Department of Accounting & Information Systems

A Thesis Paper on
Title: Finance and Accounting outsourcing: a study on the future impact on
employment rate & economic growth in the context of Bangladesh.

Supervised by:

Abdul Alim Baser ACMA

Associate Professor
Department of Accounting and Information Systems
Faculty of Business Studies
University of Barishal

Submitted By

Habiba Zaman Mime

Department of Accounting and Information Systems

University of Barishal

Date of Submission: 19 Oct 2022

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 Table of Contents

Background of the study .........................................................................................2

➢ History of unemployment in Bangladesh...................................................3
➢ Accounting Outsourcing-Busting the myths ..............................................3
Problem Statement ..................................................................................................4
➢ Objective of the study: ...............................................................................5
➢ Research Question: .....................................................................................6
Scope of the Study ..................................................................................................6
Research Methodology ...........................................................................................6
Time schedule .........................................................................................................7
Budget .....................................................................................................................7
Bibliography ...........................................................................................................8

Background of the study

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 ➢ History of unemployment in Bangladesh

For a considerable amount of time, the government of the United Kingdom was the leading
contributor to the unemployment rate in that country (Rahman, Farooq and Selim, 2021). After
the Mughol dynasty was overthrown, the British made their way to the subcontinent, where they
established themselves economically, and proceeded to plunder the area. They did not succeed in
starting any new businesses, which would have helped ease the labor crisis. Despite the fact that
a number of different enterprises were founded, every one of them was situated inside Indian
territory. After they had departed, the British abandoned the Bangladesh area, which led to it
falling into a condition of disrepair. Following the end of British authority in 1947, Pakistan
followed a similar criterion, which resulted in all kinds of industry being established in west
Pakistan rather than in east Pakistan. This occurred after the end of British administration in
Pakistan (Sajid and Sakib, 2021). The fight for independence began in 1971 as a direct response
to the monopolistic rule exercised by Pakistan. Following a struggle that lasted for nine months,
the nation was eventually divided and renamed Bangladesh after the portion of Pakistan that is
located to the east. Since the year 1971, when Bangladesh gained its independence from
Pakistan, the nation has been mired in the throes of a significant political crisis (Kalam, 2020).
Because of this, it is hard for any government to find a long-term solution to the problem of
unemployment.
The rate of unemployment in the country, particularly youth unemployment is rising at a
significant rate. Moreover, national rate of wage is still below the poverty bar. (UNNAYAN
ONNESHAN, Bangladesh Economic Update, May 2017). Unemployment and poverty are two
great problems in Bangladesh. If sufficient jobs are not generated unemployment problem will
create many complex social and political problem. Moreover, educational institutions become
the factories of producing huge number of unemployed people. So, we should be careful to
establish new educational intuitions specially universities. (Sarder Syed Ahmed & Md. Rezaul
Karim Khan 2017). Youth unemployment issue is crucial for sustainable development of
Bangladesh. The youth unemployment has increased significantly over the years whereas the
overall unemployment remained stable (CPD, 2016).

➢ Accounting Outsourcing-Busting the myths

There is a general misconception that outsourcing started with the IT sector during the mid-20th
century, which isn’t quite true. Accounting outsourcing was there even before that, but it wasn’t
really thought of as an outsourcing model. The idea was already out there.
Great Britain has always had a dominance in the legal and accounting industry, and it was during
the mid-19th century that the prevalent case-law systems compelled business owners to seek
professional guidance from specialists. Following this, Great Britain saw the creation of a
number of private law firms that offered consulting services.

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The Big 4 Accounting firms follow a similar history as they started as legal and accounting/audit
consulting firms and eventually popularizing Accounting audit and legal outsourcing practices.
Ever since, Accounting outsourcing has become a popular business strategy as more and more
businesses/accounting firms/accountants are outsourcing their non-core accounting tasks to
outside firms, going even beyond international borders.

Based on a review of extant publications, it is evident little research on outsourcing finance and
accounting as a profession and its impact on employment rate and economic growth and
accordingly many questions remain unanswered.

Current literature on outsourcing identifies differing viewpoints on what outsourcing covers.

Some literature defines outsourcing as “hiring an outside company to handle all or part of an
organization's data processing activities” (Romney & Steinbart 2006, p. 626), while others
simply refer to outsourcing as “the assignment of an internal function to an outside vendor”
(Gelinas, Sutton & Hunton 2005, p. 669).

For this research, finance and accounting outsourcing is defined as ‘the strategic use of an
external third-party organization to perform all or part of an organization’s back-office
functions within the organization's environment. This definition has been determined from the
contributions of literature on outsourcing and business process outsourcing and will be applied
to the activity referred to as finance and accounting outsourcing (F&AO).It is extensively
claimed in the literature that cost reduction is one of the main reasons tempting most small
businesses to outsource their finance and accounting functions (Financial Executive 2004, p.
52).

Problem Statement

Bangladesh is one of the developing countries in south Asia. Among several problems, one of
the major problems is the unemployment problem which is a major hindrance factor in economic
growth. According to Trading Economics global macro models and analysts’ expectations by the
end of 2022 unemployment rate in Bangladesh is expected to reach 5.40% on the other hand
unemployment rate in 2021 was 5.23%. This is an alarming situation for a developing country
like Bangladesh. Like other nations throughout the world, Bangladesh is currently experiencing a
difficult period because of the Covid-19 epidemic, which is affecting people of all ages
physically, emotionally, financially, and so on [1]. Without a doubt, this epidemic will have a
negative impact on Bangladesh's unemployment rate. Covid 19 pandemic situation make it more
worsen as several companies cannot run their activities in the pandemic situation.

