Remittance: The Driving Forces of our Economy

"In Bangladesh, we still have the youth, which is a big power for us.
We've to make them skilled through provide them training.
We'll not send laborers only; we will send skilled workforce."
-Honorable Prime Minister Sheikh Hasina
In Bangladesh, remittance is one of the most important economic variables
in recent times as it has an impact on economic growth, helps in balancing
balance of payments, increasing foreign exchange reserves, enhancing
national savings and increasing velocity of money. For about two decades
remittance has been contributing around 35% of export earnings.

Remittance:
The word remittance originates from the word “remit” which means to
transmit money or funds in banking terminology. A remittance is a transfer
of money by a foreign worker to an individual in his or her home country.

Relation between remittance and economic growth:

Remittance

Aggregate Level Disaggregate Level

Reducing Current Increase in income of

Account Deficit the recipient household

Increasing Foreign
Currency Reserve
Consumption Savings

Stabilizing Exchange
Rate

Development of
Financial Sector
 Improvement of Economic Growth Investment
Production Activities
[ N.B: Bank Written Focus এ ব্লক ডায়াগ্রাম দেয়ার সুয াগ/ ায়গা পাযেন না। তযে আইডডয়া ডনযত পাযরন। ]
Remittance from the Global Perspective:
Over the last few decades, the flow of remittance has been persistently
increasing across the globe. However, some of the developing countries like
India, China, Mexico, and Philippines etc. hold the major share of entire
remittance of the world.
Top 10 remittance (in billion US$) receipt countries in 2021
Remittances in billion US$
Nepal 8.5
Vietnam 18
Nigeria 18
Bangladesh 23
Pakistan 33
Egypt 33.3
Philippines 36
Mexico 53
China 53
India 87
0 20 40 60 80 100
Remittances in billion US$

Source: World Bank Group

Actual Status of Remittance in Perspective of Bangladesh:
According to World Bank report on migration and development, Bangladesh
was the 7th highest recipient of remittance from abroad in 2021. It
received over USD 22 billion as remittance last year which marked an
increase of 2.2 percent over the year 2020.
According to Bangladesh Bank:
 In October-December 2021, the remittance inflow achieved at USD
4831.23 million amid the impact of COVID-19 which was 10.67
percent and 22.47 percent lower than that of the previous quarter and
the same quarter of the last year.
 During FY21, remittance-GDP ratio stood at 6.03 percent, remittance-
export earnings ratio was 67.14 percent and remittance-import
payments ratio was 40.83 percent.
 The largest amount of remittance was received from KSA (USD
 1130.95 million) which was 23.41 percent of total remittance followed
by USA (17.26 percent), United Kingdom (8.87 percent) and Kuwait
(8.24 percent) in the 2nd Quarter of FY22.
 Total 299410 Bangladeshi employees migrated during the quarter of
October -December 2021 in which 31014 were female workers.
 During 2nd Quarter of FY22, 210409 Bangladeshi workers migrated to
KSA which was 70.27 percent of total migration followed by Oman
(10.26 percent) and UAE (8.18 percent).
 In October-December 2021, Private Commercial Banks, State-owned
Commercial Banks, Specialized Banks and Foreign Commercial Banks
received USD 3759.38 million (77.81 percent of total), USD 953.65
million (19.74 percent of total), USD 94.23 million (1.95 percent of
total) and USD 23.97 million (0.50 percent of total) remittances
respectively.
Flow of remittance in Bangladesh during 2014-2021 (billion US $)
Value in billion US$
25
20 21.75 22.07
15 18.36
14.99 15.27 15.56
10 13.57 13.5

5
0
2014 2015 2016 2017 2018 2019 2020 2021
Value in billion US$

Source: statista.com
Major Country-wise Share (%) of Remittance Inflows in Total
Remittance Inflows: October-December 2021
 Others, 25.90% KSA, 23.41%

UAE, 7.64%
UK, 8.87%

Oman, 3.91%
USA, 17.26%
Kuwait, 8.24%
Malaysia, 4.77%

KSA UAE USA Malaysia Kuwait Oman UK Others

Source: Statistics Department, Bangladesh Bank

Country-wise migration: October-December 2021

1.50% 4.82%
2.91%
0.04%
1.46%
10.26%
0.54%
8.18%

70.27%

KSA UAE Kuwait Oman Qatar Lebanon Jordan Singapore Others

Source: Bureau of Manpower, Employment and Training, Bangladesh

Remittance and Our National Economy:

