usage and impact of regular inflow of remittance from u.k-a study on sylhet

Usage and Impact of Regular Inflow of Remittance from U.K. in Bangladesh:

A Study on Sylhet

A seminar paper prepared as a part of BBA Program as the course no. BAN-200 (seminar & viva) by the student of 2nd year 2nd semester, under direct supervision of Prof. Dr. Md. Nazrul Islam, Head, Department of Business Administration, Shahjalal University of Science & Technology, Sylhet-3114.

Usage and Impact of Regular Inflow of Remittance from U.K. in Bangladesh:

A Study on Sylhet

Submitted to

Chairman Examination Committee

2nd year 2nd semester examination-2008 Department of Business Administration

Shahjalal University of Science & Technology, Sylhet.

Supervised By

Prof. Dr. Md. Nazrul Islam Head,

Department of Business Administration Shahjalal University of Science & Technology, Sylhet.

Submitted By

Name Registration No.

Rajeshwar Bhattacharjee 2005731012 Bidita Saha 2005731021 Md. Kamal Uddin ` 2005731035 Md. Noor-E- Alam Mazumder 2005731038 Nur-E-jannath 2005731052 Mohammad Ahsan 2005731053 Md. Monirul Islam 2005731056

2nd year 2nd semester

Department of Business Administration Shahjalal University of Science & Technology

Sylhet

Date of submission: March 22, 2009

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This is to certify that the assign topic “Usage aRemittance from U.K. in Bangladesh: A study onsubsequent students of 2nd year 2nd semester, Departmhave worked as a team under my direct supervision, Name Registrati Rajeshwar Bhattacharjee 2005731 Bidita Saha 2005731 Md. Kamal Uddin ` 2005731 Md. Noor-E- Alam Mazumder 2005731 Nur-E-jannath 2005731 Mohammad Ahsan 2005731 Md. Monirul Islam 2005731 It’s also certify that the paper is an original one and hpreviously for publication in any form. They are wished all the best in their effort. ………………………………. Dr. Md. Nazrul Islam Professor Department of Business Administration Shahjalal University of Science and Technology Sylhet.

Department of Business Administration School of Management and Business AdministrationShahjalal University of Science and Technology Sylhet-3114, Bangladesh. PABX: 88-0821-713491/714479 716123/713850/717850 Ext: 274 Fax: 880-821-715257 Website: www.sust.edu

Date: / /

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March 22, 2009 Professor Dr. Md. Nazrul Islam Head Department of Business Administration, Shahjalal University of Science & Technology, Sylhet. Subject:-Letter of submittal. Dear Sir, We are assigned to prepare a seminar on the topic entitled Usage and Impact of Regular Inflow of Remittance from U.K. in Bangladesh: A study on Sylhet. For collection of data, we have investigated much information, literature and taken survey on local branch of Bangladesh Bank, several commercial banks and a number of families. In our study we have found a lot of information on inflow of remittance from U.K. in Bangladesh. We are provided necessary supports from our university and related authorities. Surely this study will enhance our knowledge and experience and work as an important source of information for future work on this topic. May we note here that, there has been no dearth of sincerity on our part to being the issue under study into proper focus. However, we would like to request you to consider if any error is found in the paper. Finally, we would like to request you to accept our paper and thereby permit us to present it before the panel of experts. Thank you in advance for your assistance and advice in this connection. Sincerely yours, Rajeshwar Bhattacharjee Reg. 2005731012

Bidita Saha Reg. 2005731021

Md. Kamal Uddin ` Reg. 2005731035

Md. Noor-E- Alam Mazumder Reg. 2005731038

Nur-E-Jannath Reg. 2005731052

Mohammad Ahsan Reg. 2005731053

Md. Monirul Islam Reg. 2005731056

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Executive Summary Foreign remittance is money remitted in foreign currency. That means transfer of fund from one place to another place in foreign currency. International remittances are the portion of migrant workers’ earnings sent back from the country of employment to the country of origin. Foreign remittance can be inward and outward. Remittance in foreign currency that comes in the country is inward foreign remittance and remittance in foreign currency that goes out abroad is outward foreign remittance. Migrants use different methods in sending remittance involving both official and unofficial channels. Officially, transfer of remittance takes place through demand draft issued by a bank or an exchange house; travelers’ checks; telegraphic transfer; postal order; account to account transfer; automatic teller machine (ATM) facilities; electronic transfer and in kind. Besides official channels, money is remitted by hundi or hand carried by the migrant or friends or family of the migrant. The government modified every year the Money Laundering Act to prevent the illegal way of money transfer. From the point of view of utilization, different types of transfers can be discerned. Firstly and most importantly, individual transfers to families or friends. The available data shows that the bulk of remittances are used for consumption purposes. Investment in business or traditional productive uses and in savings is rather limited, but remittances are also seen as important financial means to investment in human capital, housing and land purchase. Remittances contribute significantly to the national economy. The impact at the household level is less straightforward. On the plus side, remittances allow families to meet their basic needs; open up opportunities for investing in education, health care, etc.; loosen up constraints in the family budget to invest in business or to save; are a kind of emergency resource; provide a social security for the elderly; and can boost the local economy. The negative impacts of remittances are a possible dependency on this money flow and inflation. However, there is no conclusive evidence of the impact on income distribution. Possibly remittances could result in neglecting the local productive activities in the receiving areas.

