Policy and Regulatory Framework for Remittance - Sri Lanka

This study assesses the regulatory framework for remittances in Sri Lanka and suggests mechanisms to make the remittance market more efficient. The study states that:

• Sri Lanka has a large migrant worker population and formal worker remittances account for 8% of the gross domestic product (GDP);
• Migrant workers have helped Sri Lanka reduce its unemployment levels and increase labour force participation rates;
• The Central Bank of Sri Lanka has authorized several financial agencies to engage in foreign exchange transactions and has schemes which give incentives on remittances transfer through formal channels;
• However, remittances sent through informal channels continue to be around 50%;
• The main sources of informal remittances are undocumented worker, workers with expired visas and first-time migrant workers.

The study concludes that for the Sri Lankan remittance market:

• The regulatory framework is restrictive;
• Competition is limited;
• Access is also constrained by the restrictive licensing policy and excessive regulations.

The study suggests the following mechanisms to make the remittance market more efficient:

• Separating the remittances market from the rest of the foreign exchange market and relaxing the documentary requirements for smaller remittances;
• Increasing competition among remittances service providers;
• Expanding the access to remittance services in Sri Lanka and abroad.