‘Wide gap in exchange rates hurts remittance’
The wide difference between the formal and informal exchange rate of the US dollar is a major reason behind the fall in remittance despite a record outflow of migrant workers, said Ali Haider Chowdhury, secretary general of the Bangladesh Association of International Recruiting Agencies (Baira).
"Most of the workers are interested in sending money through informal channels because it is easier and offers higher rates than in the formal platform," he said in an interview with The Daily Star yesterday.
Chowdhury, also a director of East West Human Resource Center Ltd, said when banks are offering Tk 110 to Tk 111 per US dollar to remitters, beneficiaries get Tk 117 to Tk 118 when the fund is transferred through informal channels.
So, he called for fixing the US dollar rate in line with the informal exchange rate, otherwise, it would be difficult to tackle the falling trend of remittance through formal channels.
Beneficiaries of wage earner remitters receive a 2.50 percent cash incentive on top of the market-determined exchange rate for any amount of remittance inflow. The documentation requirement for amounts exceeding $5,000 has been eliminated.
According to Chowdhury, they request workers to send money through banking channels when they depart.
"The government instructed workers to open a bank account before leaving the country and we are following the instruction. Sometimes, we publish advertisements in newspapers urging expatriates to remit money through legal channels."
But nothing seems to be working.
In August, migrant workers sent home $1.59 billion, a year-on-year decrease of 21.5 percent, the sharpest drop since April 2020, central bank data showed.
It came despite a spike in the outflow of workers in recent times.
Bangladesh sent a record 11,44,993 workers abroad in the last fiscal year of 2022-23, up 15.8 percent from a year earlier, according to data from the Bureau of Manpower Employment and Training.
Chowdhury said measures taken by the government, the central bank, and recruiters have not been effective in raising the remittance flow because of the exchange rate gap of Tk 8 to Tk 9 between formal and informal channels.
"Bangladeshi workers are going abroad to earn money, so they will definitely choose the channels that offer them the better rates."
Another factor behind the lower-than-expected flow of remittance through formal channels is when Bangladeshi expatriates want to send money via formal platforms, they need to take off from their work in order to go to bank branches. Besides, there is a need to maintain official procedures, according to Chowdhury.
"On the other hand, they can get the service from the agents of informal operators quickly. What is more, they get the higher rate."
He suggested the finance ministry and the Bangladesh Bank take the initiative to communicate with the concerned countries and introduce an app so that remitters can send money easily.
Chowdhury also recommended authorities visit abroad, arrange view-exchange meetings with remitters and encourage them to use official channels, in order to give a much-needed fillip to remittance flow.