International report: Yemeni exchange companies are currently operating as actual banksEnglish - الخميس 04 أغسطس 2022 الساعة 10:35 ص
A new report said that Yemeni exchange companies have accumulated huge public savings, after Yemeni banks lost their role in financing trade and the roles of the financial sector were transferred to the exchange sector.
The report, "Yemeni Financial Sector Challenges and Opportunities for Recovery," confirmed that money changers control the parallel foreign exchange market operations, buying and selling foreign currencies at the market price between exchange networks, banks and the trade sector.
The report clarified that exchange companies work efficiently to facilitate internal and external personal transfers and import financing, and offer financing offers (unregulated services), which means that they are currently operating as physical banks.
The July 22 report by the Capacity Assessment Project organization explained that exchange houses are often described as semi-formal since they all have licenses but also provide services beyond the scope of their licenses.
The report indicated that exchange networks are the main channel for foreign currency remittance flows of Yemeni migrants and foreign and domestic trade finance flows, as they are the only local transfer channel and foreign currency buyers in the market.
He added, money changers are holding local and foreign currencies while banks struggle with liquidity.
The report noted that even before the conflict, the exchange sector was already holding public deposits illegally.
He said that some money changers do not comply with CBY regulations, as the CBY has limited ability to organize and collect data from remittances, which prevents it from better understanding the dynamics of the exchange sector.
The report indicated that there was a sharp increase in the number of exchange companies, both licensed and unlicensed, operating in Yemen during the conflict, from 605 money changers in 2014, to more than 1,350 companies, including 800 unlicensed companies.
According to the report, it is known that unlicensed exchange shops operate under the umbrella of the largest licensed exchange companies, either informally or as agents.
According to Yemeni law, there are two types of exchange entities based on business volume: wholesale (large companies) and retail (sole proprietorships).
The report attributed the prosperity of exchange companies in Yemen to the easy access of citizens to the cash exchange system, and its removal as a strong barrier to dealing with financial services, as the money transfer system allows families throughout the country to send and receive money internally and across Yemen’s borders.