A roundtable on 'Remittance via legal channels: Scope of digital technology', organised by Prothom Alo, was held on 27 October 2022. A summary of the speakers' statements has been presented in this supplement.
Participants
Mahfuzur Rahman, former Deputy Head, Bangladesh Financial Intelligence Unit (BFIU) and former Executive Director, Bangladesh Bank
Lila Rashid, former Executive Director, Bangladesh Bank
Sheikh Md Monirul Islam, Chief External and Corporate Affairs Officer, bkash
Uttam Kumar Saha, Senior Executive Vice President, Dutch-Bangla Bank Ltd
Md Zahidul Ahsanj, Executive Vice President, Mutual Trust Bank Ltd
Golam Ghaffar Imtiaz Chowdhury, Senior Vice President, Bank Asia Ltd
Sayema Haque Bidisha, Professor, Department of Economics, Dhaka University
Masrur Reaz, Chairman, Policy Exchange Bangladesh
Khondakar Sakhawat Ali, Emeritus Fellow, Unnayan Samannay
Shawkat Hossain, Head of Online, Prothom Alo
Introductory address: Abdul Quayum, Associate Editor, Prothom Alo
Moderator: Firoz Choudhury, Assistant Editor, Prothom Alo
Discussion
Abdul Quayum
We welcome everyone here today. We want an inflow of remittance through legal channels. This will boost our foreign exchange reserves. All over the world, the price of essential commodities is on the rise. This has started to have an impact on our country too. Under these circumstances, importance must be placed on strengthening foreign currency reserves. Our workers are scattered in various countries all over the world. Today's discussion focuses on how they can send their remittance back home easily through digital means.
Shawkat Hossain
The British government passed an immigration law in 1894, giving scope for people from this subcontinent to legally work there. But the remittance or the labour migration that we talk about in Bangladesh now, began from the mid-sixties and is based in the Middle East. At the time, worker recruitment was more or less informal. It was after the independence of Bangladesh that workers were taken to the Middle East from Bangladesh, but the government did not play a role here. In 1976 the Manpower Export Bureau was set up and from then on, workers were formally sent overseas, mostly to the Middle East. And since then, basically, remittance officially made contribution to our economy.
It was during the outbreak of Covid that the general people realised the importance of remittance. Everyone is aware of the benefits of the increased inflow of overseas remittance during the pandemic. Broadly speaking, remittance is the most important of the four sources of our foreign currency. With a decrease in reserves, our main hope lies in remittance.
Though remittance had begun to come in formally at the time, hundi was a big problem. For long there had been no proper rules and regulations about how long it would take for the banks to deliver the remittances sent by the overseas workers. After Dr Farashuddin became the governor of Bangladesh Bank, he introduced and implemented certain regulations in this regard. The banks realised that remittance must be sent speedily. As to whether hundi was actually decreased or not, is a matter that calls for research. Actually, new and different methods of hundi are emerging.
Certain factors are important regarding remittance. These include easy methods of remittance, having the legitimate papers, delivering the money speedily to the beneficiaries and the exchange rate. After the misbehaviour faced by the remittance-heroes at the airport, it is hard to imagine that they will spend more to send their money back home thorugh legal channels. Firstly, they are having to go overseas to work as we have failed to provide them with employment in the country. After that, we do not treat them well. So how can be demand patriotism from them?
When we have been talking about remittance coming in through legal channels all these days, we have been referring to the banking system. Now MFS or Mobile Financial Services have emerged in this sector. As it is, MFS has become the most important means for taking financial services to people's doorsteps. Now they are taking remittance to the doorstep too. Remittance is coming to the country through MFS institutions.
Just as digital technology has potential, it has risks too. People may be going abroad more than before, but remittances are falling. The reason is that people are sending in their earnings through unofficial channels.
Hundi cannot be halted by law enforcement operations. Hundi has been around for centuries. It will remain in place as long as there is a demand. It is a matter of economics that will be resolved by economics. Measures must be taken to motivate the expatriates to send remittance via legal channels. That means the methods of sending remittance must be simplified. They must be able to send their remittance from wherever they are. MFS legitimately offers the facilities for which the expatriates turn to hundi. But an environment conducive to use this facility must be created. All concerned must work together to this end.