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Acknowledgement

This study bears imprint of many persons valuable contribution. We would like to express our gratitude to all those people who have been influential in making our paper successfully their insights, advice and suggestion have helped us to improve our text and made it even more valuable and user friendly.

We are extremely grateful to Professor Dr. Md. Nazrul Islam (Head, Department of Business Administration, Shahjalal University of Science and Technology, Sylhet) , supervisor of our seminar, for his cordial co-operation and spending valuable time for us. He has been a never-ending source of equanimity and extraordinary competence at every stage of work. We are grateful to Md. Zillur Rahman (Lecturer, Department of Business Administration, Shahjalal University of Science and Technology, Sylhet), for his enthusiastic co-operation in collecting sources. We are also grateful to the authority of Bangladesh Bank and authorities of respective commercial banks that helped us a lot during our survey. We are highly grateful to those family members who help us by providing data as we need to complete our survey. We would like to give a special thanks to our friends, senior brothers and sisters who helped us by providing information and encouragement for providing useful suggestions. We would like to express our grate gratitude to above people for their assistance to fulfill our aim. For their valuable relentless dedication, insights, good humor and tenacity we are in their debt.

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Table of Contents CHAPTER-1. INTRODUCTION Page no. 1.1 Background of the Study ………………………… 9 1.2 Objectives of the study ………………………… 10 1.3 Review of Literature ………………………… 10 1.5 Research Methodology ………………………… 11

CHAPTER-2. CONCEPT OF FOREIGN REMITTANCE 2.1 Remittance ……………………….. 14 2.2 Inward and Outward Foreign Remittance ……………………….. 15 2.3 Methods of Transferring Remittance ……………………….. 16

2.4 Public and Private Actors in Remittance Transfer ……………… 18

CHAPTER-3. INFLOW OF REMITTANCE AT A GLANCE

3.1 Regular Inflow of Remittance in Bangladesh ……………………. 23 3.2 Regular Remittance Inflow from U.K in Bangladesh …………..... 26 3.3 Bank Wise Remittance Inflow ………………………... 29 3.4 Remittance Inflows in Sylhet ……..…………………. 31

CHAPTER-4. ANALYSIS OF THE SURVEY RESULTS 4.1 Impact of Remittances on National Economy ……………………. 33 4.2 Usage and Impact of Remittances in Families ……………………. 41

CHAPTER -5. CONCLUSION AND RECOMMENDATION 5.1 Recommendation ……………………………….. 50 5.2 Limitations ……………………………….. 51 5.3 Conclusion ……………………………….. 52 Reference ……………………………….. 53

Appendices ……………………………….. 54

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CHAPTER -1.

INTRODUCTION

╠ Background of the Study ╠ Objectives of the study ╠ Review of Literature ╠ Research Methodology

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1.1 Background of the Study In modern age foreign remittance is a buzzword for all developing countries. Because it is just not a part of the income of nations, it is a power on which developments run smoothly. Yes, remittance is that kind of instrument by which standard living condition and development can be ensured. Without remittance developments never are imagined by any developing countries. Because inflow of remittance not only ensures development but also ensure the reduction of poverty.

Now-a-days remittance has kept the economy of Bangladesh more dynamic. The main sources of our national income are exports precede, foreign direct investment, foreign loans and grants and foreign remittance which is earned by working labors in abroad. By exporting man power of our own, our country receives huge amount of remittance in every month from different developed countries. The foreign remittance plays an important role on the socio-economic development of our country. Generally primary money supplies to the entrepreneurs of small and medium enterprises are financed from the major portion of foreign remittances. Besides these foreign remittances play a great contribution on the social activities such as, marital programs, various cultural programs, medical sector, and educational sector and so on. Totally the contribution of foreign remittance rising of living standard can not be described so easily. So the importance of foreign remittance in the economy of Bangladesh is widely recognized and requires little reiteration.

This study attempts to identify key issues regarding the impact of foreign remittance on our economy saw ell as our entire society. We have first discussed the overview of foreign remittance around the world and in Bangladesh. According to the study based on Sylhet region, we have categorized the inflow of foreign remittance in the Sylhet region as well as our country. Then we studied the futures to be considered as to identify the usage and utilization on the current socio cultural situation concerning the foreign remittance. Addition to this, we have made a survey on Bangladesh Bank, top ten commercial banks in and about twenty families in the Sylhet region to get the actual view of overall situation. The following section explains the observational methods that were employed to capture the concurrent inflow, usage and utilization faithfully in our study. The next section present results from the observation and monitoring study. And then the final section describes the recommendations of the study’s results.

