KARACHI: The State Bank of Pakistan (SBP) has dramatically increased payment limits for freelancers working in the digital and IT sector, and other freelance jobs, in a statement released on Wednesday.
The five-fold increase in limits has been taken to broaden the scope of both Business to Customer (B2C) and Customer to Business (C2B) transactions through home remittance channels, according to the SBP.
The original limit stood at $5,000, or around Rs772,125 per individual per month. This has now been increased to $25,000, or around Rs3.86 million, per individual per month.
The SBP said that the new limit will help freelancers to “route greater value of funds through a more economical and efficient channel of home remittances”. It will also help in receiving foreign exchange flows through the formal banking channels in Pakistan.
“This would also enable freelancers to expand their business/operations and engage new freelancers to join the workforce. This is expected to create employment opportunities and increase foreign exchange earnings of the country,” said the SBP.
The state bank also said that the move will help accelerate growth in export of services, noting that the export of services witnessed a 10.5pc rise in January 2020.
In conjunction with the statement, the SBP released Circular Letter No. 03 of 2020, in which it clarified the transaction limits to authorized dealers.
The SBP advised authorized dealers to develop “risk-based standard operating procedures” or SOPs, for the much larger value of transactions that can now effectively take place.
In particular, the advice was aimed at freelance transactions which are above $5,000 per individual per month, or the old limit for freelancers.
In those cases where it is greater than $5000, the SBP has directed banks to conduct appropriate due diligence of the transactions, and that transactions are in line with customer risk profiles.
“Banks shall obtain details of the underlying services that are provided against receipt of funds in Pakistan. These details, to be obtained from the customers, shall be inclusive of but not limited to the portal’s name (if any) through which services are acquired, counterparty acquiring the services, nature of the services etc.” the State Bank said.
It also directed banks to maintain a record of these transactions.
This is not the first time the limit has been increased. On November 27, 2019, the SBP had increased the limit on freelancers to $5,000, or around Rs772,125 per individual per month. The original limit was $1,500, or around Rs231,637 per individual per month.
“In order to broaden the scope of business to customer transactions through home remittance channel, the central bank has enhanced payment limits against freelance services from 1500 US dollar per individual per month to 5000 US dollar per individual per month,” the SBP said in a statement in November.
The decision to increase the payments limits to $25,000 was first announced on January 18, 2020, in a meeting chaired by Prime Minister Imran Khan on e-commerce.
That announcement came from Abdul Razzak Dawood, advisor to the Prime Minister for Commerce & Textile, Industry & Production and Investment.
In another meeting chaired by the prime minister on February 8, the Secretary of Information Technology, Shoaib Siddiqi emphasized government incentives for freelancers. An SBP representative also confirmed that the process for increasing the monthly limit was to be completed in two days.
In that particular meeting, it was also reported that freelancers will be given maximum incentives on the received amount, and that the exchange of foreign currency into local currency will be at interbank rate.