Brac Saajan Exchange to operate in EU

The Bangladesh Bank has given the go-ahead to Brac Saajan Exchange, the UK subsidiary of Brac Bank, to expand its business activities into the European Union in preparation of the Brexit.

Brexit, which is the prospective withdrawal of the UK from the EU in March 2019, will restrict Brac Saajan's market to only the UK, said Selim RF Hussain, managing director of Brac Bank.

So, the exchange house will now set up a 100 percent-owned subsidiary in Portugal to run its remittance business in the EU.

The development comes at a time when remittance inflow from the UK is on the decline while that from the EU is on the rise.

Last fiscal year, $808 million flew in from the UK as remittance, down 6.82 percent year-on-year, according to data from the BB.

In contrast, remittance from Italy surged 45.39 percent to $510.78 million in fiscal 2016-17 and that from Germany 25.89 percent to $31.75 million. 

"Portugal has been selected for lower costs," Hussain said, adding that Brac Saajan would eventually set up operations in France, Spain, Italy and Germany by taking licence from Portugal.

The estimated cost for setting up the exchange house in Portugal is €2.5 lakh, which will be provided from the retained earnings of Brac Saajan, according to a BB report.

The Portugal government is facilitating business organisations affected by Brexit to expand operations into the EU, said the report. Moreover, the operational costs, including tax and labour costs, are lower than in other EU countries.

Considering these factors, the central bank has decided to give Brac Saajan the green light. Brac Saajan has projected net profits of £20,996 in 2018 from the exchange house in Portugal.

The profit is forecasted to increase 14 percent, 18 percent and 20 percent respectively over the next three years.

At a time when all exchange houses in the UK are struggling for survival, Brac Saajan logged in profits of £2 lakh, £2.2 lakh and £2.39 lakh for 2013, 2014 and 2015 respectively.

A total of 14 banks got licences from the BB to run exchange houses in the UK. Of them, five have already shuttered and one could not even start its operations.

Of the remaining eight exchange houses, most are not doing well, according to the central bank report.