This study argues that foreign remittance is an indispensable part of our economy in current situation. How smoothly and properly they are used and utilized with personal and social needs and demands are crucial to the success of foreign remittance utilization. Our article describes massive impact of foreign remittance individual and social life. To figure out the level of uses, we identified some features of inflow of remittance that will act as the parameter of uses of foreign remittance. Our empirical data illustrate the scope of investment on different productive and profitable sectors by when concerning the utilization of foreign remittance. A secondary aim of this article is to point out the new sector for investment and to improve the mutual condition on the overview of the usage of foreign remittance in our area of study.

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1.2 Objectives of the study

The major objectives of the study are as follows:

I. To estimate the amount of regular inflow of foreign remittance in Sylhet as well as in Bangladesh.

II. To know about the proper usage and impact of foreign remittance in national

economy. III. To identify the promising investment sectors of foreign remittance in Sylhet.

IV. To encourage the people of Sylhet and the commercial banks to invest foreign

remittance in different industrial sectors in Sylhet.

V. To analyze the relevant strength, weaknesses, opportunities and threats of the

utilization of foreign remittance.

VI. To find out the usage of remittance from England in the families of Sylhet. 1.3 Review of Literature The usage and impact of remittance is an important current issue. To get a clear idea about this subject, the definite area is the deep analysis of the obtained information from books, newspapers, journals, articles, prospectus individuals and so on. Basically any type of study, thesis or research is made on the basis of acquired information from two main sources. There are – primary and secondary sources. In case of our research about The Usage and Impact of Regular Inflow of Remittance from U.K. in Bangladesh, primary sources are surveys conducted in various banking institutions and households and relevant information obtained from internet. On the other hands, information and data are collected from Economic Review of Bangladesh; weekly, monthly, quarterly and annual report of Bangladesh Bank; research paper of Bangladesh Bank, various journals, newspapers (specially The Daily Star), books and prospectus are used as secondary sources. In order to make the study effective and meaningful, sufficient numbers of graphs are added thereon.

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1.4 Research Methodology The use of foreign remittance is now become a significant issue in our present economy. It has a great impact on our lives as well as our entire country. Based on the inflow of remittance the proper uses and are dependent. To reach/obtain our desired outcome/destination we have taken some steps to identify categorize and analyze data and information regarding foreign remittance. On doing this we have followed descriptive research design. The research was fully based on researcher judgment and techniques.

Sources of Data:

We have collected data from two sources for our research. These are:

1. Primary Sources: Twenty household respondents 2. Secondary Sources: Bangladesh Bank, top ten commercial banks, Bangladesh

Investment Board, others.

Data Collection:

To get dependable and error free standard data we have taken primary data from relevant sources. In case of primary data we have collected quantitative and qualitative data. Here we followed/used the data are totally survey based. Besides these, we also have taken external secondary data from relevant journal research paper, several report from published materials. Finally we have collected the data from internal sources. The data collection process was fully structured. We formed open-ended and close-ended questionnaire for household respondent as well as for the banking organizations. All data are collected by personal interview. 100% respondent responds on our survey. Our time was limited around 15 days. We work as a team. To find out actual Information we followed different statistical data and figure.

Data Analysis:

We have collected data from primary and secondary sources. For primary data we tabulated the classified data. Analysis work after tabulation is generally based on the computation of various percentages. In the process of analysis, relationship or differences supporting or conflicting with original or new hypothesis should be subjected to test of significance to determine with what validity data can be said to indicate any occlusion.

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Research Design: Our Research design was descriptive to find out actual data because we have strived for better recommendation. Information related with foreign remittance include the rate of percentage, annual inflow, type, process, consumer actual needs and satisfaction level, proper utilization on industrial or productive sectors, the impact on GNP,SWOT analysis and so on. For our seminar paper we have also dependent on some secondary sources for data and information collection. We collected external published data and some computerized data from several journals, reports, features, documentary and other researcher reports. Primary data were collected from the direct participation and observation on the Sylhet city. We have targeted the main households the central bank and other commercial banks.

We have developed a questionnaire that was fully structured. Actually we have strictly maintained our consideration and judgment to select sample and take most relevant survey method.

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CHAPTER - 2.