Sheikh Md Monirul Islam
The MFS service providing establishments are licenced by Bangladesh Bank. According to the regulations, all the transactions take place within Bangladesh and so there is no chance of money leaving the country via MFS. Recently certain MFS agents, in their own business interests, cashed in remittance from certain recipient's accounts in the name of 'last mile solutions'. MFS service providers informed the relevant office of Bangladesh Bank of these suspicious transactions. Later CID carried out investigations and took legal action against them. Through such transaction monitoring, bkash and other MFS establishments have cancelled these agencies and will continue to do so. But hundi will not be stopped by simply cancelling these agencies. It will be easier to increase remittance by ensuring attractive exchange rates, apprising the expatriates of the benefits of sending remittance through legal channels and, in some cases, increasing the benefits and facilities in this regard.
It must be mentioned that the increase of remittance through legal channels via MFS is encouraging. Presently 13,000 to 14,000 expatriate Bangladeshis send an average remittance equivalent to around Tk 110 million (Tk 11 crore) daily through legal channels to bkash clients. Clients through bkash received remittances equal as the USD 234 million sent through banks in 2021 and the USD 267 million sent through banks up till September in 2022. So bkash is playing a vital role in bringing in remittance through legal channels.
Nearly over 10 million people of Bangladesh are working overseas. A large percentage of them are in various countries of the Middle East. Remittances come in through bkash from over 70 countries. The highest amount of remittance through bkash comes from the US and UK. Saudi Arabia is in third place, Singapore is tenth and Malaysia eleventh. It is mostly from the European countries that remittance comes through means because the expatriates there are relatively more tech savvy. Those working in Saudi Arabia and other countries of the Middle East, as well as in Malaysia, lack technological facilities and do not want the hassle of physically going to any MTO or Money Transfer Organisation. Hundi is an alternative to them. If all our expatriates are provided with mobile app facilities, this will be a positive solution to the problem and will usher in positive results all around.
Uttam Kumar Saha
It is very important to deliver overseas remittance to the beneficiaries. Dutch Bangla Bank has set up the most extensive network in the country for this purpose. Our services for remittance remain operative 24/7. It is possible to send remittance within seconds by means of APS (Application Programming Software). In 2021, Dutch Bangla Bank brought in remittance equivalent to USD 2.55 billion, the second highest in overseas remittance.
There are certain hitches in the way of sending remittance through legal channels. Most of our overseas workforce are labourers. Many of them live in camps. The banks are far away from the camps. The banking hours and the expatriates' working hours coincide and so a worker has to take leave to go to the bank. The hundi dealers take advantage of this and turn up directly at the labour camps. The illegal money senders deliver the funds to the beneficiaries' doorsteps speedily and so have no expenditure. So if the legal channel services cannot literally be taken to the doorsteps of the remitters and if the remittance cannot be immediately delivered to the beneficiaries, it will be a tough task to decrease the dominance sending remittance through illegal channels.
In this case, the banks which send remittance from abroad and the exchange houses can be encouraged to create their own apps. Then the workers can use these apps in their camps to send remittance home though legal means. Also, agent banking must be expanded in the small towns and the villages so the remittance recipients can easy pick up their money from their doorsteps. Both time and money will be saved.
The 2.5 per cent incentive that the government provides now for remittance, can be offered in a different form. This incentive along with an amount of the remittance can be saved as provident fund. When an expatriate comes back home, this will be a great help because in most cases, their income is never saved.
Md Zahidul Ahsan
As I used to live abroad for some time, I got to see the joys and sorrows of the expatriates first hand. At first, most expatriates would feel that sending remittance through digital financial services was a risk. All the negativities would be highlighted. But those perceptions have changed to a great extent. At present from Mutual Trust Bank, around USD 15 to 20 million in remittance is delivered every month through various MFS to the clients. These transactions total 170,000 to 200,000 in number.
Many exchange houses have apps, but do not use these. These houses do not have much transaction. Investment is required and that is where they lag behind.
A platform is required on our side for the remittance distribution process. India's National Payment Corporation has over 20 products. Yet we have just three products. We have no platform to deliver remittance 24 hours a day, 7 days a week. In many cases a settlement takes five full days, but the beneficiaries want instant delivery. We have certain infrastructural problems too.
Around 40 to 50 per cent of our overseas workforce is illegal. They are unable to end remittance through legal channels. There is no solution to their problem of their sending money legally. The government needs to give this due thought. Anyone will want the maximum from their earnings. Patriotism comes later. After all, the expatriates are sending their family's upkeep. I feel the exchange rate should be market-based.
Golam Ghaffar Imtiaz Chowdhury
In 2021, a total of 276,000 persons went overseas. In 2022, we managed to send 784,000 people overseas. But in 2021, our remittance was USD 17.24 billion, yet in 2022 this was USD 16.46 billion. This is a matter of concern for us. In August 2022, remittance totalled USD 2.04 billion. In September it fell to USD 1.54 billion. So where are the wages of the newly exported manpower going? They are surely receiving wages, after all.
