After exports, remittances have served as the economic oxygen during the current global recession for Bangladesh. Since independence, remittances have made a substantial contribution to the country’s economy. Employment, foreign exchange revenues, poverty reduction, food security, rural infrastructural development, education, and people’s living conditions have been among the driving factors. According to data from the World Bank, Bangladesh is one of the top seven nations in terms of international employment and expatriate income. According to the Bangladesh Expatriate Welfare and Foreign Employment Ministry and Bureau of Manpower, Employment, and Training (BMET), more than one crore Bangladeshis have been working in different countries since 1976. Remittances are mainly sent by low-educated expatriates, who earn money by pouring blood into various countries, including the Middle East. There are two ways for expatriates to send money to Bangladesh from their home countries. One is through established channels such as banks, while the other is through informal and illegal hundi syndication.
Expatriates of Bangladesh Now and Then
According to official data, Bangladeshi citizens have bagged jobs in 172 countries worldwide. Every year five to ten lakh workers from Bangladesh go abroad officially. The majority of them are unskilled labourers. According to several sources, around 2 million workers travel overseas with alternative visas. Saudi Arabia is the largest labour market in Bangladesh. Following that are nations such as Oman, Qatar, and Bahrain. Additionally, Jordan, Singapore, Italy, Kuwait, Malaysia, the United Arab Emirates, and Maldives were once major labour markets for Bangladesh. Still, a substantial number of Bangladeshis labour legally and illegally migrate to these nations.
Essentially, remittance is used in four sectors by Bangladeshi expatriates. These are the maintenance of expatriate family members, repayment of debts incurred while going abroad, investments, and joint insurance. According to a study of the Global Economic Prospects, 56% of remittances in Bangladesh are transferred through informal channels. The good news is that the rate of remittances made through formal channels has increased recently due to the development of rural infrastructure and 2.5% incentives by the government.
From 1976 to June 2022, the total export of the workforce was 1,42,49,699 people. Till July this year, 6,15,518 people have been exported. A maximum of 4,57,227 Bangladeshi workers went to Saudi Arabia in 2021, which is 74 percent of the Bangladeshi workers who went abroad that year. The Middle East has long been one of Bangladesh’s most prominent and well-known labour markets.
The rate of migration is higher in rural areas than in urban areas. According to the 2019 data by the Bangladesh Bureau of Statistics, 68.44 percent of remittance earnings are spent on purchasing daily necessities in villages. 27.98% in various assets, 2.13% in durable items, and the remainder in savings. Families of immigrants invest more in education and health. As a result, remittances contribute to the long-term growth of education, skills, and human resources.
Economic Contribution through Remittance
In the previous fiscal year (2021–22), expatriates sent home $21.03 billion in remittances. During the preceding fiscal year, remittances totalled $24,77 billion. The last fiscal year saw a minor fall in remittances due to restrictions placed in some countries as a result of the coronavirus outbreak. Nonetheless, the positive trend has been restored in the first two months of the current fiscal year.
According to the data of Bangladesh Bank, the remittance received last month was 2.03 billion. In July, 2.09 billion dollars arrived. Unquestionably, the government’s move to prolong timely incentives to encourage remittances deserves praise. Prior to January 1, 2022, this incentive was 2%; however, it has since been increased to 2.5%. However, Hundi’s impact is not waning. Recently, a government minister stated that 41 percent of remittances sent by expatriates come through Hundi. The total amount is 862 million dollars.
The expatriate Bangladeshis are not always adequately appreciated. These low-educated ‘remittance warriors’ were subjected to extreme neglect and harassment at various places, including the airport.
The consequence of the Negligence and the Dominance of Hundi through Modern Methods
Remittances sent by expatriates through legal channels are decreasing due to digital hundi. Hundi merchants have chosen the Mobile Financial Services (MFS) platform. Some unscrupulous agents are involved in this crime. As a result, the export of Bangladeshi labour to the diaspora has increased, while the country’s inflow of foreign currency has dropped. Several MFS institutions have already cancelled 5,419 agency licenses, according to BFIU data. But is suspending the licenses enough?