Concept of Foreign Remittance

╠ Remittance

╠ Inward and Outward Foreign Remittance

╠ Methods of Transferring Remittance

╠ Public and Private Actors in

Remittance Transfer

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2.1 Remittance

Foreign remittance, in simple terms, means money remitted in foreign currency. That means transfer of fund from one place to another place in foreign currency. International remittances are defined as the portion of migrant workers’ earnings sent back from the country of employment to the country of origin (ILO, 2000). Remittance can also be sent in kind. Transfers that take place in kind are quite difficult to measure. Levitt (1996) identified ideas, practices, identities and social capital that flow from receiving to sending countries as social remittance. One may however argue that social capital, identities and ideas that are taken by the migrants from their countries of origin to the countries of destination should also be seen as social remittance. In this case, it flows from origin to destination. Remittances can be individual and it can also be collective. When individuals send remittance to his or her household or kith and kin that can be termed as individual remittance. When a group of migrants, their associations or professional bodies mobilize resource together and send for collective or community programs that can be termed as collective remittance. Individual remittances are mostly geared towards the family whereas collective remittances are generally used for community development. When migrants send home part of their earnings in the form of either cash or goods to support their families, these transfers are known as workers’ or migrant remittances. Remittances have been growing rapidly in the past few years and now represent the largest source of foreign income for many developing countries. The official data on the inflow of remittances into Bangladesh refers to the transfer of funds made by migrant workers through the banking channel (and through post offices) (Mahmud, 1989). The records of such transfers can be easily separated from other foreign exchange transactions since these take place under what is known as the Wage Earners’ Scheme (WES). Not only are remittances large but they are also more evenly distributed among developing countries than capital flows, including foreign direct investment, most of which goes to a few big emerging markets. In fact, remittances are especially important for low-income countries. Remittances are typically transfers from a well-meaning individual or family member to another individual or household. They are targeted to meet specific needs of the recipients and thus, tend to reduce poverty. In fact, World Bank studies, based on household surveys conducted in the 1990s, suggest that international remittance receipts helped lower poverty (measured by the proportion of the population below the poverty line) by nearly 11 percentage points in Uganda, 6 percentage points in Bangladesh, and 5 percentage points in Ghana.

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2.2 Inward and Outward Foreign Remittance 2.2.1 Inward Foreign Remittance All remittances that come from foreign countries to the local country regarded as inward foreign remittance. That means remittance in foreign currency that comes in the country is inward foreign remittance. Sources of inward foreign remittance are

I. Export Proceeds II. Remittance by Expatriate Bangladeshi/Bangladesh national working abroad

III. Commissions/Fees etc. earned by local business people (indenting commission, recruiting agents commission, export brokers commission)

IV. Foreign loans and grants, donation and gift. 2.2.2 Outward Foreign Remittance All remittances from a local country to a foreign country local currency credited to non-resident money accounts of foreign banks or convertible money accounts constitute outward foreign remittance. That means, remittance in foreign currency that goes out abroad is outward foreign remittance. Sources of outward foreign remittance are

I. Payments of import liabilities II. Payments of consular fees and commissions etc.

III. Foreign travel quota through travelers cheque/ Foreign currency IV. Educational expenses for students abroad/medical expenses and other purposes V. All other payments sent abroad in foreign currency.

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2.3 Methods of Transferring Remittance

Migrants use different methods in sending remittance involving both official and unofficial channels.

2.3.1 Official channels Officially, transfer of remittance takes place through demand draft issued by a bank or an exchange house; travelers’ checks; telegraphic transfer; postal order; account to account transfer; automatic teller machine (ATM) facilities; electronic transfer and in kind. When remittances are transferred directly from the foreign account of migrant worker to his own account at home it is known as direct transfer. This can be through telegraphic means or otherwise. Remittances are frequently sent through demand draft in Taka issued by a bank or an exchange house in favor of a nominee of migrant. Usually the draft is sent by post or in emergency by courier service. One can send remittance through the postal authorities. In such case the remitted money is handed over to the receiver by the local post office. Travelers’ cheque are also used as a means to send remittance. However they will be treated as official transaction when they are encashed through banks. At the time of coming from abroad one can bring foreign currency. If the amount is more than US$5000 one has to declare at customs by filling up the FMJ form. Migrants can also send remittance to their Non-resident Taka and Non-resident foreign currency accounts.

2.3.2 Unofficial channels Hundi or Money Courier is the most common among the unofficial channels of transfer. Hundi refers to illegal transfer of resource outside the international or national legal foreign currency transfer framework. Organized groups based in diverse cities such as London, New York, Dubai, Kuala Lumpur and Singapore conducts hundi operation through their partners in Bangladesh. From some countries remittances are sent by moneygram. It can be only collected from a local agent on production of a satisfactory identity document. Besides this, other unofficial methods are, sending remittance through departing friends and relatives; personally hand carried by the senders themselves without declaration, and in the form of visa/ work permit for sell or family use. There are some macro and micro level reasons behind Hundi operations in Bangladesh. The macro level reasons were:

• The demand for foreign exchange from racketeers who wish to finance smuggling of various items including gold;

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• The demand from importers’ for foreign exchange from other sources in order to benefit from the existing tax regime by under-invoicing imports;

• An unholy alliance among officials of financial institutions, business and hundi operators;

• Financing recruitment charges of the recruiters; • Difference between official and unofficial exchange rates; • Quality and speed of service, and ability to reach clients both in destination

countries and in the source countries. From individual’s perspective, the hundi system provided the quickest method for sending money and little fees for transaction. Hundi operation used the social network of the migrants, which made door to door service available. Bank transactions required paperwork, and officials were not always customer friendly. Given the less-educated background of most migrants, many of them opted for hundi channel. Besides, an important social reason for choosing hundi was the need to maintain confidentiality. Migrants desired to send money to two or more persons secretly without creating tension among the receivers i.e., wife and father of the sender. Such micro level research is not readily available on methods used in sending remittance by the Bangladeshi immigrants from industrialized countries. However the macro data of Bangladesh Bank on remittance flows from all over the world highlights an interesting feature. In 2002, an abnormally high growth of remittance flow in the formal channel was witnessed from the UK and the US. Over a period of the last seven years, the growth of remittance remained between 4-6 percent with regard to the US. In 2001, remittance from the country grew by 47.99 percent. Remittance flows from the UK were erratic during this period. In some years, it registered growth, and in others, it declined. Surprisingly, in 2001, from January up to November, remittances grew 136 percent. Such unusual growths are attributed to increased surveillance of governments of concerned countries and improved services of the banking sector since 2001.

