Bangabandhu Sheikh Mujibur Rahman Science and Technology University, Gopalganj-8100.

Research Proposal

on

“The Influence of remittances on financial stability and credit growth in Bangladesh”

Course Name: Business Research Method Lab Course

Code: FNB 400

Supervisor-

Tanmay Borman

Assistant Professor

Department of Finance & Banking

BSMRSTU, Gopalgonj.

Submitted by –

Nazmul Shakib

ID: 18FB024

Session: 2018-2019

Year: 4th

Semester: 1st

Department of Finance & Banking

BSMRSTU, Gopalgonj

Submission Date: June, 2024

Abstract

This research investigates the influence of remittance inflows on financial stability and credit
growth in Bangladesh. With remittances amounting to approximately $22 billion in 2023, their role
in the Bangladeshi economy is significant yet complex. This study aims to provide a comprehensive
analysis of how these financial inflows affect the banking sector's stability and the availability of
credit. By employing both quantitative and qualitative methods, the research will offer valuable
insights for policymakers, financial institutions, and researchers, ultimately contributing to the
development of effective strategies for leveraging remittances for sustainable economic growth.

Introduction and Theoretical Framework

Background Information

Remittances are a major source of foreign exchange and income for many developing countries,
including Bangladesh. Over the past two decades, Bangladesh has consistently been one of the
top recipients of remittances globally. These inflows have played a crucial role in supporting
household incomes, reducing poverty, and enhancing economic stability.

Recent Developments

In recent years, Bangladesh has seen fluctuations in remittance inflows due to various global
economic factors, including the COVID-19 pandemic and changing migration patterns. Despite
these fluctuations, remittances remain a vital component of the economy, supporting not only
household consumption but also investment in education, health, and small businesses.

Quantitative and Qualitative Focus

To understand the full impact of remittances on financial stability and credit growth, this study
will utilize both quantitative and qualitative research methods. Quantitative analysis will involve
examining financial data from banks and other financial institutions, while qualitative research
will include interviews with policymakers, financial experts, and remittance-receiving
households.

Theoretical Framework

The theoretical framework for this study is based on the following key concepts:

1. Financial Intermediation Theory: This theory explores how financial institutions act as
intermediaries between savers and borrowers. Remittances can influence this process by
increasing the funds available for lending.
 2. Dependency Theory: This theory examines the potential risks associated with dependency on
external financial inflows, such as remittances. It will help in understanding the vulnerabilities
that remittance-dependent economies might face.
3. Economic Development Theory: This theory focuses on how financial resources, including
remittances, contribute to overall economic growth and development.

Statement of the Problem:

While the macroeconomic benefits of remittances are well-documented, their specific impact on
financial stability and credit growth within the Bangladeshi context remains underexplored.
There is a need to understand how remittance inflows influence key financial stability indicators
and credit availability, and to identify any associated risks.

Purpose of the Study

General Objective:

 To evaluate the impact of remittance inflows on financial stability indicators in Bangladesh.

 To examine how remittance inflows influence credit growth within the Bangladeshi banking
sector.

Specific Objectives:

1. To analyze the effects of remittance inflows on bank liquidity, asset quality, profitability, and
capital adequacy.
2. To investigate the relationship between remittance inflows and credit availability in urban and
rural areas.
3. To identify patterns of remittance usage among recipient households and their impact on
financial stability and credit growth.
4. To provide policy recommendations for optimizing the benefits of remittance inflows.

Literature Review

Previous Research: Several studies have explored the macroeconomic impact of remittances,
focusing on aspects such as poverty reduction, economic growth, and household welfare.
However, research specifically examining the dual impact of remittances on financial stability
and credit growth in Bangladesh is limited.

Key Studies:
  Rahman (2019): Explored the impact of remittances on household welfare in Bangladesh,
highlighting the role of remittances in reducing poverty.
 Ahmed and Uddin (2021): Investigated the macroeconomic effects of remittances, focusing on
economic growth and stability.
 Chowdhury (2020): Examined the role of remittances in the financial sector, particularly their
impact on bank liquidity and profitability.

Research Gap: Existing literature lacks a comprehensive analysis of how remittance inflows
influence financial stability indicators and credit growth in Bangladesh. This study aims to fill
this gap by providing empirical evidence and detailed insights into these dynamics.

Research Questions

1. How do remittance inflows affect financial stability indicators such as bank liquidity, asset
quality, profitability, and capital adequacy in Bangladesh?
2. What is the relationship between remittance inflows and credit availability in urban and rural
areas of Bangladesh?
3. How do remittance-receiving households utilize these funds, and what is the impact on financial
stability and credit growth?
4. What policy measures can be implemented to optimize the positive effects of remittance
inflows on financial stability and credit growth?