Every year almost 5 million people graduate from public and private universities in our country
and enter the job market [12]. They come here with the hope of returning support and service to
their families, societies, and eventually for a better and respectful life. But due to the crisis in the
job market, their [Received 11 Nov 2021; Accepted 27 Dec 2020; Published (online) 31 Dec
2021]. The high incidence of prolonged unemployment among graduates raises concerns about
the readiness and relevance of skills that tertiary education institutions in Bangladesh impart to
their students"-World Bank in its latest report [11]. The unemployment rate among the educated

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people in the country will be 47 per cent in 2021[10]. Besides, one in three graduates is
unemployed in Bangladesh. To overcome this situation outsourcing Finance and Accounting can
be evaluated for economic growth.

Now, we all know unemployment is a macroeconomic issue that is not easy to deal with. It is
quite hard to fight the unemployment problem but not impossible. Tremendous growth in
information technology (IT) sector in Bangladesh has been in the last 3 years. This growth gives
huge opportunity for Bangladesh to focus on digital economy: a global market for digital
outsourcing.

Outsourcing has become much more popular method in the last decade, and there is a figure
shows that more than two million people have been hired as an outsourced employee in 2013,
and China and India are the most attractive destination (Selvaggio, 2014). Lisa Salvaggio
provides statistical data that 43% of the IT sector, 26% of distribution (logistics), 12% of call
center jobs and 38% of research and development (R&D) are taken care of by outsourced
workers.

Bangladesh was already on its way to becoming one of the key forces that are
providing worldwide outsourcing services, and the onset of the Covid -19 pandemic
has only fueled this sector’s growth fu rther. The pandemic has also pushed many
foreign companies and organizations to shift their workload online, and as a result,
the worldwide demand for IT work exporters has also increased massively, giving
rise to an increased demand for freelance workers around the globe ( The Financial
Express,15 November 2022).The companies prefer to outsource their accounting function
have different targets as saving time or money, getting high-quality bookkeeping services,
reducing the risks typically involved with relying on in-house staff. Basically, we can divide
advantages into two groups, financial and non-financial. Finance and Accounting outsourcing
can be useful tool as this sector has uprising demand in growth of economy as numerous people
of Bangladesh are unemployed after graduation.

In previous times several research papers were published about the unemployment problem in
Bangladesh and outsourcing. Although previous studies have underlined the necessity of
accounting outsourcing (Wood et al., 2001; Nicholson et al., 2004;Nicholson and Aman, 2006),
outsourcing refers to the process of moving outsourced activities to in‐house role (Elliot,
1998).But no research published showing the relationship between Financing and Accounting
outsourcing and its impact on the employment rate and economic growth of Bangladesh.

The main purpose of the research is to find the relationship between Finance and Accounting
outsourcing, economic growth, and the employment rate of Bangladesh.

➢ Objective of the study:

Some major objectives of this research are-

1. The study is an attempt to find out the positive or negative impact of Financing and
Accounting outsourcing on employment rate and economic growth rate.
2. Any impact on traditional Accountant Jobs.
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 3. Impact of Accounting and Financing outsourcing on the economic situation of undergrad
students at different universities in Bangladesh.
4. To find the expansion of Financing and Accounting outsourcing in Bangladesh.

➢ Research Question:

1. What is the relationship between Financial and Accounting outsourcing and employment
rate and growth rate?
2. How does Financing and Accounting outsourcing impact the job of traditional
Accountants?
3. Why is Financing and Accounting outsourcing not expanding as per expectation?

Scope of the Study

This study is from the perspective of Bangladesh's economic situation. We will analyze the data
from 2018 to 2022 to run this research. We will also collect data from different universities'
undergraduate students.

Research Methodology

Research Design:
Research is defined as “the process of systematically obtaining accurate answers to significant
and pertinent questions by the use of the scientific method of gathering and interpreting
information” (Clover & Balsley 1984, p. 1). As the outcome of any study is influenced by the
choice of research design, determining the study’s characteristics will be a significant factor in
the quality of the conclusion (Miller & Salkind 2002, p. 18)
“Business research can be classified on the basis of either technique or function” (Zikmund
2003, p. 54), and where the research is based on purpose or function, it can be further classified
into exploratory, descriptive, or causal research.
“The objective of a descriptive study is to describe. Descriptive studies are often designed to
collect data that describes the characteristics of persons, events, or situations. Descriptive
research is either quantitative or qualitative in nature. It may involve the collection of
quantitative data such as satisfaction rating, production figures, sales figures, or demographic
data, but it may also entail the collection of qualitative information” (Uma Sekaran 2015, p.97).

Data Sources:
Data has been taken from two different sources-
➢ Primary Sources: Undergraduate students, graduated students, job seekers, employed
persons, unemployed persons.
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 ➢ Secondary Sources: Previous works , journals, newspapers, Bangladesh Bureau of
Statistics and Websites
etc.

Research Method:
This research is mixed, and as being descriptive, both primary and secondary methods have been
used to gather data and information. In this research, we will know the combined effect of
F&AO and economic rate and employment rate.

Data Collection Technique:

The data of this study has been collected using the web survey method, observation and case
studies. Data has been collected through questionnaire, direct conversation and internet (social
network).

Time schedule

The research project is divided into three activities. The time frame necessary for the completion
of this research project is approximately 2 months. During these 2 months, periodic reports will
be provided on the progress being made.

Time 1 week 2weeks 4 weeks

Data collection

Data analysis

Report writing

Budget

The approximate budget for this research project is discussed following:

Serial No. Element of Cost Total

1 Editing & computer 1500

programming

2 Traveling 1000

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 3 Reporting, printing & mailing 500

4 Miscellaneous 1000

5 Total 4000

Bibliography

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[2]. Rahman, M., Farooq, M.O. and Selim, M., 2021. Mitigating educated youth unemployment
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