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Show me the money: LuLu CEO Adeeb Ahamed

Adeeb Ahamed is proud of his achievements. In just five years, he managed to transform LuLu International Exchange from a humble one-branch operation to a network of 100 outlets spread across six countries. Back then the global financial crisis was at its height.
“We started at a time when the market was at rock bottom. Since then, year-on-year, we were seeing double-digit growth,” the chief executive says, attributing results to the market rebound over the past few years.
LuLu International Exchange was set up in Abu Dhabi, UAE, with a paid-up capital of AED50m and the first branch in the emirate’s Al Wahda Mall. The company falls under the Emke Group, or Lulu Group International as it’s called now, a conglomerate of 25,000 employees operating in manufacturing, import and export, wholesale and consumer products, across 32 countries and spanning the Arabian Gulf, Asia and Africa. It is best known for its chain of LuLu hypermarkets.
Moving into the remittances and exchange business was a natural progression for the group, explains Ahamed.


“As we’ve seen, any retail company at some point in time has diversified by entering the financial sector. Take the likes of Walmart, Sainsbury’s and Tesco’s, at some point in their growth timeline they diversified into the financial business and that’s because it is a natural fit for the retail business.”
While the group has traditionally stuck to business segments where it has done well, it identified an opportunity in the remittances business. Due to the increasingly large numbers of expatriates living in the Gulf region, large percentages of migrant workers’ incomes are sent to their home countries every month.
A 2013 study by the Kuwaiti-based Diplomatic Centre think-tank found that the UAE and Qatar had the highest percentage of expatriates in the Gulf region compared to their local populations, while Saudi Arabia — due to the size of the country and its population — had the largest number of foreigners, estimated at 8 million.
“A lot of migrant income has to flow outside of the country. While the remittance side of the business is part of the banking sector, it hasn’t been catered to by the banks as such in this part of the world,” Ahamed says. “We decided to try that portfolio first, rather than going into a non-banking financial license and then testing out with credit cards and other facilities like Walmart, Tesco’s and Sainsbury’s have done. We decided to go to the bottom part of the pyramid, which is the remittances business.”
However, Ahamed says the company “did not want to become a mere exchange or remittances company”, rather aiming to establish itself as a payment solutions provider. “We decided we wanted to enter into everything and anything that deals with making a payment and that also takes into account moving money from one side to another.

In order to achieve this goal, Ahamed convinced the group of the importance of embracing acquisitions as a strategy for expansion. Without acquisitions in the remittances business, he argued, growth would be constrained. Five years on, LuLu International Exchange has become one of the biggest players in the market, with over 1,500 employees and operations in five Gulf countries — excluding Saudi Arabia — and in India and the Philippines. It also has a liaising offices in Bangladesh and India.
“In five years, 100 branches is a good number for us to compete against our competitors in the market. Having a regional presence also brings up the value,” Ahamed says.
However, the CEO’s ambition doesn’t stop there. The exchange business hasn’t reached 25 percent of its potential growth, according to Ahamed, who says the company has been purely focused on expanding and establishing its footprint in the market and getting regulators to accept its presence.
“In the next two years, the plan is to stabilise and grow the business. Branch expansion is what we are looking at in each of the markets we operate in. In the UAE, we have 30 branches and we put in a license request for extra branches. In fact, we will be opening our 100th global branch very soon by the end of this year. We had an internal target of reaching 100 branches by the end of this year and I am glad that we are on the cusp of achieving our target.

“The closest competitor has over 600 branches. We would like to see the company grow to be among the top three remittance providers in the market,” he says.
For remittances, the company’s biggest market is India, followed by the Philippines and Bangladesh, thanks to the large expatriate communities living in the Gulf region. In the UAE, the Indian market comprises 50 percent of LuLu International’s business, whereas in markets such as Kuwait, the Egyptian market is considered a “very strong corridor” followed by India, according to Ahamed.
Still, the company doesn’t have access to the Arab world’s largest economy: Saudi Arabia. This is due to regulations that do not allow obtaining an exchange license in the country. However, Ahamed is optimistic this will change.
“Going forward we feel the regulators will see the importance of having an exchange license in the country and opening it up, and at that point we will be ready to enter the market.”
The absence of exchange companies in a market creates alternative services for the expatriate community, Ahamed argues. This makes it more important for regulators to recognise the value of businesses such as the one he heads.

“At present, what we find is that there are certain banks doing that business but that the money is still being routed into parallel networks and channels, which is not good for the economy of the remitting and receiving country. It is very important to legalise the channels where the money is flowing in both remitting [and] receiving countries,” he says. “When you have players like us entering the market with the compliance in place, it helps streamline a lot of issues. Other countries [in the region] have understood this a long time ago.”
Furthermore, Ahamed is upbeat about growth prospects in the GCC region over the coming five years, as each country in the six-nation bloc pours billions of dollars into developing infrastructure from building ports, airports, malls, metro, tram and railway projects as well as large venues to host the upcoming World Expo 2020 in Dubai and the FIFA World Cup 2022 in Qatar. This will inevitably attract people to seek job opportunities in the region, Ahamed believes.
“I think the next five years seem to be very healthy for us and we are really excited to have these kinds of projects in GCC that would benefit the exchange and remittances business,” he says.
The remittances industry is under huge pressure in the GCC region. Newer stringent laws are being drafted by the countries are taking a toll on the exchange houses. In the UAE the exchange houses are facing mounting operational cost and higher minimum capital requirement endorsed by the Central Bank of UAE. It might not come as a surprise if some smaller players consider merging their entities with bigger companies to retain their validity in the market.

Kuwait, for instance, has been calling for the imposition of a five-year residency cap on foreigners and a restriction on bringing their families into the country, which might adversely affect remittances. Oman on the other hand, is considering to levy a 2 percent tax on expatriate remittances in a move to overcome a budget deficit due to drop in oil prices.
Adeeb Ahamed on LuLu’s expansion plans
“Of the five years since we began our operations, this year has been the busiest year yet with us opening 24 branches in this financial year. Out of the 24 branches that we have launched in 2014, nine branches are in UAE alone, including the 100th global branch that will be opened soon. We are concentrating on consolidating our branches at the moment, though we are planning to expand further, not only in the number of branches but also to new markets and countries.
“Our business model includes both acquisitions of existing companies as well as setting up new companies. We have believed in both organic and in organic growth of the company which has led us towards success in the past five years.
“In India, we opened the country’s 25th branch in November. With the growth prospects brightening, we will be opening at least 12 branches in 2015 in India. We have applied for the Authorised Dealer category II license with the Reserve Bank of India which authorises us to do outward remittances. In addition to our now existing full-fledged money changer license, we have also asked for a money transfer service scheme (MTSS) license to permit us to do cash payouts to our customers through our outlets in India. We are in the process of applying for the license of small savings bank with an intention of operating a small bank in India.
“We plan to open at least 25 branches by the end of 2015 in the GCC region, subject to regulatory approval. Apart from opening branches, with an intention of strengthening our MENA remittance corridors such as Egypt, Lebanon, Jordan etc, we are in talks with various banks of the region for banking arrangements and tie-ups."

Saturday, 20 December 2014 2:24 AM
Arabian Business