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2.4 Public and Private Actors in Remittance Transfer

There are several actors involved in the area of remittance transfer. Among them, Ministry of Finance (MoF) and Bangladesh Bank (BB) are the two most important institutions. Besides, Ministry of EWOE (MoEWOE); Ministry of Foreign Affairs (MoFA); Ministry of Commerce (MoC); Bureau of Manpower, Employment and Training (BMET); National Savings Bureau (NSB); Privatisation Commission (PC) and Board of Investment (BoI) are other relevant ministries and agencies in the public sector. Nationalised Commercial Banks (NCBs), Private Commercial Banks (PCBs), and exchange houses holding drawing arrangements with public and private banks operating in Bangladesh are the other public and private actors. A new bank, established by a Micro-finance Institution (MFI) and Refugee and Migratory Movements Research Unit (RMMRU) of the University of Dhaka are two of the recent non-traditional players in the area of remittance. 2.4.1 Direct Actors

Ministry of Finance Ministry of Finance (MoF) is the prime policy making body regarding banking and remittance. Macro-economic policies that affect exchange rate, monetary and fiscal mechanisms, foreign exchange reserve etc. are regulated by this ministry. The Internal Resources Division (IRD) of the MoF floats savings instruments in market, frame rules and identify purchase procedures.

Bangladesh Bank Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains foreign exchange reserves and monitors floating exchange rate mechanism in the current accounts. Bangladesh Bank encourages the nationalized and private banks to link up with foreign banks and exchange houses in the destination countries. It has a separate department for regulating and monitoring remittance entitled Foreign Exchange Policy Department (FEPD). It also generates analyses, interprets and distributes data on inflow of remittance. Nationalized Commercial Banks

Nationalized Commercial Banks (NCBs) of Bangladesh make direct banking facilities available at the doorsteps of Bangladeshi emigrants especially in those countries where a large number of Bangladeshis are employed. Five NCBs are deeply involved in remittance transfer. These are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank Ltd. and Bangladesh Krishi Bank (BKB). Among the NCBs, BKB is solely targeted towards

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agricultural development in rural areas. Within Bangladesh these five NCBs have 2945 branches. Through them they can disburse remittances even in distant areas. Besides their own branches, NCBs have opened exchange houses in joint collaboration with different banks and financial institutions in different countries of the world.

Private Commercial Banks Private Commercial Banks (PCBs) are also involv ed in remittance transfer. Of the PCBs, Islami Bank of Bangladesh Ltd. has been found to be most proactive

in the area of migrants’ remittance. National Bank, International Finance and Investment Corporation (IFIC), Prime Bank and Uttara Bank are other private banks involved in remittance transfer. Most of their activities are in the Middle East. Saudi Arabia is the major working area of Islami Bank along with Qatar, Bahrain and UAE. National Bank is operating in Oman, Kuwait, UAE, Qatar, Bahrain and Saudi Arabia. IFIC has curved out a major niche in Bangladeshi community in Oman and has its largest share with 41% of the market. It also has branches and exchange offices in Nepal and some other Middle Eastern countries. Uttara Bank runs exchange house in Qatar in collaboration with a local financial institution.

Corresponding Relationships In almost all countries of the world, both NCBs and PCBs have corresponding relationships with banks through which Bangladeshi migrants may easily send their money to their beneficiaries’ accounts with any branch of any bank in Bangladesh. 2.4.2 Indirect Actors

Ministry of Expatriates’ Welfare and Overseas Employment (MoEWOE) The government, in responding to the demand of the expatriate Bangladeshis and the migrant workers, created a new ministry entitled the Ministry of Expatriates’ Welfare and Overseas Employment (MoEWOE) in December 2001. Prime function of the ministry is to create, promote and regulate employment in overseas. An important consideration for promoting employment is to ensure steady flow of remittance (GoB, 2003). This ministry has appointed labor attaches in 13 foreign missions to protect the rights of migrants and disseminate information on dos and don’ts in the receiving countries including information on official remittance transfer mechanism.

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Ministry of Foreign Affairs (MoFA) The Bangladesh missions in various migrant receiving countries also have a role in the remittance transfer process. Among other things, the labor wing in foreign missions assess the feasibility of opening new branches of Bangladeshi banks in the country concerned and the efficacy of foreign banks and exchange houses whose names are proposed by Bangladeshi financial institutions for developing correspondent relationship.

Bureau of Manpower, Employment and Training (BMET) BMET is the executing agency of the MOEWOE in regulating migration. Some of the major functions of BMET were to develop and implement training programs, collect and analyze market information on labor, and control and regulate the recruiting agencies. The government believed through the above activities BMET would be able to ensure maximum outflow of labor and inflow of remittance. An important objective of BMET is to take measures for increasing the flow of skilled labor so that the remittance flow is enhanced. Besides, the above two ministries, MoC, PC and BoI are some more indirect players in remittance transfer.