On the other hand, cash dollars are being laundered through illegal gaming, betting, gambling, and online forex trading. Hundi Syndicate members send SMS messages to Bangladeshi agents via apps or social media, with the MFS account number and amount of expatriate beneficiaries included. The agent enters the beneficiary’s identification number. Due to this, expatriates’ money does not enter the country in foreign currency.
The Impact of Hundi on Money Inflation
For quite some time, the country has been experiencing a currency crisis, one of the causes of which is the decline in remittances alongside vast corruption and money laundering. In addition to banks, the dollar rate has risen on the open market. Beginning of this year, one dollar was worth approximately BDT 90 on the open market. Recently, it reached a peak of 119 BDT. The exchange rate has decreased from BDT 106 to BDT 110 as a result of a number of measures and a central bank inspection. At the import level, the price of the dollar, which was 86 BDT, increased to 112 BDT. Now, it has decreased to 106 BDT from 104.
This is how the dollar soared as demand exceeded supply. The market price of the commodity has grown as a result.
Hundi syndication’s involvement in the MFS sector provides doorstep service to remittance recipients. They receive instructions from abroad that merely define the quantity and quantity. Consequently, payment is made to the beneficiary’s number using this account. The funds are sent to the recipient’s number as soon as possible. In this instance, hundi sellers often do not charge any sort of service fee. Sending money via banking channels, which costs an average of 4%, is more expensive than sending money via hundi. Hundi also ensures prompt transactions through MFS. The majority of Hundi outlets are located near Bangladeshi-dominated regions abroad. In some instances, they bring home foreign currency. Occasionally, advance funds are sent on behalf of an expatriate. Due to these advantages, hundi is becoming increasingly popular alongside its prompt and paperwork service. Despite the increase in labour remittances abroad, government report shows that remittances
through banking channels are falling. Despite numerous efforts to discourage international travel, there is a severe scarcity of cash dollars on the market. In the financial year 2021-22, expatriates sent money equivalent to two thousand 103 million dollars through banking channels. Compared to the previous fiscal year, this is a decrease of 3.75 billion dollars or 15.12 percent. However, according to the Ministry of Labor and Employment, 630,000 workers left last year. The first six months of this year saw the departure of an additional 650,000 workers. Even yet, the fall in remittances is concerning.
Despite the fact that the dollar’s price is determined by the market, the dollar’s strength in the market has increased. While I am writing this article, banks sell dollars to their customers at a price of more than 107 BDT per USD. In addition, the dollar’s price on the open market has soared to 110-115 BDT.
Interestingly, rates for the same currency vary from location to location today. When remittances sent by expatriates arrive, the dollar price is 108 BDT. If the same dollar comes through export, its price is 99-102 BDT. The price quoted for import is 104.50 BDT. However, freelancers and other dollar-earning sector employees receive a 2.5 percent government incentive on their salary. In addition, 115 BDT is withheld from a person seeking to purchase dollars for overseas medical care (in the open market).
The implication of the Russia-Ukraine War and the high demand for Hundi
After the beginning of the Russia-Ukraine war, the demand for dollars on the market surged due to the rise in the cost of imported products, such as energy. In comparison, neither export nor expatriate income increased. As a result, the country is experiencing a dollar problem. The dollar’s worth has climbed while the BDT’s value has declined. In less than seven months, the country’s currency has depreciated by more than 25 percent. Before this war began, the exchange rate was between 84 and 85 BDT.
The foreign exchange reserves have lately surpassed 36.97 billion dollars. According to the Bangladesh Bank’s data, the reserves decreased to 37.13 billion dues to the payment of 1.74 billion by Asian Clearing Union (ACU) countries for the period of July to August. It is anticipated to decline further due to various expenditures and other factors.
Author- MD Talebur Islam
