The consortium that agreed in December to buy struggling UAE foreign exchange and digital payments company Finablr signed a sales and purchase agreement to acquire Bahrain-based remittance business BFC Group Holdings and its subsidiaries through its new WizzFinancial platform.
The deal will create the largest remittance services and currency exchange group in the MENA region and will be licensed to operate in more than 30 countries, Switzerland-based Prism Group and Abu Dhabi’s Royal Strategic Partners, the consortium behind the deal, said recently.
With 20 million customers, the group will become the only operator with a direct presence in all six GCC countries, they said.
BFC Group Holdings is the holding company for Bahrain Financing Company, Bahrain Exchange Company in Kuwait, BFC Forex & Financial Services in India and BFC Payments in Bahrain.
The companies are licensed by the Central Bank of Bahrain, the Central Bank of Kuwait, and the Reserve Bank of India, respectively. The group specializes in sending and receiving money and offers foreign currency exchange services.
Finablr comprises a group of foreign exchange and digital payments companies such as UAE Exchange, Xpress Money, Unimoni, Remit2India, and Bayan Pay that was previously owned by Indian billionaire BR Shetty, who was involved in a major financial scandal.
Remittance flows to poor and middle-income countries stood at $540 billion in 2020, the World Bank said in its migration and development brief in May.
Remittances to the MENA region are expected to grow by 2.6% in 2021.
“Two of the largest and most well-established remittance companies in the region are coming together to create a market-leading financial services group,” Anthony Wagerman, chairman of the advisory board at the Prism Group, told The National in an interview.
“The deal fills gaps for WizzFinancial in parts of the Middle East where it did not already have a presence.”
The acquisition of BFC will enable Royal Strategic Partners to “raise the level of resilience, agility and core competencies to create an integrated financial ecosystem,” said Hamad Al Ali, chief executive of Royal Strategic Partners.
The consortium will focus on growing BFC by making the existing business work more efficiently, leveraging FinTech developments, and making more acquisitions to strengthen the network, said Wagerman.
COVID-19 pandemic had hastened digitization in the payments space.
Finablr’s troubled history
The group floated on the London Stock Exchange in April 2019 in a deal that valued it at £1.23 billion ($1.7bn) but its shares were suspended in March 2020 after problems emerged at a number of Shetty’s companies, including the UAE’s biggest private healthcare business NMC Health, which was later placed into administration.
The UAE Central Bank moved in to undertake direct supervision of UAE Exchange while investigators who were called in to look at Finablr’s books found a previously unreported debt of $1bn in May 2020, sparking a restructuring that led to its Travelex subsidiary being taken over by lenders.
The consortium agreed to buy the remainder of the group last December for a nominal fee of $1, plus up to 25% of any funds recovered from “third parties in respect of possible historic wrongdoing” up to a maximum of $190 million.
Regional remittances market
The UAE was the second largest source of remittances globally in 2020, followed by Saudi Arabia, according to the latest report from the World Bank.
The US was the biggest source country, sending $68 bn abroad last year, while the foreign workers in the UAE sent home $43 bn and those in Saudi transferred $35 bn, said the recent report.
Remittances from Saudi have been slowly declining since 2015 as oil prices have moderated and the government has encouraged hiring of nationals. For instance, foreign workers sent $1.8 bn to the Philippines in 2020, down 36% from 2015.
Despite the large drop in foreign workers in the GCC, remittances from Saudi held up in 2020 thanks in part to the cancelation of travel to Saudi Arabia, which diverted funds set aside for the Haj pilgrimage to remittances to Bangladesh and Pakistan, according to the report. Both of those countries offered tax incentives last year to boost remittances from migrant workers abroad.
Remittances to the Middle East and North Africa rose by 2.3% to about $56 bn in 2020, following a 3.4% increase in 2019, the report said.
The gains came amid unexpectedly strong inflows to Egypt (up 11% to a record $30 bn), the fifth-largest recipient of remittances globally, and to Morocco (6.5% to $7.4 bn).
Tunisia saw a 2.5% increase, while other countries, including Lebanon, Iraq, Jordan, and West Bank and Gaza all experienced double-digit declines.