2.4.3 Non-traditional Players

Micro-finance Institutions (MFIs) Micro-finance Institutions (MFIs) have emerged as a non-traditional player in remittance area. MFIs have been delivering various banking facilities in rural Bangladesh for over two decades. The largest MFI of Bangladesh, BRAC has already established a bank. BRAC Bank has developed corresponding relationships with different international banks and participating in remittance transfer. It is using 1200 branch offices11 of BRAC in quick transfer of remittance at the grassroots. Grameen Bank, the global pioneer of micro-finance, had sought permission to BB for taking part in remittance transfer and utilization. BB was favorably disposed to this idea. However, Grameen Bank was established under the Social Act Ordinance, 1983. The bank is governed through that. It does not allow her to deal with foreign exchange. Therefore, in order to participate in remittance area, the ordinance has to be amended in the parliament. As this is cumbersome process, Grameen Bank is yet to get involved with remittance. Research and Training Institution Refugee and Migratory Movements Research Unit (RMMRU) of the University of Dhaka is the only research, training and advocacy institution that specializes on migration. It has conducted major researchers in different areas of migration ranging from streamlining labor recruitment process, female migration, returnee reintegration, and work condition of migrants, impact of labor migration on national economy and households, and

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Bangladeshi Diaspora. The pioneering study on migrant remittance to Bangladesh that covered nature of remittance receiving families and remitters, methods of remittance transfer, comparative costs, and, scope of microfinance institutions in remittance transfer and utilization was conducted by RMMRU. The immediate past Governor of Bangladesh Bank officially recognized the contribution of this research in policy reforms for increasing official flow of remittance. RMMRU has two training programs on migration. Both of them are geared towards capacity building of actors involved with migration. One is for young academics and professionals on ‘Social Science Research and Migration’. The other one is specifically targeted towards channeling information to the potential migrants. Local level government representatives along bank officials and NGO workers at the grassroots are provided training on ‘Labor Migration Process’. This is a one-week residential training program. Among other things, the training provide information on relative merits and demerits of remittance transfer through formal and informal channels, investment instruments available for the migrants both in public and private sector, practical demonstration on remittance transfer procedures etc. For imparting the training, a module has been developed by RMMRU with the help of government functionaries, bank officials, and members of returnee migrants’ associations, academics, lawyers and executives of MFIs. Besides RMMRU, BMET and Welfare Association of Returnee Bangladeshi Employees (WARBE) also use this module in their pre-departure briefings and orientation training of migrants respectively. Different ministries, public and private banks, and government agencies call upon RMMRU expertise in the area of migration including remittance.

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CHAPTER - 3.

Inflow of Remittance at a Glance

╠ Regular Inflow of Remittance in Bangladesh

╠ Regular Remittance Inflow from U.K in

Bangladesh

╠ Bank Wise Remittance Inflow

╠ Remittance Inflows in Sylhet

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3.1 Regular Inflow of Remittance in Bangladesh

The outward migration of labor and the remittances that are generated as a result have been a feature of Bangladesh’s post liberation history. The earliest official records on remittances indicate that the country received about US$24 million in overseas remittances in 1976. Since then foreign remittance receipts have grown at an exponential rate.

Remittance to Bangladesh has increased from $1088.72 million in the 1993-94 to $7914.78 in 2007-08(Table 1). That is about $6826.06 million has increased over 15 years of time. Table 1 and figure 1 show the increases.

Table 1: Remittance inflow in Bangladesh

Year Million US $ 1993-94 1088.72 1994-95 1197.63 1995-96 1217.06 1996-97 1475.42 1997-98 1525.43 1998-99 1705.74 1999-00 1949.32 2000-01 1882.1 2001-02 2501.13 2002-03 3061.97 2003-04 3371.97 2004-05 3848.29 2005-06 4802.41 2006-07 5978.47 2007-08 7914.78

Source: Bangladesh Bank

0100020003000400050006000700080009000

1993

-199

4

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

2007

-08

Year

Mill

ion

US

$

Figure 1: Graphical Representation of the Table 1

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3.1.1 Remittance Sets Benchmark

Remittance inflows set a new record in 2008 crossing $8b mark. According to Bangladesh Bank (BB) statistics, in the just concluded calendar year remittance worth $8.22b came into the country .The figure was $769.79 million last December. Table 2 and figure 2 show remittance benchmark:

Table 2: Remittance sets benchmark

Month 2007 (in million $) 2008 Jan 462.55 710.74 Feb 500.32 689.26 Mar 537.29 808.72 Apr 543.74 781.71 May 557.02 730.26 Jun 516.38 753.58 Jul 567.11 820.71

Aug 470.95 721.92 Sep 590.67 794.18 Oct 559.05 648.51 Nov 617.39 761.38 Dec 635.39 769.79

