There has been a profound rebound in remittance coming in through official and unofficial channels to Bangladesh. There is a renewed hope amongst people that despite many short-term problems being faced due to the change in government, people at home need the extra cash and the economy can meet the need with dollars earned abroad. As one looks at the data, remittance earnings over the last quarter (July - September, 2024), the figure has jumped from US$1.91 billion in July to $2.40 billion in September, 2024. Sceptics are quick to point out that this is temporary and may fall anytime due to changed economic circumstances in destination countries where bulk of our workers are concentrated.
This is partly true. But the other side of the argument is seldom highlighted. People are sending more money through official channels regardless of the difficulties encountered in doing so. More and more expatriates understand the need to send it through formal financial channels because this will directly help the country to defray the costs of development. The remittance surge over the last quarter has only the second time it has happened over a 39-month long period.
Sustaining the momentum, however, will require a lot of work. According to information made available by the central bank (BB) and reported by the Financial Express, "This September receipt got enhanced by over 80 per cent year on year from $1.33 billion recorded in September 2023. Compared with the remittance earnings in August 2024 worth $2.22 billion, the September figure is around $200-million higher." Some constructive measures taken thus far are paying off. The depreciation of the national currency (BDT) against the greenback and expansion of the crawling peg mid-band, according to experts, have encouraged remitters to send home more money back home.
Despite the uptick in remittances, the net payments being made in foreign exchange (forex) for both imports and repayments on foreign loans together with interest are still in the negative. Much needs to be done to make it more difficult for business entities to launder money abroad. It is not only a question of employing 'hundi', but also addressing trade mis-invoicing. Despite protestations to the contrary by exporters, there is enough evidence available that puts the amount of foreign exchange laundered abroad at around $8.0 billion annually. That is a massive amount of forex the equivalent of which is not entering the local economy every year. These problems continue to pester because no political government in the past has worked to plug the loopholes, as it worked in their self-interest to move huge sums of money abroad. Getting back to inward remittance, banking insiders agree that tighter control over policy have helped. Today, the BB has lifted the restriction in controlling the exchange rate. So, remitters sending money through banking channels get their money's worth since the exchange rate is now more attractive. This has dealt a blow to the grey market, but are the measures enough? Certainly not!
Until now, all the focus has remained on banks and formal financial institutions. One has to remember that the bulk of Bangladeshi workers are blue-collar, not white-collar, i.e. they are not very comfortable with banking procedures and paperwork. As Bangladesh has spent considerable resources to upgrade its digital footprint, financial institutions and the central bank have also become online. It is necessary now to open up the various digital applications available to people globally so that they may remit money directly from their mobile phones. What has to be worked on are regulatory issues about precisely how people can send money using cellphone technology to cut through the hassle of formal banking.
Of course, such a step may face resistance from formal financial institutions as they will fear loss of business. On the contrary, this will help their business if Bangladeshi banks and BB work together to make mobile applications that will work with cell phones, and the money sent are disbursed through banks and / or non-banking financial institutions. Now that the technology exists, it is the mindset to make it happen. This is the only way to bring the so-called "un-bankable" on board and double the inward remittance basket. The Bangladesh Bank needs to start working on this policy framework without delay.
mansur.thefinancialexpress@gmail.com