Using remittances wisely and effectively

Migration is a natural phenomenon which has contributed immensely to the evolution of mankind. From the very beginning, people have migrated for food and security; now people migrate for economic opportunity and income security. It is estimated that over five million Bangladeshis are currently working overseas to build a better future and enhance the standards of living for their families. This strong community of expatriate Bangladeshis has been actively participating in the growth of the local economy. According to a World Bank report, Bangladesh was estimated to receive US $ 15 billion by the end of 2013.

Remittances by expat population are emerging as an important source of external development finance for the country. These remittances are registering exponential growth in absolute volumes. Relative to other sources of external finance, remittances provide vital social insurance to local population who are afflicted by the socio-economic scenario. Remittances to Bangladesh have increasingly been a major contributor to the development of the country.

In Bangladesh, after the readymade garment (RMG) sector, remittance is the second highest export earning sector of the economy. It helps in balancing the BoP and enhancing national savings of the country. According to Bangladesh Bank, the country received a total of USD 6779.04 million in the first six months of the current fiscal 2013-14. Considering this large amount of remittance inflow in the country, it is imperative for Bangladesh to channelise such funds effectively for poverty alleviation and foreign aid substitution.

The Bangladesh Bank has taken several initiatives to encourage the inflow of remittances through legal channels. These initiatives give the remitter an opportunity to invest in the capital market with various special investment schemes  like wage earner development bond, US dollar investment bond and US dollar premium bond. To increase the network of remittance receiving outlets, Bangladesh Bank has authorised micro credit organisations and post offices for expeditious remittance practices.

Remittances have contributed to the expansion of financial market activities and development of payment systems. They, also, have enhanced direct capital flows and distributed those funds to end users for investment or financial consumption purposes. The government of Bangladesh, besides positively helping to improve the socio-economic condition of migrant families, is using the remittance income to construct educational institutions, hospitals and infrastructure for transport sector among others. Once known for its reliance on foreign aid, Bangladesh is finally on the brink of shedding off that stigma. The strong community of expat Bangladeshis has been actively participating in the growth of the local economy and the momentum of remittances is gaining pace steadily.

The writer is Vice President and Business Head of Xpress Money. [email protected]