Source: The Daily Star, 5 January 09

0

100

200

300

400

500

600

700

800

900

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Months

Am

ount

in M

illio

n $

2007 2008


24

3.1.2 Flow of Remittance in % (Last 8 Months)

Remittance growth in February was the lowest in the last eight months due to the ongoing global recession. Although the overall remittance growth was 27 percent in the eight month period (July to February) of the current fiscal year, in February it was only15 percent compared to the previous Februarys $689.26 million. The remittance inflow in February was $784.47 million, which was $859 million in January. Except October, the last six months remittance growth ranged from 19 percent to 53 percent. In the first eight months of the current fiscal year the total remittance inflow was $6148.2 million against $4840.51 million in the same period last fiscal year. Table 3 and figure 3 show the flow of remittance:

Table 3: Flow of remittance in % (Last 8 months) Months Jul Aug Sep Oct Nov Dec Jan Feb Flow in

% 44 53 34 16 23 19 20 15

Source: The daily star, 4 Mar, 2009

JUL AUG SEP OCT NOV DEC JAN FEBS1

44

53

34

1520

16 1923

0

10

20

30

40

50

60

Flow in %

2008-09


25

3.2 Regular Remittance Inflow from U.K in Bangladesh 3.2.1 Remittance Inflow from U.K in Bangladesh. It is becoming increasingly evident that remittance inflow from U.K. is likely to be adversely affected. In 1998-1999, $54.04 million came from U.K. in Bangladesh. In 2005-2006 that was $ 517.39 million and now it has been increased to $896.13 million in 2007-2008 which sets a benchmark. Table 4 and figure 4 show this increase:

Table 4: Remittance inflow from U.K

Year U.K. ($ in Million)

1998-99 54.04 1999-00 71.79 2000-01 55.70 2001-02 103.31 2002-03 220.22 2003-04 297.54 2004-05 375.77 2005-06 517.39 2006-07 886.90 2007-08 896.13


Remittance inflow

0100200300400500600700800900

1000

1998-1999

2000-2001

2002-2003

2004-2005

2006-2007

Year

$ in

Mill

ion

Remittance inflow


26

3.2.2 Country Wise Remittance Inflows in Percentage

Bangladesh sent a record 832,000 people abroad in 2007, most of who chose to go to the oil- rich Golf countries after skyrocketing crude prices led to a construction boom in the Middle East. In fiscal 2008, 29.37 percent of remittances came in from the Saudi Arabia and the second highest is USA is 17.44 percent alone. After the UAE in third, the UK is the fourth largest remittance country for Bangladesh with just over 11.32 percent. Table 5 and figure 5 show the country wise remittances inflow:

Table 5: Country wise remittance inflows in percentage

Country KSA USA UAE UK Kuwait Qatar Oman Italy Bahrain Others Percent 29.36 17.43 14.34 11.32 10.91 3.66 2.78 2.7 2.5 5 Source: The Daily Star, 16 NOV, 2008

29.36

17.4314.34

11.32

10.91

3.662.78 2.7 2.5 5

KSAUSA

UAE

U.K.Kuwait

Qatar

OmanItaly

Bahrain

Others


27

3.2.3 Country Wise Remittance Inflows in Sylhet

Bangladesh sent a record 832,000 people abroad in 2007, most of who go abroad from Sylhet region. They are most likely interested to go in U.K. In fiscal 2008, 45.5 percent of remittances came in from the U.K. in Sylhet, which is near about 11 percent of total country’s remittance inflow. The second highest is Middle East Countries, which are carrying 30.25 percent. After the USA in third, the Canada is the fourth largest remittance country for Sylhet. Table 6 and figure 6 show the country wise remittances inflow:

Table 6: Country wise remittance inflows in Sylhet

Country UK USA Middle East Canada Others Percent 45.5 8.25 30.25 11 5

45.5

8.25 30.25

11

5

UKUSAMiddle EastCanadaOthers


28

3.3 Bank Wise Remittance Inflow

3.3.1 Top Ten Banks of Bangladesh in 2008 (Remittance inflows)

In fiscal 2008, Islamic Bank Ltd. has acquired first position to take up $1585 million remittance through legal channels and the second position is Sonali Bank with taking up $1270 million. The third of Agrani Bank is taken up $630 million remittance and then the National, Janata, Uttara, BRAC, Pubali, Prime and AB Bank are in positioned that shows in the table 7 and figure 7 below:

Table 7: Top Ten Banks of Bangladesh in 2008 (Remittance inflows) Banks Islami Sonali Agrani National Janata Uttara BRAC Pubali Prime AB

$ in Million

1585 1270 630 425 417 405 380 365 290 125

Source: The Daily Star, 12 Feb, 2009

0

200400

600

800

10001200

1400

1600

$ in million

1

Banks

IslamiSonaliAgraniNationalJanataUttaraBRACPubaliPrimeAB


29

3.3.2 Top Five Banks of Sylhet (Remittance inflows)

In fiscal 2008, the top five Banks of Sylhet which have taken up more remittances are given below in Table 8 and figure 8:

Table 8: Top Five Banks in Sylhet (Remittance Inflows, January 09)

Banks Islami Sonali Prime Uttara Janata Tk. In

Millions 26.56 2.92 3.79 11.05 2.29


0

5

10

15

20

25

30

Tk. In Million

Islami Sonali Prime Uttara Janata

Name of the Banks


30

3.4 Remittance Inflows in Sylhet

Sylhet is the top zone who received large amount of foreign remittances in last 3 or 4 years. A large number of people from Sylhet are involved in working in foreign countries, especially in U.K. If we follow the remittance inflow in Sylhet from Year 2003-04 to 2006-07, we can get perfect information regarding that. Table 9 and figure 9 show the annual remittance inflows in Sylhet:

Table 9: Annual Remittance Inflow in Sylhet

Source: Bangladesh Bank .

