Sri Lanka is introducing a series of financial incentives aimed at persuading migrant workers to channel their earnings through official banking systems, as authorities intensify efforts to strengthen foreign exchange reserves and meet stringent international anti-money laundering standards.
The government’s latest package combines subsidized housing loans, a state-backed contributory pension scheme and targeted credit facilities, all designed to reward expatriate workers who remit money through licensed banking channels instead of informal networks such as the widely used Undiyal system.
Officials argue that the strategy extends beyond offering welfare benefits to migrant workers. It is also a critical economic intervention intended to secure stable inflows of foreign currency at a time when Sri Lanka remains vulnerable to external financial shocks.
Under the new initiative, migrant workers registered with the Sri Lanka Bureau of Foreign Employment (SLBFE) will be eligible for housing loans at concessional interest rates. Rather than directly subsidizing banks, the government plans to reimburse part of the interest cost, reducing borrowers’ repayment burden while encouraging continued use of formal remittance channels.
In another landmark policy, the government plans to establish Sri Lanka’s first contributory pension scheme specifically for overseas workers. However, eligibility is conditional. Workers must remit their foreign income through recognized banking channels, allowing authorities to capture foreign exchange while simultaneously providing long-term social security benefits.
Commercial banks are also supporting the initiative. DFCC Bank’s “Manusavi” Loan Scheme enables migrant workers to obtain financing before or during overseas employment. Yet borrowers must repay these loans exclusively through inward foreign currency remittances deposited into Personal Foreign Currency Accounts (PFCAs), creating another incentive to avoid informal money transfer systems.
While these measures appear attractive for workers, economists note that the broader objective is to increase official foreign exchange inflows, improve banking sector liquidity and strengthen Sri Lanka’s balance of payments. Every dollar remitted through licensed banks enhances the country’s foreign reserve position, helping stabilize the exchange rate and finance imports.
The timing is significant. Sri Lanka is currently undergoing its third Mutual Evaluation by the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering. Authorities face mounting pressure to demonstrate effective controls against money laundering and terrorist financing, particularly within the informal financial sector.
Central Bank Governor Dr. Nandalal Weerasinghe has repeatedly warned that reducing dependence on informal remittance systems is crucial to maintaining international confidence in Sri Lanka’s financial sector. Failure to demonstrate effective enforcement could expose the country to heightened international scrutiny and undermine ongoing economic recovery efforts.
To reinforce compliance, the President has established a national Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) operational committee involving 25 government institutions. New legislation is being expedited while retired investigators have reportedly been brought back to strengthen enforcement capacity.
For policymakers, the challenge now extends beyond introducing incentives. Their success will ultimately depend on whether migrant workers perceive sufficient value in abandoning informal remittance channels in favour of the regulated financial system—a shift that could prove decisive for Sri Lanka’s economic stability.