Business
Understanding informal remittances during a crisis: Experience from Sri Lanka
IPS Policy Insights
by Dr Bilesha Weeraratne, Piyumi Ranadewa and Manisha Weeraddana, January 2024
Remittances carry vast economic implications for recipient countries at both macro and micro levels. The choice to send remittances through formal channels such as banks, registered money transfer operators, and online platforms, as opposed to informal avenues like Hawala/Undiyal operators or family networks, plays a pivotal role in achieving positive outcomes for migrants, their families, and the broader society of these nations.
The recent foreign currency crisis and subsequent economic downturn in Sri Lanka, partly linked to the decrease in remittance inflows, underscore the increased importance of understanding remittance channels, especially during crises. However, gaining an understanding of the market for informal remittances is hampered by the intrinsically hidden nature of such activities, which has led towards limited data availability. By recognising these gaps in the existing literature, this study aims to bridge the knowledge deficit by delving into the realm of informal remittances, focusing on the use of informal remitting channels in Sri Lanka during an economic crisis. The study relies on qualitative data while utilising a thematic approach towards data analysis in presenting empirical evidence addressing two specific research:
1) What are the characteristics of the informal remittance channels used by Sri Lankans?
2) What are the implications of informal remittances on the economic crisis in Sri Lanka?
The study derives information from a range of sources, such as extensive desk research and qualitative data collected via 19 key Informant Interviews. The interviewees represent migration-related stakeholders (the IOM, State Ministry of Foreign Employment Promotions & Market Diversification and Sri Lanka Bureau of Foreign Employment), five remittance-related stakeholders (the Central Bank, private and public sector banks and financial institutions), three researchers, seven migrant workers ( three low skilled and four high skilled) currently working in the UAE, Japan, Malaysia, and Saudi Arabia, engaged in domestic work, technical, government or banking sector etc. Qualitative data were also collected from respondents with experience regarding outward informal remittances. The determination of the sample size was based on reaching the point of saturation, where no new information emerged in subsequent interviews. Furthermore, the sample composition was guided by employing the maximum variation sampling technique. To focus on remitting behaviours surrounding informal channels during times of crisis, data were collected between May and August 2022.
Findings
Prior to the economic crisis, formal channels effectively channelled remittances, but the widening cost disparity amid the crisis drew more workers towards informal sectors.
While using informal channels raises concerns such as potential misuse for criminal activities and economic penalties, individual risks are overrated, with a low likelihood of negative outcomes.
The regulatory framework for remittances varies across countries, reflecting local needs and conceptualisations.
Factors influencing channel choice include cost, transaction speed, and no transaction limitations, convenience, accessibility, and anonymity.
Hawala/Undiyal systems emerged as widely used informal channels, especially among low-skilled migrants. Trust and confidence in these unregulated systems minimised the perceived risks.
For irregular migrants, the added benefit of anonymity in informal channels has shown to be particularly advantageous.
During the economic downturn, trust in the regulatory framework diminished due to new policies, pushing workers towards informal channels.
Using formal channels persisted among those aware of legal requirements and with access to digital platforms.
Some high-skilled workers explored alternatives like cryptocurrencies.
Exchange rate volatility, rupee depreciation, and increased control over remittances steer migrants towards informal channels during crises.
Recommendations
As informal channels gain widespread popularity, controlling their usage becomes a considerable challenge. The study outlined the following recommendations to provide a comprehensive understanding of the intricate dynamics associated with informal remittances and contribute to effective measures for managing their impact.
Enhancing awareness:
About personal and national consequences of informal channels.
How to distinguish between formal and informal operators.
Enforcement of regulations pertaining to informal remittances.
Lowering the cost of remittances through formal channels and aligning exchange rates with market rates.
Shifting formal channels from rules-based to risk-based approaches in implementing documentary and identification requirements within KYC policies.
Tailoring incentives for formal channels to cater to the specific needs of migrant groups and ensuring that migrants are well-informed about potential benefits of formal channels.
Removing national and international barriers hindering access to formal channels.
This policy insight was prepared by IPS researchers Dr Bilesha Weeraratne (bilesha@ips.lk), Piyumi Ranadewa and Manisha Weeraddana based on findings from a study on ‘Understanding Informal Remittances During a Crisis: Experience from Sri Lanka’ authored by Dr Bilesha Weeraratne, Thilini Bandara & Thisuri Ekanayake under The South Asia Centre for Labour Mobility and Migrants (SALAM) project conducted by IPS. For more policy insights from IPS, visit: https://www.ips.lk/publications/policy-insights/.
By Ifham Nizam
Australian High Commissioner to Sri Lanka Matthew Duckworth described Omega Traders’ latest investment in a modern dhal-processing facility as a strong example of how cross-border supply chains can translate into productive investment, local value addition and new business opportunities in Sri Lanka.
The investment, which adds a 150-metric-tonne-per-eight-hour-day processing capacity to Omega Traders’ operations, marks a significant expansion of the company’s manufacturing footprint as it celebrates 45 years in Sri Lanka’s food commodity industry.