If there is no profitable method for the remittance heroes to send their earnings home, no channel, legal or illegal, will appeal to them. They are unable to understand through whom their money is reaching the beneficiaries. They do not know of the money is being sent in their name or in anyone else's name. MFS can play a role by providing the remittance heroes with awareness-raising handbooks. This can explain about which method of sending remittance will be most profitable or how he can buy land without being cheated and so on.
At the end of the day, while the rate of human resource export may be on the rise, remittance is declining. In the case of banks, NPSB must be made compulsory. We have certain limitations for which it is not being possible to have app-based transactions.
The hundi people point out that they send the money in the shortest possible time. But is API-based, app-based and NPSB-based processes can be brought together, the hundi agents will not be able to compete with us. If the money is sent through banks the remittance-heroes will benefit. They must be told that. They must be made aware.
Sayema Haque Bidisha
I want to speak on two issues. One is about how remittance is entering the country. The other is, how this remittance is being spent. Both issues are vital to the national economy. We have worked on the process of how this money is spent. It is seen that they money spent on consumption plays an important role in poverty eradication due to multifarious impact. But there are certain factors related to those receiving foreign remittance. If the recipient is a woman, they spend the money more on health, education and similar areas. Attention can be paid to creating certain attractive instruments for saving and investment in this regard. I feel this is an important issue.
Another matter is, as transactions are easy with mobile banking, the government can provide them with certain facilities. The infrastructure can be further digitalised and assist in simplifying the digital ecosystem. The government can also consider providing financial subsidies. The legal procedures in this regard must be made easier. Most of the recipients of remittance from overseas are women. Women face certain obstacle in banking procedures. While much of this has been resolve, there are still a few bottlenecks. There is a lack of understanding of the digital processes. The internet network is inadequate, not everyone has smartphones and there are other problems too.
Digital literacy is very important. Considerations can be made for smartphones with some basic features. Our local companies can come forward in this regard. People have a propensity to want more cash in hand and so are more interested in getting the money through illegal channels. Efforts should be made to lessen the difference between legal and illegal channels as much as possible. This calls for new and improved inputs for mobile financial services.
The internet is important. It is not possible to personally teach everyone about smartphones and that is why I am referring to smartphones with certain basic features. But it is essential to ensure a legal financial framework for the senders and subsidy for the recipients. Until and unless the gap between legal and illegal channels is closed, people will lean towards the channels from where they will get more financial benefits.
Masrur Reaz
There are certain positive aspects to our overseas remittance. Over the past seven to eight years, the most remittance in South Asia comes to India. But if we look at overseas earnings, Bangladesh ranks the highest. This is our strength. And Bangladesh doesn't lag behind either when it comes to remittance coming in through digital means. But we are receiving less than we require.
After many years, pressure has emerged on the country's wage balance. That is why our reserves have fallen. The foreign exchange market is unstable. And we have to turn towards a consumer-oriented economic system. In the rural areas, a large chunk of the foreign remittance is used for family purposes. The rural areas cannot be left out in this regard.
The channels for remittance to come through digital means must be increased. Mobile financial services (MFS) have had an excellent start, but this must be sped up. A survey indicates that 32 per cent of those who do not use MFS, are fearful of using such services. Digital education must be stepped up. If problems crop up, easy solutions must be brought forward too. Research shows that the consumers do not find solutions in 30 per cent of the cases. Most of the overseas earners who do not use MFS are women and people of the rural areas. Of the overseas earners, 50 per cent are women and 46 per cent of from rural areas. Both these groups are important in the receiving o foreign exchange. Those prone to risk in the rural areas must particularly be provided education in digital finance. The IDTP system must be put in place. This is a globally acknowledged solution. Also, women-centric and women-friendly products must be created. There is lacking in this area.
Khondakar Sakhawat Ali
This issue can be viewed from three angles -- the cause of the problem, the possible solution, and policy support. Firstly, money has always come in through illegal transactions to the country by 'hundi'. This is an intrinsic part of the political economy. Undisclosed funds and black money is a serious obstacle to remittance through legal channels. A large part of the funds of individuals or companies is kept back in the concerned country to be sent abroad, and undisclosed money is used within the country. In this manner, the money from expatriate workers' remittance is being siphoned off and invested abroad. This is evident from comparative studies concerning facts and figures concerning overseas workers and Bangladesh bank's foreign currency flow. A regulatory institution like Bangladesh Bank must play a firm and professional role in the interests of the country and the people.
