How exchange houses fit in Qatar´s new wage protection system

How indispensable will exchange houses be in the implementation of the new Wage Protection System in Qatar?

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After the law mandating electronic wage payments for workers in Qatar was recently approved, optimism is doing the rounds of banks and other financial institutions in the country. For a long time now, blue-collar workers have seemingly had difficulties with handling their wages paid to them in cash by employers.

From cash thefts to stolen valuables, several migrant workers opt to not report such cases to the police for fear offending their co-workers and/or roommates. A Nepali employee explains why he resents not having a bank account, “On pay days, I head straight to an exchange house to wire my salary home as soon as I get paid.” He is one among an estimated million or more blue-collar workers who lack electronic access.

Workers in Qatar
An estimated 1.2 million blue-collar workers are expected to be covered by the WPS

Last year, what bq magazine gathered from the banking industry was a clear expression of the possible difficulties in implementing a large scale WPS (wage protection system) drive.

WPS is an electronic salary transfer system that allows employers to securely pay workers’ wages via banks, bureau de change and other institutions authorised to provide this service by. Bankers privately say if the idea here is to emulate Dubai, it is a bad proposition.

“Dubai has massive infrastructure and is set for the next 30 years. We are not,” says a banker anonymously. However banks like Doha Bank and International Islamic welcomed the idea of paying low income workers through such channels.

Exchange houses are also proposed to be a part of the WPS. Bashar Al Waqfi, general manager of Alfardan Exchange tells bq in an interview: “We foresee that exchange houses will be part of the WPS, and that is why there was no specification of ‘banks’ in the law.

This is a nationwide project, and we are sure the Qatar Central Bank (QCB) will utilise all capabilities and resources available within the local financial sector to ensure achieving the best possible results.” Country Head of Qatar-UAE Exchange, Edison Fernandez adds, “We are confident that similar to the UAE model, the Qatar government will also invite exchange houses to play a prominent role in the successful adaption of the WPS initiative in the country.”

The role of exchange houses might come in later, say industry experts, commenting on how they might be indispensable to the WPS ecosystem, although no official intimation has been received from QCB regarding exchange house participation. An official from Habib Exchange in Qatar confirms non-receipt of any QCB directives for the same.

“The local banks will be able to handle the majority of the load, especially during the early stages of the project. It is only when the government decides to further include other segments of workers, the role of the exchanges houses will become increasingly important. I don’t think the banks will be able to or interested in handling the load of small businesses and even households at a later stage,” the industry source says expressing his personal opinion.

Collectively if banks and exchange houses are part of the WPS, there will be ease or high probability of this initiative being successful. Banks, exchange houses, employers and employees, all have different but equallyimportant roles to play, according to Fernandez.

Bashar Al Waqfi
Bashar Al Waqfi

In 2009, the UAE Ministry of Labour (MOL) in conjunction with the Central Bank of the UAE (CBUAE) introduced the Wage Protection System (WPS) as a means to electronically process and monitor the timely payment of salaries using the Central Bank’s UAE Fund Transfer System (UAEFTS).

Fernandez reveals more, “The UAE model actually started in 2007 itself. The first model was EWPS (Electronic Wage Payment System). They later fine-tuned the entire model and came up with WPS. In the year 2009, it was officially launched and now a good percentage of blue collar employees are getting their salary this way.”

Implementation in Qatar

Speaking about whether Qatar can successfully emulate the UAE model, Fernandez says, “Qatar can implement it with 100 per cent success. “In fact, implementing a similar model will be far easier in this country, owing to lesser number of companies and employees in comparison to the UAE. In 2009 when WPS was announced in the UAE, there were close to 269,000 companies to be served.”

To successfully deploy this project on a massive scale, realistically, a large amount of resources will have to be mobilised and directed towards the working of this initiative. “This is a nationwide project, and we are sure the QCB will utilize all capabilities and resources available within the local financial sector to ensure achieving the best possible results,” comments Al Waqfi.

The financial sector has welcomed and made all arrangements to accommodate this new system. Alfardan Exchange, for its part, supports the country’s introduction of WPS and hails the government for this bold step. “In our establishment, we are ready to support and be an active part of any system introduced to non-banking financial sectors,” says Al Waqfi and adds, “Our structured currency programmes are fully equipped to coincide with any new financial rules and regulations enforced by the government and we are ready to take on the WPS service if it is later extended to other financial institutions.

In addition, we welcome new systems like WPS which enforce proper financial governance within the country. We are ready to develop the necessary system or logistic requirements to accommodate any government or Central Bank mandates.”

Case for a card-based model

Edison Fernandez
Edison Fernandez

A Nepali employee who earlier worked as a helper in a neighbourhood store in Najma lost QR 10,000 in a labour camp theft which was later reported to the police. This was the money he had saved for over a year from his paltry salary. Clearly, there is lack of a sense of security following such incidences.

