Inward remittance has already emerged one of the major sources of foreign exchange that helps Bangladesh keep its economic situation stable despite all odds.
The inflow of remittance rebounded to a record level in the fiscal year (FY) 2017-18 after a year of decline due mainly to higher prices of fuel oils in the global market.
The inflow of remittance jumped by more than 17 per cent or US$2.21 billion to $14.98 billion in the FY 18 from $12.77 billion a year ago, according to the Bangladesh Bank (BB) statistics.
Depreciating mode of the Bangladesh Taka (BDT) against the US dollar has also helped increase the flow of inward remittance in the recent months.
On August 27, the inter-bank exchange rate was BDT 83.75 per dollar, up from BDT 80.66 a year earlier.
On the other hand, the average crude oil price stood at $68.8 per barrel in April, 2018. It was $63.5 per barrel two months ago.
Country-wise inflow of remittance: The Kingdom of Saudi Arabia (KSA) topped the list of major sources of remittance for Bangladesh with a total of $2.59 billion sent from the country in the FY 18 while the United Arab Emirates (UAE) and the United States were second and third respectively.
During the period under review, Bangladesh received $ $2.43 billion from the UAE and nearly $2.0 billion as remittances from the United States.
Qatar, Oman, Bahrain, the United Kingdom, Hong Kong, Germany, Japan, Malaysia, Singapore, Australia and South Korea are among the other top sources of remittance.
There has been a gradual change in the remittance flows region-wise with the focus shifting from Middle East to East Asia, Europe and North America.
For instance, Malaysia has become the fifth largest remittance source for Bangladesh.
There is a notable change in this tradition. Besides the traditional flows of male workers going abroad, the number of female expatriates is growing at a significant pace.
This trend added a new dimension to the Non-Resident Bangladeshis (NBRs) portfolio.
The central bank of Bangladesh is now emphasising expediting the flow of inward remittances from Japan and South Korea with setting up more drawing arrangements.
Currently, 29 exchange houses are operating globally with 1,213 drawing arrangements to boost the inflow of remittances.
Easing policies for boosting inflows : To ease the formal channel, the central bank has already reduced the security deposit requirement for the exchange houses abroad to establish drawing arrangements with local banks.
Under the relaxations, the amount of security deposit for a drawing arrangement has come down to US$10,000 from $25,000 earlier while the security deposit for Non-Resident Taka (NRT) account has been trimmed to BDT 0.20 million from BDT 0.50 million earlier.
The central bank has also advised the banks which have exchange houses abroad to appoint agents in the countries concerned to help boost the inflow of remittance.
All banks have also been asked to extend cooperation in ensuring mandatory opening of an account of each outbound worker before their departure for foreign destinations.
The central bank earlier asked the banks to build mass awareness both at home and abroad about advantages of sending money through the banking channel using different TVCs (television commercials).
In addition to their own bank branches and ATM booths, banks are now using the branch networks of the micro-finance institutions (MFIs) and post offices as the sub-agent for remittance distribution.
Remittances are also distributed through agent banking across the country.
Ensuring better services for NRBs: Bangladesh's all scheduled banks have already been asked to take measures for improving the quality of remittance services so that the NRBs send their hard-earned money home through the formal channel.
The banks have also been instructed to open a 'help desk' for ensuring better services at each of their branches that deal with remittance.
The central bank has taken the moves to attract the NRBs so that they send money through the banking channel instead of the illegal 'hundi' system and help boost the foreign exchange reserve.
The banks have also been instructed to inform the NRBs about all types of investment opportunities for them and build awareness among the people about the advantages of sending remittances through the banking channels.
The central bank of Bangladesh has been encouraging expatriates to send their hard-earned money through banks.
Global remittance situation: Not only Bangladesh, remittance to low- and middle-income countries also rebounded to a record level in 2017 after two consecutive years of drop.
Bangladesh received $13.5 billion as remittances in 2017, according to the World Bank (WB).
Globally, Bangladesh is the ninth highest recipient of remittances and in South Asia it ranks third after India ($69 billion) and Pakistan ($19.7 billion).
In 2017, remittances were 5.4 per cent of the GDP (gross domestic product) of Bangladesh.
The WB estimates that the officially-recorded remittance to low- and middle-income countries reached $466 billion in 2017, an increase of 8.5 per cent over $429 billion in 2016.
Global remittances, which include flows to high-income countries, grew 7.0 per cent to $613 billion in 2017, from $573 billion in 2016, the WB said in its latest Migration and Development Brief.
Remittances are expected to continue to increase in 2018, by 4.1 per cent to reach $485 billion. Global remittances are expected to grow 4.6 per cent to $642 billion in 2018.
Longer-term risks to growth of remittances include stricter immigration policies in many remittance-source countries, the WB says.
"Also, de-risking by banks and increased regulation of money transfer operators, both aimed at reducing financial crime, continue to constrain the growth of formal remittances," it noted.
The stronger than expected recovery in remittances is driven by growth in Europe, the Russian Federation and the United States.
The rebound in remittance, when valued in US dollar, was helped by higher oil prices and a strengthening of the euro and ruble, the WB explained.
Outlook for the FY 19: Bangladesh expects the overall inward remittance to cross the $17 billion mark by the end of fiscal year (FY) 2018-19 as different moves have already been taken to spur inflows.
The inflow of remittance may grow by more than 16 per cent to $17.43 billion in the FY 19 from $14.98 billion in the previous fiscal, according to the central bank's latest monetary policy statement (MPS).
