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PAKISTAN: Banks profit from crime fears

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    PAKISTAN: Banks profit from crime fears

    The following report in the Financial Times gives a picture of the times we are living in:

    Rampant lawlessness in Pakistan has been good for the business of United Bank's rupee travellers cheques operations.

    UBL first launched its rupee travellers cheques in 1971, but saw the business eventually fade away and close down.

    However, growing personal insecurity in the country in recent years has given it fresh impetus.

    More businessmen are relying on rupee travellers cheques as a safeguard against armed robberies, who have become more frequent in parts of the country.

    Bankers said the monthly turnover had risen to Rps15bn ($290m) up from less than Rps1bn a decade ago.

    Zoha Imam, head of UBL's rupee travellers cheque business, said: "Our success story is that we made profit in the first month of our launch this summer. The potential is just so much that there are endless opportunities here."

    Bankers said Pakistan's large population of 138m provided a significant base for business growth. Three banks offer rupee travellers cheques - UBL, Habib Bank and Muslim Commercial Bank.

    Mian Muhammad Mansha, president of MCB, which has the largest turnover of the cheques, said: "Rupee travellers cheques are now like hard currency. More and more people use them. We now have the first offshore users.

    "Pakistanis have recently encashed rupee cheques in the central Asian [former Soviet] republics," he added.

    However, bankers want the government to remove a 0.3 per cent withholding tax on the sale of rupee cheques, announced this year. They argue that without the tax, the market would see further growth.

    Bankers pointed out that the business still needed to become more user friendly. For instance, replacement of lost or stolen travellers cheques can take a minimum of two to three weeks.

    Some also said that security systems to detect counterfeit cheques needed to improve substantially with a new national standard.

    Bankers worry that the government may tax rupee travellers cheques more to compensate for a sharp fall in official tax revenues, which could discourage future prospective users.

    "Whenever our bureaucrats and planners go to the other extreme of putting too much tax on a business, it's usually a sign that further growth becomes hampered," said Mr Mansha.