Graham Stack in Hamburg -

Unistream, the biggest player on the money transfer market in the former Soviet Union, insists the crisis hasn't impacted on its operations to any great degree and it still plans to expand its network into Germany.

One year ago, as the financial crisis struck, the media was full of stories about how the Central Asian countries would face a crisis as the remittances from Russia they depend upon dried up. With remittances from Russia accounting for 20-45% of GDP for the countries of the Caucasus and Central Asia, the severity of the crisis descending on Russia at the end of 2008 seemed to bode ill for Eurasia. Alarmist scenarios predicted even state collapse in Tajikistan as workers returned home empty handed.

However, Suren Ayriyan, president of Unistream, the eastern Western Union that had a 27% share of the money transfer market for the Commonwealth of Independent States at the end of 2008, tells bne that none of these doom-laden scenarios panned out and the volume of money transfers has remained largely stable on the year. "After a short blip, transfer volumes are back to their level of one year ago," says Ayriyan. "Money transfers did fall at the start of 2008, but recovered by the spring. People simply did not return home even if they lost their jobs, they stayed in the country and found other work, even if only in the informal economy. No one went anywhere."

Another factor supporting money transfer volumes during the crisis was that with fuel prices staying high, the cost of transport home became unaffordable for many migrant workers. "That's why, although the average amount of a single transfer has fallen, the number of transfers has risen," explains Ayriyan.

This means that despite the 30% dip in the market in the first quarter, money was quickly flowing again as things stabilised. With Russian companies looking to cut costs, cheap immigrant workers out-compete Russians on the labour market. Tajikistan, Uzbekistan and Kyrgyzstan are among the few CIS countries to have experienced growth this year, not least due to the stable level of remittances facilitated by Unistream. The International Monetary Fund forecast in its Regional Economic Outlook released in May that growth in Central Asia would drop to around 1% this year.

Unistream's total volume of transfers in 2008 was $4bn (at current dollar rates), and in 2009 it's looking to reach $4.5bn in spite of the crisis. This is remarkable growth; turnover has grown from $760m in 2005 to $1.85bn volume in 2006 and $3.7bn in 2007, with the number of customers soaring from 870,000 in 2005 to 3.7m in 2007. In 2008, the company held 57% of the market in Armenia, 45% in Kyrgyzstan, 41% in Moldavia, 25% in Tajikistan and 22% in Uzbekistan. The particularly strong showing in Armenia is not coincidental: both Ayriyan and co-owner of the bank Gagik Zakarian are of Armenian origin, one of the historic diaspora nations. There's a "$4bn flow to Armenia from Russia annually," Zakarian tells bne, "and about another $500m from the US."

Going German

The awareness of the West as a source of remittances is now prompting Unistream to roll out its system into the EU countries, including the UK and Greece, but first and foremost Germany. "Today, more than 3m of the country's residents are economic migrants from the CIS, which, given the decidedly high standard of living in Germany, is inevitably a dynamic growth driver for the money transfer market," says Ayriyan.

Analysts at Unistream estimate that Germany's money transfer market in all directions will be worth more than $12bn annually even in the immediate post-crisis period, which is absolutely colossal, bearing in mind that the Russia-CIS corridor was worth a total of $15bn in 2008, with the Germany-CIS corridor's value at around $4bn. Unistream is looking to take 10% of this corridor's volume in the mid-term, according to Ayriyan.

A particular challenge to setting up in Germany has been the toughness of the money laundering laws and general supervisory requirements of the financial sector, which makes obtaining a license a time-consuming and exhausting process. Despite the strictness of personal identification rules for money wires, the extent of internet coverage here means Unistream is developing an online service. "At the same time, taking into account that many migrants in Germany from the CIS are of the older generation, it is important to have a physical presence, including Russian speaking staff," says Ayriyan.

Unistream is owned by its founders Georgii Piskov and Zakarian, with a 26% stake spun off to Aurora private equity group in 2006. Piskov and Zakarian were the founders and owners of Russia's Uniastrum Bank, until selling 80% of the bank to Bank of Cyprus in 2008 for €447m, months before the financial crash. This means the Unistream owners have deep pockets with which to finance the further expansion of the system, which was not included in the deal. "Unistream is a highly solvent, highly liquid system," Piskov tells bne, "which does not need any extra financial support presently. However, any funds it requires for business purposes will be forthcoming."

Piskov makes no bones of his ambitions in the money transfer business. "We want to go global, and expand beyond the CIS corridor. When you have created such a system, it's simply logical to roll it out in country after country," he says.

Send comments to The Editor