The government as well as the general people of our country is very alert
about remittance flow. The remittance inflows from the foreign countries
have changed our national and domestic life. It plays a vital role in running
our economic activities. The role of remittance in accelerating economic
growth is discussed below:
 Reduction of Poverty:
From our rural areas, a vast majority of people work in 63 overseas countries.
They send remittance which will ultimately help reduce poverty. It has
brought peace and in the society. It makes the unstable economy stable.
 Increase in foreign exchange reserves:
According to the calculations of Bangladesh Bank, the foreign exchange
reserve at the end of 2019-20 FY is 36.037 billion US dollars and at the end of
FY 2020-21 it is 46.391 billion US dollars. According to the data, the foreign
exchange reserves have increased by 10.354 billion US dollars in a single fiscal
year. The role of remittances sent by expatriates is crucial behind the increase
in foreign exchange reserves.
 Increase in per capita income:
Bangladesh Bureau of Statistics (BBS) shows that, the per capita income at the
end of the 2019-20 fiscal years was 2,064 and at the end of the 2020-21 fiscal
years it was 2,227. According to the BBS, per capita income has increased by
163 US dollars in one fiscal year. The role of remittances sent by expatriates
is very crucial behind the increase in per capita income.
 Development of Service Sector:
Expatriates send remittance through banking channels. Banks are the major
parts of service sector. According to the Economic Survey-2021, the
contribution of the service sector to GDP is 51.53 percent. This sector becomes
developed through the remittance of expatriates. The flow of remittances
through banking channels has increased due to 2 percent incentive given by
the present government.
 Development of industrial Sector:
According to the Economic Review-2021, the contribution of the industrial
sector to the GDP is 34.99%. Foreign remittance helps Bangladesh to make
investments for industrial development. Through sending remittance,
expatriates play direct and indirect role in the industrial development of the
country. As a result, the industrial sector is continuously developing.
 Development of agricultural Sector:
Agriculture is one of the main sectors of our economy. According to the
Economic Review-2021, the contribution of agriculture sector to GDP is
13.47%. Remittance of expatriates helps to develop agricultural sector of
Bangladesh. Through sending remittance expatriates play direct and indirect
role in the agricultural investments of the country.
  Increase in employment opportunities:
According to the Bangladesh Bureau of Statistics (BBS) survey, the number
of educated unemployment in the country is 26 lakhs. According to the
International Labor Organization (ILO), about 4 crores 82 lakh working people
in the country are unemployed. Foreign remittance has been continuously
keeping the contribution to create the employment opportunity in Bangladesh.
In the last five years mew staff went abroad from Bangladesh
Year Number of Staff
2017 1008525
2018 734181
2019 700159
2020 189272
2021 271445
[Source: Bureau of Manpower Employment and Training (BMET)]
 Poverty alleviation:
According to the Economic Review-2021, the poverty rate is 20.5 percent and
the extreme poverty rate is 10.5 percent. Poverty is a common situation of our
life. Foreign remittance has been continuously keeping the contribution to
alleviate the poverty of in Bangladesh. Moreover, the remittance of expatriates
has the positive impact on socio-economic condition of migrant families.
 Capital formation & Investment:
Business sector has become major role-playing sector in our economy.
Remittance of expatriates helps to the formation of business capital. According
to the Economic Review-2021, the national investment in the fiscal year 2020-
21 is 29.92 percent. The role of the remittance behind this investment is very
crucial.
 Exemption from foreign debt cycle:
The government has been paid various government and non-government
import bills and installments of different foreign debt & donation from the
remittance income. Remittance income helps the government of Bangladesh
to reduce dependency on foreign aid. 'Remittance makes more strong local
currency against US dollar.
 Infrastructural Development:
The role of remittances in the development of infrastructure is significant.
Remittances help in construction of schools, colleges, universities, hospitals,
roads, highways, bridges, culverts etc. Relying on remittances, we now have
the courage to implement many big projects, including the 6.15 km long Padma
Bridge, with our own funds, which is a great direction for our economic
development.
 Handsome Domestic Capital:
Bangladesh has huge shortage of domestic capital. We are not capable of
providing speediness to domestic capital. In this regard, remittance has
played a pivotal role in giving strength to the economy. It has helped increase
the economic activities of our country.
 Changing Our Rural Economy:
Because of increasing of inflow in remittance, economic activities at the
grassroots level have increased, especially economically backward people
have come under the shadow of mainstream economic activities of
Bangladesh. As a result, the rural areas have changed a lot infrastructural and
at the same time poverty has been decreased.
 Establish Industry:
Investment is a prerequisite condition for establishing industrialization in
Bangladesh. Remittance has increased the extent of investment in the country
by the migrant workers. Furthermore, remittance has fulfilled the scarcity of
domestic capital in time of conducting industrialization process.
Problems of Sending the Remittance:
Sometimes, the workers who are working in foreign countries are facing
some problems which are discussed below:
 Lack of Proper Banking Assistance:
Those who are working in foreign countries don't have enough idea of
banking system. They don't know how to send money from overseas to
domestic country.
 Complicated and Unavailability Banking Service:
As the workers are illiterate, they face some complexity on banking system.
In many cases, the migrant workers want to avoid the excessive official
formalities of banking system. So, they feel the language problems.
 Unwanted Delay in Transferring Remittance:
 Money transmissions from overseas get late. If the system is easy, they will
feel fresh as well as get comforts. For the enhancement of the workers, it is
very necessary to introduce suitable banking system so that the workers'
relatives can get money quickly.
 Unexpected Exchange Rate:
The workers working in foreign countries are doing much labor and earn
money. Therefore, we see that the rate of exchanging money is not high. So,
the government should take necessary steps in making the interest rate high
to inspire the migrant workers.
 Unskilled Migrants:
Research shows, 50 percent of Bangladeshi migrants are unskilled. We have
only 2 percent of skilled-professional migrant workers.
 Frauds at the recruiting agencies.
 Illegal and lengthy process of migration and non-co-operation of
embassies abroad are daunting the potential flow of remittance.
 ILO explored some problems faced by Bangladeshi migrants include;
high fees for migration charged by recruitment agencies, especially for
low skilled jobs; low wages, lack of information on migration
opportunities and risks; discrimination, exploitation and abuse while
overseas; and insufficient services to protect the rights of workers.
If the existing prevailing factors could be eliminated, remittance would
double or triple and thus Bangladesh could avoid Dutch disease.
Measures Taken by the Government and the Bangladesh Bank:

