The geographical distribution of remittance inflows to Sri Lanka during 2005 has been as follows: •  57% from Middle Eastern region  •  18.5% from European Union  •  6.5% from other European countries  •  6.5% from North America  BIS Review 3/2007  3  •  4.5% from Far East-Asian countries  Government policy Successive governments in Sri Lanka have encouraged and promoted Sri Lankans to work abroad, both in skilled and un-skilled categories. The workers are permitted to open tax-free Non-Resident Foreign Currency (NRFC) Accounts which facilitate the receipt and retention of remittances in foreign currencies. Expatriates and workers are also allowed to have Resident Foreign Currency (RFC) accounts after their return to Sri Lanka. Taking the deposits in these accounts as collateral, low interest housing loans have been provided to the remitters and their families. The government has introduced “Sri Lanka Nation Building Bonds” to enable Sri Lankan migrant workers and other expatriates to participate in the Nation Building programme. In addition to government, the Sri Lanka Foreign Employment Bureau, Association of Licensed Foreign Employment Agencies, the Commercial Banks, Specialised Banks, money changers and money transfer systems are key players in the remittance industry in Sri Lanka. The Sri Lanka Foreign Employment Bureau continues to hold awareness programmes to educate remitters to channel funds through formal institutions and also look into the welfare aspects of migrant workers. The banks have now taken the initiative to establish links with migrant workers prior to their departure.

The Central Bank of Sri Lanka has permitted banks and financial institutions to establish exchange houses in several countries to enhance accessibility by remitters. More recently, the Central Bank has taken a keen interest to enhance remittance flows into the country. From a payment system improvement point of view, it is essential for Sri Lanka to consider using wireless ATMs and E-Banking systems in rural areas to facilitate speedy disbursement of funds. As has been the case in the Philippines, Mobile Commerce (MCom) through SMART Padala (Philippines) and global G-Cash services should be introduced in Sri Lanka. In the meantime, internet-based transfer services such as wire transfers, automated clearing house transfers and cheque transfers should be further facilitated. Sri Lanka should take steps to reduce high remittance fees from remitting countries, such as Japan, Italy and the US by building up partnerships with banks in these countries as well as money transfer companies. In Sri Lanka too, Telecom services and Dialogue GSM are planning to introduce SMART Cards to connect remittance receivers and their bankers. As the SMART card system may require the use of agents in outstations, the banks involved should register these agents and provide on-line banking facilities to them. While the telephone company ensures the security of money transfers, the agents and banks should attempt to reduce cost of money transfers as well as mitigating risks involved in this activity. In addition to the banking sector, Sri Lanka should speed up the linking of Sri Lanka's postal system with the global postal network.