International migration in Bangladesh is increasingly becoming the most visible profile of the informal sector --- economic and social aspect --- at its most successful, remaining robust over the years. Not only has it been going on for over four decades now, but looks to have developed a new found strength in the recognition of its informal structure by the formal.
Although state level agencies supported by international organizations are trying to restrain its functioning and bring under formal control, as is natural, it continues to grow. Basically the state capacity to control the sector is limited and the focus now is on regulating the intermediaries- the so called "dalals". However, they are only part of the scheme and not it's largest or most significant entity.
Although the dalals are painted as negative by many, the attitude of everyone concerned is ambiguous. In 2006, when I was working to set up the "Safe Migration Unit" (SMU) at BRAC, I had proposed a programme on formalizing the dalal system and also reducing the influence and clout of dalals. However, when in discussion with GOB officials, I was informed that they were very useful for bringing in clients that benefitted the agencies as well as the GOB officers. At that time the dependence on the dalals was high and our proposed actions were discouraged.
Now the situation has changed for all parties concerned and the GOB has extended its reach significantly to play a role as intermediaries themselves. Since the economic benefits are high the opportunities are positive, both officially and personally, this is understandable. Hence the current phase may see the rise of the officials playing the facilitating role which dalals did before.
While that may be entirely not possible, attempts are on to limit the role of dalals in the project objective relating to formalizing the dalal system. Such efforts however need to be unpacked in the light of the overall migration sector and the cost-benefit analysis from the migrants' perspective. Till that happens the jury will have to be out on the initiative.
Remittance patterns remain one of the more reliable indicators of the formal-informal world's performance indicators. Since the Covid-19 crisis, the official world has been anxious about it even more as it came coupled with other global crises as well. The issue was about the dollar reserve hence the anxiety was about the functioning ability of the government which would be limited by lack of dollars.
More than at any other time, this was when the official world was reminded of the importance of the remittance senders. That is not to say that the sender has become more important. The dollar is and perhaps, it's this gap that is the source of the anxiety and the actions now.
Inward remittance fell in the first quarter of 2023-24 fiscal period due to increased use of informal channels like hundi despite a sharp rise in the number of Bangladeshi migrant workers stated by Bangladesh Bank. It declined 13.5 per cent when the number was $4.91 billion in the July-September quarter of 2024. This was a drop from $5.67 billion in the same period previous year as per BB info.
Officially, most migrant workers live in the Middle East which amounts to about 67.1 per cent of the total migrated workers as per official data. Of them 39.8 per cent went to Saudi Arabia, 20 per cent to Malaysia, 15.2 per cent to Oman, 6.9 per cent to the United Arab Emirates and 5.4 per cent to Singapore in 2022-23.
"The number of registered overseas migrant workers increased to 372,100 in the three-month period in 2024, up 26.3 per cent year-on-year. In the 2022-23 fiscal year, the amount of inward remittance was $21.61 billion, which was about 4.8 per cent of Bangladesh's gross domestic product," says to a media report.
The issue is about the problems being faced in the banking sector in particular and the import economy in general. And that gap is not being met. The banking crisis is a result of the inadequacies of the formal economy rather than the social system in which they are located.
Sources in the formal financial sector say that, due to increase in defaulted loans, slow growth of deposits due to high inflation and sale of dollars from foreign exchange reserves, large amount of money is coming out of the market. Again, the central bank has lately stopped lending to the government for the purpose of controlling inflation. The government has been borrowing from commercial banks, which has exacerbated the liquidity crunch. As a result, the banks are struggling to manage their day-to-day banking activities without the help of the central bank. Consequently, they are facing a liquidity crisis.
Based on evidence, there is a high risk in depending on the formal sector alone. On top of that, other troubles are on the horizon including possible sanctions on the RMG sector. Whether that will happen or not is uncertain but that it will increase pressure on the dollar situation is certain. In fact, RMG export has been on the decline for the last six months.
Given that scenario the chances are that the dollars are going to become more scarce inevitably and this will put more pressure on remittance income. However, the mechanics of remittance is such that it's a complex balance between rates and sense of safety and convenience and it's the sender who alone understands that. No matter what is done, the informal sector appears to be growing stronger even as the formal/Government tries to control it.
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