The central bank has estimated the figure considering previous trends and other recent developments like higher oil prices in the international market.
Remittance inflows and export growth may sustain their recent performances, driven by global output growth and stronger economic activity in the Middle East for higher oil prices.
The government and the central bank have taken measures to reduce the cost of remittance transfer. They are working to curb unauthorised intermediaries' role in transferring remittances to support inflows through official channels.
Senior bankers, however, said the target of inward remittance might be achievable, if the existing trend continues.
Remittance inflows from different countries, including Japan, Lebanon, Canada and South Korea witnessed an upswing in recent months.
However, remittance flows from the KSA are affected mainly due to regulatory changes in the kingdom, a senior banker has said. Most of banks are now offering higher rates for remittances to encourage NRBs to send money through official channels. An executive of the central bank said the upward trend in manpower export in recent years would help achieve the target.
More than 2.32 million workers went abroad with jobs in 2015, 2016 and 2017 calendar years, according to official figures.
Policy markets should take effective measures to ensure hassle-free receipt of remittance at lower costs that would help boost its inflows further.
The global average cost of sending $200 was 7.1 per cent in the first quarter of 2018, more than twice the Sustainable Development Goal (SDG) target of 3.0 per cent.
"Major barriers to reducing remittance costs are de-risking by banks and exclusive partnerships between national post offices and money transfer operators," argued the WB's Migration and Development Brief.
These factors constrain the introduction of more efficient technologies like internet and smart phone apps and the use of cryptocurrency and blockchain in remittance services.
Remittances to South Asia grew a moderate 5.8 per cent to $117 billion in 2017. In 2018, the flow to the region is likely to grow modestly by 2.5 per cent to $120 billion, the WB says.
Remittances help keep financial system stable: The inflow of remittance is contributing to keep stable the country's overall financial system. It helps boost both inflows of foreign exchange in the market as well as deposits in local currency with the scheduled banks.
The upward trend of inward remittance is also helping keep the country's foreign exchange reserve at over $32 billion despite meeting higher import payment obligations recently for fuel oils and food grains.
It has also kept Bangladesh's economy strong through creating domestic demand for both products and services. That also helps achieve maximum economic growth.
The most remarkable contribution of NRBs is the investing of their hard-earned money for development of the country's rural economy in the form of micro, small and medium enterprises (MSME) that also contributes to developing entrepreneurship in Bangladesh.
The NRBs' remittance is also being invested in the capital market and different savings instruments and the government-approved securities.
Wage Earner's Development Bond (WEDB): The NRBs are allowed to purchase the WEDB without opening any foreign currency (FC) account.
Bond Denomination: BDT 25,000; BDT 50,000; BDT 1,00,000; BDT 2,00,000; BDT 5,00,000; BDT 10,00,000 and BDT 50,00,000,
Maturity Period: Five years,
Interest rate:12 per cent on maturity (in BDT).
CIP status: If investment in the WEDB is BDT 80 million or above.
The bond-holder will be entitled to draw interest on a half-yearly basis at 12 per cent per annum. Any interest, if not drawn, will be paid with principal amount on maturity with the benefit of compound interest at 12 per cent on a half-yearly basis, according to the existing WEDB rules.
US Dollar Premium Bond: The Bangladesh Government Savings Bond is issued in equivalent US Dollar against the foreign exchange remitted by the wage earners.
Bond Denomination: US$ 500, US$ 1,000, US$ 5,000, US$ 10,000 and US $50,000,
Maturity Period: Three years,
Interest rate: 7.5 per cent on maturity (in US$),
Eligible purchasers: Bangladeshi nationals residing abroad and Bangladeshi origin foreign nationals residing abroad
CIP status: If investment in US Dollar Premium Bond is US$ 1.0 million or above.
US Dollar Investment Bond: The NRBs and Bangladeshi origin foreign nationals residing abroad are eligible to purchase the US Dollar Investment Bonds without opening any FC accounts.
Bond Denomination: US$ 500, US $1,000, US$ 5,000, US$ 10,000 and US $50,000,
Maturity period: Three years,
Interest rate: 6.5 per cent on maturity (in US$), and
CIP status: If investment in US Dollar Investment Bond is US$1.0 million or above.
Bangladesh government earlier took a number of measures to boost sales of the two dollar bonds and the local currency-denominated WEDB in a bid to build up the foreign exchange reserve.
As part of the moves, the finance ministry earlier relaxed provisions on the three bonds allowing non-resident Bangladeshis (NRBs) to buy these without attestation by any Bangladesh embassy.
The NRBs will be able to earn more through investing their money in the risk-free savings instruments due to their high interest rates on the investment instruments.
At present, the NRBs are eligible to receive up to 75 per cent loans against their bonds.
Bangladesh Government Treasury Bond (BGTB): The NRBs may invest in the BGTBs through their NITA accounts. In addition to residents, non-resident individuals and institutional investors are also eligible to purchase the bond.
Bond Denomination: BDT100000- and its multiples,
Maturity period: Two, Five, Ten, Fifteen and Twenty years,
Interest rate: Determined by auction committee and coupons are payable semiannually from the date of issue.
Invest in capital market : The NBRs are allowed to invest their funds in the country's capital market using Non-Resident Investors Taka Accounts (NITA).
Under the existing provisions, balances in the NITA may be used freely to buy shares of the Bangladeshi listed companies.
These balances are also freely transferable to the foreign currency account of the same person with their respective banks.
Currently, the NRBs are now investing in the country's capital market using more than 155,000 beneficiary owner (BO) accounts.
siddique.islam@gmail.com