Focus On Sliding Remittance-1
BB plans to reform remittance channel connecting to mobile banking
Bangladesh Bank (BB) is contemplating to remodel the remittance channel to arrest the sliding remittance inflow that may unsettle the macro-stability of the economy that it took a long time to achieve. A team of experts are now working on the observations of central bank study conducted recently by a group of officials in some countries to probe the issue of remittance decline.
A top central bank official has said that the BB's move to redesign the remittance channel connecting remittance to mobile banking is an idea in the offing. The measure would be an alternative to informal remittance (Hundi) to which the expatriates are attracted because of better exchange rate, lesser fee, secured transfer of money and convenience for the real time transaction/conversion.
"As convertible rate, fee and quick delivery of cash in remote areas are serious matter of consideration of expatriates willing to send money home, we are working on an alternative formal modality to attract remittance of small tickets connecting MFS with available payment system. The effort to loop-in MFS would take care of the last mile solution that Bangladeshi diaspora keenly seek to send remittance to their loved ones. But, the effort should be joined by all stakeholders to formulate a right strategy", said ShuvankarShaha, Executive Director of Bangladesh Bank.
Remittance, the life blood of the economy contributed 13 per cent of Bangladesh's gross national product (GNP) in 2015, has been on the decline over the years that has left the policy makers worried. The country received 16 percent less remittance from July to April in the current fiscal year than it did in the same period in last fiscal. The drop followed a rise in April from the March figures.
Bangladesh Bank officials who visited Singapore, Malaysia and Saudi Arabia to identify the reasons for sliding trend of remittance with particular focus on hundi through mobile banking channel have identified some more reasons for drop in remittance inflow in the country.
"People are losing jobs and as a result they don't have official documents to send any money to their relatives even though they make some earnings through informal engagements. For example, nearly 30,000 workers lost jobs in Singapore as Shipping Industry faced severe blow with a huge amount of loss", said a BB official.
"In Malaysia", he continued, "a large number of illegal workers are unable to produce any documents and many legal workers are discouraged to go to exchange houses or banks as the cost of remittance is higher than unofficial channel. Besides, the workers having job can send remittance matching with the salary mentioned in the work permit (Aakama in case of KSA) even if they earn extra compensation for additional jobs they do".
So, the BB official observed, banks can attract expatriates to send their legal earnings with lower fee of remittance and quick delivery of cash to their relatives in remote areas with commercial arrangement with MFS and that might be the right solution.
"But a favourable exchange rate for the hardworking expatriates needs to be considered too. And we are working to address these issues", he told The Daily Observer.
The falling trend of remittance is a reality and the reasons for that are well identified. Hence, engaging into blame game would not only be futile but waste of time as well. Rather a proactive alternative solution that would shun the informal channel with a formal arrangement to attract remittance through National Exchequer is the way forward. Such measure surely would bolster Bangladesh's 32 billion strong foreign reserves.
"Over the years, banks failed to attract people as their cost of remittance is high. They put less focus on customers and failed to deliver cash in remote areas quickly in many instances. This discouraged people of small income expatriate group to use official channel", a senior central bank official told The Daily Observer.
Hundi or Hawala is an old money transfer system now being used by black money traders in cross- border transactions. It has been observed by the BB Investigation Team that unscrupulous money traders use the name of mobile financial service operators to attract remittance senders offering them higher exchange rate, low cost, quick and safe cash payment service.
"We can't stop hundi overnight or stop money launderers/unauthorized exchange outlets who misuse the logo of bKash or Rocket. But, we can reduce Hundi by attracting small ticket remittancesize using these MFS providers that have access to remote areas in Bangladesh. However, we need a collaborative approach", he said on condition of anonymity.
Dr BiruPaksha Paul, former Adviser to the governor of Bangladesh Bank also thinks in the same line. "Chasing hundi agents would be impractical and impossible. Even Singaporean police officers witness the illegal outlets without any urge to arrest illicit money traders; so, our efforts from a thousand miles away would be doomed to fail", he said through a writing published in a daily.
"The only way to defuse the hundi system is to outperform them by ensuring four things: 1) a countrywide network; 2) market- based exchange rates; 3) quick delivery/service; and 4) social advocacy for using the official channels", he suggests.
Given the reality, the government has moved to bring remittance entering the country through MFS under a regulatory framework of the Central Bank to curb Hundi. The government is going to formulate a policy after holding meetings with Bangladesh Bank, bKash and other stakeholders with an aim to recognizing the inflow of remittance through channels other than banking sector.
"Our aim is to ensure a win-win situation in which no one is affected, and the inflow of remittance will not stop", Planning Minister AHM Mustafa Kamal said at a meeting Sunday.
MFS operators are welcoming this unique initiative. "We welcome the government's policy initiative and like to work with commercial banks to bring remittance through formal channel", Major General Sheikh Md Monirul Islam (retd), the Chief External and Corporate Affairs Officer of bKash said.
"Our existing agent network has the capacity to provide the last mile solution ensuring quick delivery of the money to the recipient at any remote corner of Bangladesh and to the satisfaction of the remittance sender", he said.
Industry experts say an efficient model to channel formal remittance of small tickets can surely be achieved through partnership between commercial banks and MFS providers. Low income Bangladeshi expatriates are eager to see the government policy implemented; sooner the better.