Secondly, over the past one decade, DFS has won customer confidence based on four indicators (quality investment, global standard technology, distribution and management). Expatriate's remittance is coming to the country through legal channels via the two major DFS operators, bKash and Rocket. Opportunities have been created in the country to use bank accounts through DFS mobile apps. Creating this good example for expatriate workers as well as expanding its size and reach, is a possible solution. A system has to be created where the DFS platforms go to the expatriate workers collect their payments. The DFS platforms must be able to function overseas under their own identity. At the same time, in the interests of the clients, importance must be given also to cyber security.
Thirdly, in the interests of the future economy, it is vital to look for new markets and destinations to send workers in Europe and other countries of the world. A task force can be formed to devise a long-term solution to sending remittance to the country. The task force must include representatives of BFIU, the finance ministry, the overseas employment ministry, the foreign ministry, the embassies of the concerned countries, expatriate worker recruiters and expatriate workers. Bangladesh Bank should consult the central banks of the countries where there are more expatriate workers from Bangladesh and work out a possible solution.
Lila Rashid
Remittance comes in through legal and illegal channels. These channels compete with each other. The issues that come forward in understanding the indictors of this competition are, providing services in the shortest time possible, providing services in the last inexpensive way possible, and maintaining as much secrecy as possible in remitting the money. Basically it is in these three areas that the competition exists between the legal and illegal channels.
Before the technology emerged, hundi or illegal channels of remittance had the upper hand. They would operate through individuals. One person would be in the country and one abroad, they would do the transactions. The banks didn't have this facility. After the emergence of technology, the matter became convenient.
Technology offer legal channels a lot of facilities which the remittance recipients enjoy. There is no doubt about that. There is big investment in technology. The use of technology in big businesses brings down service charges. If one understands technology, then secrecy can easily be maintained.
When we were young, we would debate over 'Is science a blessing or a curse?' Actually, it all depends on the user. When it is used in the interest of the state, we call this a blessing. When it is used to highlight an individual, then we say it is curse for the state.
Technology is used for legal and illegal means, both. The people on either ends of an illegal transaction are communicating through technology. The difference is that if the money comes through legal means, it goes to the reserves. When it comes through illegal channels, it remains there and this is basically a national loss.
From a smaller perspective of foreign currency exchange, the matter of supply and demand is involved. The person sitting here is doing exactly the same as the person on the other side. But in the case of illegal channels, the agent this side is told from the other side, distribute the money in this manner. The person on the other side keeps the remittance with him and so it is not added to our reserves.
Mahfuzur Rahman
Earlier overseas remittance would lie for long in the banks. That is no longer so. It has been said in the discussion that police operations will not be able to halt hundi. It is also important to fix exchange rates. Patriotism will not stand for long in the face of exchange rates. Bangladesh's foreign missions have an important role to play. While working with expatriates in various countries, I saw that most of them are unhappy with the ambassadors. There are incidents where they even attempted to assault the ambassadors. This is because they do nothing in the interests of the expatriates. Those who will work in the interests of the expatriates should be placed in charge at the embassies.
Bangladesh Bank took initiative to create an NRB data bank. This will include the names of the expatriates, their mobile phone numbers and email addresses. This will apprise us of the various initiatives of the expatriates. We had collected some information ourselves too. The embassies had been requested to ensure that all expatriates were included in the list. No a single embassy responded. The embassies must have an effective role in this regard. The government must take initiative too.
If an attractive scheme can be set up for investment, remittance through legal channels would increase. I agree that exchange rates should be guided by the market. The foreigners actually do not want hundi to step. In Singapore, a country where the police catch you even if you flick cigarette ash in the streets, hundi is carried out opening and the police say nothing. If remittance could be sent through an app, it would increase. Everyone needs to be sincere about this.
Firoz Choudhury
I thank you all on behalf of Prothom Alo. Several important recommendations came up at today's discussion. We hope the policy makers take these into cognizance and that the country's foreign exchange reserves are further strengthened.
Recommendations
· Remittance must speedily delivered to the beneficiaries 24 hours a day and seven days a week
· The process of sending remittance digitally through legal channels must be simplified
· Alongside incentives, the future financial security of the expatriates must be ensured by attractive schemes for provident funds, investment and savings.
· In order to stop hundi, steps must be taken to increase awareness must be mobilised among the expatriates and increase their digital understanding
· The embassies must play an effective role in sending remittance through legal channels
· Foreign exchange rates must be determined by the market
· Ways and means must be determined to for unregistered expatriate workers also to send their remittances through legal channels
· The workforce in the Middle East must be brought under MFS services