Fernandez further elaborates: “There are concerns in the labour camps. When employees get their salaries, they have to keep it in a room, shared by seven or more other people. There is no feeling of being secure.” A card based WPS model is highly convenient. “The card will be pin protected, and the workers can easily store it in their wallet, and use it as per their convenience,” says Fernandez.

A while ago, UAE was using a different model wherein employees could come to exchange houses, show their IDs and collect their salaries. However the manual system was more cumbersome and on request of several employers, exchange houses migrated to the card based system.

“UAE Exchange was the first exchange house in the UAE to introduce an electronic payroll card that offered all the conveniences of a debit card,” reveals Fernandez and also adds, “The probability of implementing a manual system here in Qatar is less.”

An industry source reveals his experience with prepaid plastic was excellent. “It gave us insights into consumers’ preferences and market trends, while witnessing wide acceptance among various segments,” he says. According to him, the electronic car- based model, along with ATMs make for a “smart distribution channel.”

A card based model is also advantageous in the sense that there won’t be any limits on the number of workers that can be serviced. “Employees can use any of the ATMs in the country and there won’t be any constraints,” Fernandez comments. “If it’s manual, then definitely there will be constraints.

Exchange houses have limited space and resources to handle this.”Parties involved in WPSAl Waqfi believes it all depends on the distribution channels the exchange houses will adopt. “Our head office is capable of handling only 100 workers at any given time,” explains Habib Exchange and Al Waqfi agrees that conventional exchange centres may have limits on the number of workers they can service at a given time.

“The card service, however, allows employees to receive their salary from any ATM machine within the country. In this case there would be no limit on the number of workers accommodated,” he says.

There will be high similarities in the model, according to Fernandez, and he is confident of presenting a tailor-made solution in the WPS education process among the employers and employees as per the requirement of the country, should the need arise.

Al Waqfi feels having the best business approach with state-of-the-art technology and hiring the best talent in the market seems like a viable solution to keep pace.

Cause for cost

There may be a total of 25 exchange houses in Qatar and some 18 banks, and to be covered are an estimated 1.2 million blue-collar workers (their number is expected to go up substantially as years roll by).

However, considering that the distribution of the workers is equitable, each financial institution which is part of the WPS may get in its share some 28,000 workers on average. Again, considering that the average salary of a worker is QR 2,500, wage transfers by an institution in a month may total QR 70,000. Industry sources advise that costs will not be major and won’t be an issue.

“In the UAE, this operation was affordable and employers were bearing the cost,” they say. Reminiscing about his experience in UAE, Fernandez throws light on the possible cost structure. “In this market too, the cost will be borne by employer. There is no correlation between the fees that will be charged and the salary the employee gets.”

Low profitability does not seem to be a challenge. “We can make this profitable easily. There are many cost leadership and price leadership strategies we can adopt. So for a company like ours, we can apply our own learning standards and customise a solution that will support the companies and the initiative itself,” says Fernandez while speaking about the Qatar-UAE Exchange specifically.

In the case that profitability for exchange houses seems low, an exchange house official talks about the opportunity presented by cross-selling techniques. “Being part of the WPS service providers will definitely improve the footfall in our locations and this presents a great opportunity to cross-sell our existing services, ultimately bringing a new segment of clients who will use our core services,” explains the official.

Wages protection SystemAll round awareness

An interesting point raised by Fernandez was directed at the need for social awareness and education as part of this initiative. He believes they have something important to offer the local markets – expertise – not just for product development but also their vast exposure in taking WPS to thousands of employers and hundreds of thousands of employees in the UAE. “We can share the good practices in the UAE with the local government.”

For several years, blue-collared workers have been receiving their salaries or wages in cash, and to some extent, there is a high level of satisfaction. “After 30 days of work, they will have cash in their hands. Once we migrate to a card based system, there will be a sort of disconnect.” This is where educating the workers comes in, according to Fernandez. “We explain how the payroll cards can be used and how they are beneficial.”

The advantage of having exchange houses in the ecosystem is the convenience factor. “There is also the comfort factor,” says Fernandez.  “Of course 360 degree education is required starting from employers, managers, execution teams, payroll managers, HR heads followed by employees and participating service entities.

It will be an ecosystem by itself, or will evolve into one. Proper coordination, communication and a synchronised work pattern will emerge once this is implemented,” he enlightens while speaking about how his experience in the UAE markets will further their awareness creation initiatives among employers and employees.

Al Waqfi concludes on that note: “The main objective of the WPS is protecting the wages of the employees, but I think that each country has its own and unique model and objectives. In Qatar, and due to the efficiency of QCB and strong relationship and connection with all financial institutions within the country, we are confident that this initiative will be highly successful.”

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