for developing countries. No breakdown of the most popular sending countries was given by QCB.

But worldwide, the largest remittance receiving country last year was India, attracting about $71 billion.

India was also the largest recipient of remittances sent from Qatar in 2012, according to previous World Bank data.

More than $2.29 billion was sent from Qatar to India that year. It was followed by Nepal at $1.99 billion and Pakistan at $1.23 billion.


Photo for illustrative purposes only.

Photo for illustrative purposes only.

ATMs across the country will soon be required to contain sensors that detect tampering, following a soon-to-be released directive from Qatar Central Bank. The move is part of the authority’s increasing efforts to combat debit card fraud, a senior QCB official has told Doha News.

Earlier this month, the financial regulator ordered banks to beef up anti-fraud education of customers in addition to reinforcing an existing prohibition on using debit cards to make online purchases without entering a personal identification number (PIN).

ATMs are commonly used in Qatar because so many transactions here require cash, and there is no fee to transact at a machine that isn’t from one’s own bank.

The soon-to-be mandated ATM anti-theft technology aims to tackle “skimming,” in which thieves place an inconspicuous device on an ATM card reader to capture data contained on a card’s magnetic strip as it is slid into the machine. Meanwhile, a hidden camera records the personal identification number entered by the cardholder.

Armed with that information, thieves make replicas of the cards and rapidly drain an individual’s account.

While these attacks occur around the world, experts say thieves go wherever they find vulnerabilities. This means authorities are under constant pressure to add new layers of security.

“We can’t stay still,” said Abdul Hadi Ahen, the acting director of banking, payments and settlements systems department at the Qatar Central Bank. “It is part of the game.”

It is not clear if instances of fraud are increasing in Qatar. Ahen declined to provide details on the frequency of debit card fraud here, and several experts told Doha News that financial institutions typically keep such information under tight wraps.

New measures

QCB is in the process of testing the tampering sensors, which would alert guards to begin visually monitoring the activity via security cameras at the ATM. If it turns out to be a bank customer fumbling with their card, no action is taken. If the activity is suspicious, the ATM can be shut down remotely, and the authorities notified.

Additionally, banks in Qatar will soon be required to install plastic shields over keypads to prevent an overhead camera from recording PIN numbers.

Ahen said there is no firm timeline for the new rules to take effect.

Meanwhile, QCB has also closed a loophole in using debit cards for online shopping. Qatar has already restricted the use of debit cards to transactions where the customer must enter a PIN to authorize the purchase.

But Ahen said it came to the central bank’s attention that some local financial institutions were routing transactions through payment processing systems outside Qatar that didn’t require PIN authorization – presumably through Visa and Mastercard.

To close this gap, the authority sent a directive to the country’s banks earlier this month, reminding them that debit cards cannot be used for online shopping.

“There was a hole. I closed it,” he said.

Ahed added that merchants who want to accept online debit card payments can enroll in QCB’s payment gateway, QPAY, which has a feature that allows customers to enter their PIN through an encrypted platform.

The recent QCB directive also instructed banks to do more to educate their customers about preventing banking fraud. This includes, for example, not opening “phishing” emails that appear to be from a bank that ask customers to submit their bank card number.

It appears some local banks went even further. In a text message sent to clients earlier this month, Qatar International Islamic Bank advised customers to change their PIN at the closest ATM.

“Awareness and education are the most important ways of combating fraud,” Ahen said.

Why thieves come to the Middle East

Part of the challenge in understanding the scope of the problem is that financial institutions don’t like to talk about specific cases.

Indeed, a survey of Qatar bankers conducted several years ago found that 56 percent of respondents would not publicly report cases of fraud, likely out of fear of damaging the public perception of their company, according to Qatar University professor Nitham Mohammed Hindi. He co-authored a paper on the local industry’s perceptions towards fraud in 2008.

The study was based on 198 confidential surveys submitted by bankers from 10 local financial institutions. Eighteen percent of respondents said they’ve seen evidence of illicit use of ATM cards in Qatar, making it the fourth-most common type of bank scam visible to bank officials, behind credit card theft (31 percent), misappropriation of company resources (22 percent), and bribery (19 percent) and tied with theft, Hindi told Doha News.

He speculated that QCB has statistics showing that debit card theft has become more of an issue in recent years, given its recent efforts to fight that particular form of fraud.

Both Hindi and Ahen noted that a thief who gains access to an individual’s ATM card can cause more damage than with a credit card, because they can wipe out bank accounts quickly, and there are less limits and controls to halt transactions.


William Grootonk/Flickr

Another expert said ATM card skimming comprises the bulk of theft-related problems for financial institutions.

“That’s the biggest concern that the banks have,” said Robert Penn, Middle East general manager of ACI Worldwide, a company that helps banks minimizes fraud-related losses.

He said that there is nothing that makes the Middle East more or less attractive to thieves, although he noted that Qatar’s wealth and growing population make the nation’s bank accounts a lucrative target.

He added that the weaknesses lie in the United States and several Eastern European countries that don’t require debit cards to contain chips for payment processing.

This means that thieves come to countries such as Qatar, steal the information contained on cards’ magnetic strips, dump it onto a blank or “white” ATM card, and then travel to those other nations where the new cards can be used to withdraw large sums of money.

“Fraud just moves around and goes to wherever the weakest link is.”

The number of personal loans given by banks in Qatar over the past eight months has fallen 18 percent, a new report by the QNB Group states.

The drop is due largely due to two reasons, according to the report.

The first is the setting up of a centralized credit bureau by Qatar Central Bank, which assesses the creditworthiness of potential borrowers.

The second is QCB’s tightening of lending norms, which it did in April of 2011 following an outcry over the rising debt of Qataris.

Some 75 percent of nationals are in debt, according to the 2011 National Development Strategy.

Most owe an average of QR250,000. Qatar hopes to halve the number of indebted nationals by 2016, the report states.

In 2011, QCB placed a ceiling of QR400,000 on personal loans to expats and dropped the loan limit for nationals to QR2 million from QR2.5 million.

But that still comes with a generous repayment period of six years.

Meanwhile, lending to government and quasi-government agencies rose an astonishing 35 percent to QR201.3 billion ($55.3 billion) from January to August of this year, the QNB report states.

That sector now gets 42 percent of the total number of loans issued by banks, nearly double the rate from five years ago.

According to the report:

Financing of large capital investments in developing the country’s infrastructure has been the key driver of public sector loan growth.

Government agencies, semi agencies and large corporate, which are engaged across economic sectors, are expected to continue to be the main driver of loan growth given the large development program and infrastructure projects underway and to be implemented in the short to medium term. 


Credit: Photo by Omar Chatriwala