High Fees Drive Bangladesh Remittance Into Informal Channels

Dhaka, Bangladesh | November 24, 2008 by D-8 Secretariat

Speakers at a seminar said yesterday high fees charged by financial institutions and low level of banking penetration among rural people prompted non-residents Bangladeshis (NRBs) to use informal channels to remit money from abroad. They also identified an insufficient number of ATM booths and lack of confidence in banks as the setbacks that discouraged people from using the banking channel in remitting money.

“The reasons why a large part of remittance transactions takes place through informal channels instead of financial institutions, include high fees charged by banks and financial institutions and low-level of bank penetration among the rural poor,” said Jamaluddin Ahmed, treasurer of Bangladesh Economic Association.

The seminar, held at the Bangladesh Economic Association (BEA) auditorium, focused on migrant remittance. The association’s president Dr Quazi Kholiquzzaman Ahmed and General Secretary Prof Abul Barkat also spoke at the seminar.

AKM Shameem, head of Corporate Banking for Mutual Trust Bank, said expatriate workers prefer unofficial channels mainly because of better exchange rates and faster receipt of the remitted money by the beneficiaries.

According to a survey, 46 percent of remittance is channeled through official sources, 40 percent through hundi, 8 percent by migrant workers themselves and 4 percent through friends and relatives.

Since 1976, about 8.5 million Bangladeshis have been working abroad. Saudi Arabia, USA, UAE, Kuwait, Oman and Bahrain top the list of countries where most Bangladeshis are working. The speakers suggested formation of a cell under Bangladesh Bank to centrally control remittance transactions of all the banks.

D-8 Secretary General, Dipo Alam, recently led discussion on remittance issue in the APEC Seminar theming “Securing Remittance and Cross Border Payment form Terrorist Use” in Jakarta, Indonesia, on 22-23 October 2008.

D-8 countries, with their 930 millions people, are countries whose large populations are working abroad as migrant workers. Their money/remittances send to their families (parts of $ 251billions remittances in 2007) have proven to reduce poverty and also contribute significantly to the economy of the countries.

However, recently these migrant workers’ remittances are being potentially suspected by some international banks’ policies that discriminated simply because they are Muslims/or have Muslims names, and connect to the misuse issues of financial for terrorism. Therefore in this opportunity at the APEC Seminar, D-8 Organization - standing side by side with other international organization such as APEC, IDB, and OIC - plan to discuss thoroughly the issue, and will seek better way to cooperate together to avoid moslem migrant workers being suspected exageratively and treated discriminatively.

D-8 Secretariat has been taking a concentrated initiative to set up a D-8 working group on remittance issue since last year to help member countries to better route this potential remittance for the development of the D-8 member countries. Secretariat had contacted some participants who attended International Meeting on Migrant Workers in Brussels, Belgium, to work with D-8 Organization on ideas to set up a Working Group on Migrant Workers and Remittances. This would also include cooperation of international organization such as ADB, World Bank and IMF.

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