The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas has “reason to be concerned” about the “growing trend” of outbound money transfers that hit $136m in 2022 as it represents incomes that are lost to this nation, it was argued yesterday.

Jeffrey Beckles, Island Pay’s managing director, told Tribune Business that the increasing sums involved largely represent “wages that are earned here but not spent here” thus depriving the Bahamian economy of consumption-related expenditure that studies have shown typically drives two-thirds of all activity.

While acknowledging that persons have total freedom to do as they wish with their earnings, he added that “money going out of the country is no good to us” with The Bahamas needing every cent of spending power it can get amid the ongoing struggle to fully rebound from COVID’s devastation.

Mr Beckles spoke after Central Bank data revealed that Bahamas-based money transmission businesses handled $204.6m worth of transfers in 2022 in involving some 441,900 transactions. Of these, by the far the majority - some 65 percent or 285,159 of the volume, and 66 percent or $136.074m of the value - related to outward bound transfers to other countries.

By comparison, The Bahamas received some 156,714 incoming money transfers worth a collective $68.575m - representing a net deficit of $67.5m when compared to outgoing transactions. The higher outbound transactions are likely explained by the large immigrant workforce, mainly Haitians, Jamaicans and Filipinos, sending their earnings back home to support family and friends, plus Bahamians sending funds to relatives who are abroad.

However, one source, speaking on condition of anonymity, suggested that included in outbound transfers are also monies that Bahamians are moving abroad in increasing sums due to a loss of confidence in the country’s fiscal and economic situation and prospects for a turnaround.

“You’d be shocked to see how many Bahamians of note are moving money from The Bahamas,” they added. “There are noted families who have consistently been moving consistent amounts of money they have in savings and investments offshore. They are continuing to lose confidence in the Bahamian economy and are moving money in large numbers. That contributes to the weakness of domestic spending and impacts the foreign exchange reserves.”

Mr Beckles made no mention of this, but told Tribune Business of the Central Bank data: “I think it’s indicative of a couple of things. Residents of The Bahamas are beginning to actualise there’s opportunity to send money out of the country and they are engaging digital platforms to do this legally.

“The downside is the continual repatriation of monies earned in The Bahamas. That number continues to grow and we should all be concerned about that. That is the trend that monies being generated in The Bahamas, earned in The Bahamas - not by corporations, but by individuals - are not being spent in The Bahamas.

“On the one hand people are engaging these platforms to more easily transfer funds, do more cross-border transactions with funds, but the bigger picture is we are starting to see this trend continue. Money going out of the country is no food to us,” the Island Pay chief continued.

“That is not to say people don’t have the right to to do what they want to do with their money, but in this case it’s not about people spending as consumers and buying items. These are actual wages leaving the country. The major issue is wages being earned here, but not used here, doesn’t help the economy. That’s a growing trend and we should be paying attention to it. Some people may say it’s a small amount, but the year before it was not that large. There’s reason to be concerned.”

Mr Beckles, meanwhile, told Tribune Business that The Bahamas “grossly under estimates” the number of citizens and residents who are either unbanked or under-banked, meaning they either have no or very little access to the financial services that most persons take for granted.

“I think we grossly under estimate the number of Bahamians and residents who are unbanked and under-banked in this country,” he argued. “They handle a lot of cash. As cash becomes challenged by digital payments disruption, the unbanked and under-banked are going to look for ways to participate in the economy. It’s a growing sector that needs to be assisted.

“That’s why we in the digital payment space are there. That’s part of the reason we exist. It’s huge; not just in The Bahamas but around the world.” Pointing out that digital payment providers offer unbanked and under-banked Bahamians access to the global market, not just that of The Bahamas, Mr Beckles added: “We have brought the world to The Bahamas and, in many respects, have brought the unbanked and under-banked individuals to the global table.

“One of the purposes we have at Island Pay is to provide financial inclusion. There are a lot of Bahamians and residents left out of traditional financial services that need to be serviced and maintained. We see the banks constantly saying we’re not going to offer this service, not going to offer that service any more, closing branches. We cannot disadvantage those consumers. They still need access to financial services, and that’s why were in this space.”

The Central Bank of The Bahamas, in a recent industry briefing, detailed a number of regulatory reforms on its agenda including some that will impact digital payments providers and money transmission businesses. In particular, it plans to shift the supervisory and regulatory framework for the sector from the Banks and Trust Companies Regulation Act to the Payment Instruments (Oversight) Regulations 2017.

“The proposed legislative revisions seek to move the supervisory and regulatory framework for money transmission service providers from the Banks and Trust Companies Regulation Act and place the framework under the Payment Instruments (Oversight) Regulations 2017,” the Central Bank said in its presentation.

Mr Beckles said the sector was unsure of the rational for the change, or what it will mean for operators, but said it would be welcome “if the intent is to make it more seamless to regulate it, to manage it”. He added: “If the change means better management, it enhances it, that’s a good thing but we’re not sure exactly what that means.”

According to the Central Bank, the five licensed money transmission businesses possessed a collective $24m in assets as at December 2022, while the three electronic money services providers had another $8m between them.