Methodology

Research Design:

The study will employ a mixed-methods approach, combining quantitative and qualitative
research techniques to provide a comprehensive analysis.

Quantitative Methods:

 Data Collection: Secondary data will be collected from the Bangladesh Bank, commercial banks,
and financial institutions. This will include data on remittance inflows, bank liquidity, asset
quality, profitability, and capital adequacy.
 Data Analysis: Statistical techniques such as regression analysis and correlation analysis will be
used to examine the relationship between remittance inflows and financial stability indicators.

Qualitative Methods:

 Interviews: Semi-structured interviews will be conducted with policymakers, financial experts,

and remittance-receiving households to gather insights on the qualitative aspects of remittance
inflows and their impact.
  Case Studies: In-depth case studies of selected banks and financial institutions will be conducted
to understand the practical implications of remittance inflows on their operations.

Sampling:

 Quantitative Sampling: A stratified random sampling method will be used to select a

representative sample of banks and financial institutions for quantitative analysis.
 Qualitative Sampling: Purposive sampling will be used to select interview participants, ensuring
a diverse range of perspectives.

Limitations & Delimitations

Limitations:

 Data Availability: Access to detailed financial data may be limited, which could impact the depth
of the quantitative analysis.
 Scope: The study will focus on the banking sector in Bangladesh, which may not capture the full
impact of remittances on the broader financial system.

Delimitations:

 Geographical Focus: The study will focus on Bangladesh, providing a detailed analysis of the
country's unique context and challenges.
 Time Frame: The research will examine data from the past decade to provide a comprehensive
analysis of recent trends and developments.

Expected Results

Quantitative Results:

 Empirical evidence on the relationship between remittance inflows and financial stability
indicators.
 Statistical analysis showing the correlation between remittance inflows and credit growth in the
banking sector.

Qualitative Results:

 Insights from interviews with key stakeholders, including policymakers, bank officials, and
remittance-receiving households.
 Case studies illustrating the practical implications of remittance inflows on financial stability and
credit growth.
Significance of the Study

Theoretical Implications:

 The study will contribute to the existing literature on remittances, financial stability, and credit
growth, offering a detailed analysis of the Bangladeshi context.

Practical Implications:

 The findings will provide actionable insights for policymakers to formulate strategies that
leverage remittance inflows for economic stability and growth.
 Financial institutions can use the insights to design products and services that cater to the needs
of remittance-receiving households while enhancing financial stability.

Policy Recommendations:

 Enhancing financial products and services tailored for remittance recipients to promote savings
and investment.
 Developing regulatory frameworks to ensure the stability of financial institutions receiving large
volumes of remittances.
 Implementing strategies to channel remittance inflows into productive sectors to boost
economic growth.

Conclusion

This study aims to provide a comprehensive analysis of the impact of remittance inflows on
financial stability and credit growth in Bangladesh. By addressing these critical issues, the
research seeks to inform policy decisions, enhance financial sector performance, and contribute
to the sustainable economic development of Bangladesh. Through a combination of quantitative
and qualitative methodologies, the study will offer a holistic view of how remittances influence
the financial landscape, providing valuable insights for various stakeholders.

References

1. Ahmed, S., & Uddin, M. (2021). Macroeconomic effects of remittances in Bangladesh. Journal of
Economic Development, 46(2), 145-162.
2. Chowdhury, A. (2020). The role of remittances in the financial sector: A Bangladeshi perspective.
Finance and Development Review, 15(1), 88-105.
3. Rahman, M. (2019). Impact of remittances on household welfare in Bangladesh. International
Journal of Social Economics, 46(4), 567-585.
Appendices

1. Instructions to Participants:
o Detailed instructions for participants involved in the interviews and surveys.
2. Original Scales:
o The scales and measurement tools used for quantitative analysis.
3. Interview Protocol:
o The protocol followed during the qualitative interviews.
4. Sample of Informed Consent Forms:
o Examples of consent forms provided to participants.
5. Official Letter of Permission to Conduct Research:
o Formal letters obtained from relevant authorities to conduct the research.

Budget

Personnel:

 Principal Investigator: $10,000

 Research Assistants: $5,000

Data Collection:

 Secondary Data Access: $1,500

 Interview and Survey Costs: $2,500

Travel:

 Local Travel for Data Collection: $3,000

Materials and Supplies:

 Office Supplies: $500

 Data Analysis Software: $1,000

Miscellaneous:

 Contingency Fund: $1,500

Total Budget:

 $25,000

By following this structure and addressing each section thoroughly, you can create a
comprehensive and authentic research proposal that meets academic standards and provides
valuable insights into the impact of remittances on financial stability and credit growth in
Bangladesh.