“The promise of decent jobs for all seems hard to realize individually,
But I am convinced that together, we can do it.”
-Honorable Prime Minister Sheikh Hasina
To encourage the remittance inflows through the banking channel,
Bangladesh govt. and the Bangladesh Bank have taken a number of measures
of which some important ones are as follows:
 The government announced 2 percent cash incentive for the first time
for inward foreign remittance through banking channel effective from
1 July 2019.
 Expand labor markets
Middle-East is one of the top overseas employment markets for Bangladesh.
Because of political instability, the labor demand for those areas has reduced
and Bangladesh is facing huge difficulties in exporting laborers. So, this
country is searching for new labor markets in different countries and
expanding its labor markets.
Ministry of Expatriates Welfare and Overseas employment establish a new
research cell to expand the migrant workers’ market. Because if those
activities, this country has opened a new labor market in the new 63 countries.
To ease exporting labor forces this country, strengthen Bangladesh Overseas
Employment and Services Limited.
 Sent workers on G2G
The government sends housemaids to Jordan with no cost and sends garments
workers there with a little cost. BMET and BOESL are sending workers
abroad at a minimum cost. The total cost to South Korea of migrant workers
is only 68 thousand takas.
 Establishment of Probashi Kallyan Bank
The government are providing financial helps to the people who are eager to
go abroad and who are returning from abroad. This is a specialized
government bank which provide loans to migrant workers.
 Welfare activities for migrant workers
Governments are helping to return back dead migrant workers; provide
financial help to that family and helps to collect compensation and insurances.
It also helps in collecting salaries, returning back detained workers, and
provide essential securities.
 Modernize migration system
The government are reducing the effect of brokers by establishing a digital
fingerprint database.
 Encourage people to send remittance on a valid channel
The government are providing a 2 percent incentive on remittance which
comes using valid channel. Commercial banks are setting up relations with
foreign exchange houses with the advice of the government. There is 34
exchange house of commercial banks of Bangladesh abroad.

Recommendations:
As remittance brings positive impacts to the socioeconomic condition of
Bangladesh, the government of Bangladesh and other relevant associations
need to consider with due importance.
  For government, several rule and regulation favorable to the migrants
and remittance flow should be formulated.
 Several investment opportunities can be created so that the remittances
of transnational migrants can be utilized properly.
 Government Organizations (GOs) as well as Nongovernment
Organizations (NGOs) should consider the interest of international
migrants and work for making congenial environment of sending money
to the country.
 The related institutions should be concerned about the rights of migrant
workers so that they can get favorable environment from the beginning
of the migration to the returning phases.
 In additions government should introduce provisions of sending money
with low cost as well as it can make sure that at the time of collecting
remittance in the home the sender and receiver are not required to pay
extra fees.
 Above all, NGOs can launch awareness programs for the families of the
remittance recipient families so that they can be provided with
guidelines of proper utilization of remittance.
 Finally, researchers should consider the prospects of remittance in
respect to the development of Bangladesh and should work on to find
out the problems and prospects related to international migrants and their
earning remittances.
Therefore, remittance is very vital for the acceleration of economic growth in
Bangladesh. Remittance has some problems also but they are very negligible
in comparison to its overall benefit. So, government, concerned authorities
and the people of Bangladesh have to take proper care about remittance
considering its importance in our economy.
Sources:
1. Bangladesh Bank
2. Bureau of Manpower Employment and Training
3. statista.com
4. World Bank
5. tradingeconomics.com etc.