Speaking at the inauguration of the new Lentil and Orid Dhal Processing Factory in Wattala, last Friday, H.C. Duckworth said the facility represented more than an increase in production capacity, pointing to the wider economic value created when Australian agricultural production is connected with Sri Lankan processing and distribution.
‘This facility is not operating on its own. It is part of a long supply chain and a trade partnership between Sri Lanka and Australia, Duckworth said.
His comments placed the Omega Traders’ investment within a broader commercial context: Australia brings agricultural production and established export capabilities, while Sri Lanka provides processing capacity, labour, market access and opportunities for further value addition.
The investment comes as Sri Lanka continues to look towards greater domestic processing and value-added manufacturing rather than relying solely on the import and distribution of finished commodities.
Dr. (Mrs.) Siddhika G. Senaratne, Director General/CEO of the Sri Lanka Standards Institution (SLSI), who attended the inauguration as Guest of Honour, highlighted the importance of quality assurance in food processing and the role of standards in maintaining confidence across the supply chain.
The facility is equipped with new-generation cleaning, processing, sorting and quality-control machinery, including advanced colour-sorting technology, automated systems and an in-house quality-control laboratory.
The additional capacity will support Omega Traders’ three principal Mysoor Dhal brands — Rainbow Jumbo Dhal, Komas Dhal and Rozanna Dhal — which serve different segments of the Sri Lankan market.
But the investment also has a distinctly local agricultural dimension.
Through its Orid Dhal operation, Omega Traders plans to source locally grown black matpe from Sri Lankan farmers and process it at the new facility.
That creates a domestic value chain linking farmers to industrial processing and consumers, while potentially increasing demand for locally produced agricultural commodities.
Duckworth said this type of business partnership could generate benefits for both countries.
‘Australia produces some of the world’s best agricultural products and we are very efficient and very capable at trading them. But that alone is not going to bring success to Australia. Just as building a factory like this is not going to bring success to Sri Lanka, he said.
‘It’s when we bring these entities together that our products produced in Australia can be processed in excellence here in Sri Lanka that enables this to be a success, the H.C. explained.
The investment therefore combines two complementary supply streams: imported agricultural commodities, including Australian-origin products, and locally produced black matpe for the Orid Dhal operation.
For Sri Lanka, the business significance extends beyond Omega Traders itself. Increased processing capacity creates demand for logistics, packaging, distribution, services and agricultural inputs, while supporting employment within the food-processing ecosystem.
HR-led transformation places people, culture and business performance at the heart of the organisation
Ideal Motors (Pvt) Ltd,has achieved a significant milestone by securing multiple prestigious workplace and organisational culture accolades in 2026, reinforcing its position as an employer of choice in Sri Lanka’s automotive sector.
Among its latest achievements, Ideal Motors has been recognised as one of the 20 Great Workplaces for Young Talent in Sri Lanka 2026, ranked No. 1 and awarded the Gold Medal in the Small and Medium category of Best Workplaces™ in Sri Lanka 2026, and ranked No. 18 among Best Workplaces™ in Asia in the Medium Scale category—the highest-ranked Sri Lankan organisation in the category. The company also received Industry Excellence for Workplace Culture – Trading Industry.
The Young Talent recognition was presented at the Great Place To Work® CXO Forum 2026 held on 10 September 2026 at Cinnamon Life, Colombo. The recognition followed an evaluation of more than 100 certified organisations and highlights workplaces that create meaningful opportunities for employees under 35 to develop, contribute and grow.
At the Best Workplaces™ in Sri Lanka Awards Gala 2026, held on 11 September 2026 at Cinnamon Life, Colombo, Ideal Motors achieved another historic milestone by entering the Best Workplaces Sri Lanka list for the first time and securing the No. 1 Gold Medal in the Small and Medium category. The company also achieved No. 18 in Best Workplaces™ in Asia, reflecting the strength of its workplace culture beyond Sri Lanka.
These achievements represent more than a collection of awards. They reflect the transformation taking place within Ideal Motors, where people, culture and business performance are increasingly viewed as interconnected drivers of sustainable growth.
Over the past few years, the organisation’s HR function has evolved from a predominantly administrative role into a strategic business partner, with greater emphasis on employee experience, capability development, engagement, performance, communication, wellbeing, diversity and inclusion, and data-driven HR practices.
The Automobile Association of Ceylon (AAC) conducted a seat belt safety awareness programme in front of its headquarters and along Galle Face Centre Road, encouraging motorists and passengers to make seat belt use a habit on every journey.
AAC staff, working alongside officers of the Sri Lanka Police Traffic Division, distributed specially designed hanging tags and stickers to drivers. The material carries a clear reminder that seat belts protect drivers as well as passengers in both the front and rear seats.
The public awareness drive was held ahead of the requirement taking effect on 20 September 2026, under which seat belt use becomes mandatory for every occupant of a vehicle travelling on an expressway.
AAC emphasized that the regulation should be understood as a life-saving measure rather than only a legal obligation. Wearing a seat belt can help prevent occupants from being thrown inside or from a vehicle during a collision and can lessen the severity of injuries.
The Association said road safety legislation must be supported by sustained public education, visible enforcement and responsible behaviour by all road users. The participation of the Traffic Police helped the campaign reach motorists directly in a busy part of central Colombo.
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