Fiscal Year 2003-04 2004-05 2005-06 2006-07 Sylhet (TK in Crore) 954.4 1039.2 1223.8 1433.5

0200400600800

1000120014001600

Volme in crore (Tk.)

2003-04 2004-05 2005-06 2006-07

Fiscal Year

Remittance inflow in Sylhet


31

CHAPTER - 4.

ANALYSIS OF THE SURVEY RESULTS

╠ Impact of Remittances on National Economy

╠ Usage and Impact of Remittances in

Families

32

Impact of Remittances Given the different variables driving the remittances behavior are differently affected by the state of economic activity over the business cycle. It is conceivable that remittances may be pro-cyclical or even cyclical with the output in some of the recipient countries. Even if remittance move counter cyclical with the output in the home countries of migrant workers, the cycles in home and host country, economics may move together in sync, thereby making it difficult for migrant workers employed in a crisis stuck economy to help out family members facing similar condition back home. 4.1 Impact of remittances on national economy

The importance of the remittance flow to the economy of Bangladesh should not be underestimated. Remittances contributed more than 4 per cent to the country’s GDP and almost 20 percent of foreign exchange earnings. Remittances amounted to one-third of the total amount of government revenue from taxes and to 30 per cent of the total amount of debt service payments. It equaled 60 per cent of the development budget. The total amount of foreign aid which flows into Bangladesh is less than the total amount of remittances. Table 10 and figure 10 illustrate this for 2006-2007:

Table 10 Relationship of remittances to indicator

Indicator Relationship of remittances to indicator (in %)

GDP 4.2 Government revenue 34.6

Annual development budget 58.9 Total foreign exchange earnings 19.1

Imports 19.0 Foreign aid disbursed 114.3

Medium- and long-term debt service 31.0 Source: Statistical Bureau of Bangladesh

0

20

40

60

80

100

120

Relationship of remittances to indicator (%)

GDP Governmentrevenue

Annualdevelopment

budget

Total foreignexchangeearnings

Imports Foreign aiddisbursed

Medium- andlong-term debt

service

Indicator


33

4.1.1 Impact of Remittance on GDP The contribution of remittance to GDP has also grown from a meager 1 percent in 1977-1978 to 5.2 percent in 1982-83. During the 1990s the ratio hovered around 4 percent. However if one takes into account the unofficial flow of remittances, its contribution to GDP would certainly be much higher. An increase in remittance by Taka 1 would result in an increase in national income by Tk 3.33. Table 11 and figure 11, which charts remittances as a percentage of GDP, highlights its growing importance in the economy of Bangladesh.

Table 11: Impact of remittance in GDP growth

Year GDP

1996-97 9.62 1997-98 9.5 1998-99 9 1999-00 8.47 2000-01 9.6 2001-02 10.21 2002-03 10.35 2003-04 10.63 2004-05 10.57 2005-06 10.79 2006-07 10.58

Source: World Development Indicator CD-ROM 2000

0

2

4

6

8

10

12

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

Year

GD

P (in

%)


34

4.1.2 Impact of Remittance on GNP

Remittances, as a percentage of GNP, have also gone up approximately more than two fold for Bangladesh from 1980 to 1999. From table12 and figure 12 it quite evident that the trend of growth rate of GNP (Gross National Product) and the contribution of remittance to GNP is quite similar. Thus, it can be said that remittances contribute positively to GNP.

Table 12: Impact of remittance in GNP growth

Year Growth rate of remittance (%)

Growth rate of GNP

1980-81 0.54 0.06 1985-86 0.80 0.27 1990-91 1.11 0.28 1995-96 0.58 0.25 1996-97 0.02 0.05 1997-98 0.21 0.06 1998-99 0.03 0.05 1999-00 0.12 0.05


1.2

1

0.8 Growth rate of remittance (%)

0.6

0.4

0.2

0 1985-86 1995-961980-81 1990-91 1996-971997-981998-991999-00

Growth rate of GNP


35

4.1.3 Impact of Remittance on Debt Payments

Table 17 brings out the contribution of remittance to the balance of payments and for debt and services payments for Bangladesh. The data provides quite impressive results for Bangladesh. Remittance as percentage of trade balance has increased for Bangladesh from 33.737 in 1980 to 57.668 in 1999. This indicates that remittance is quiet significantly contributing to meet the trade imbalance of the country. For the peak year 1996-97, remittances contributed almost 53.34% to overall balance of payment for Bangladesh. This continued to increase as the year passed. Therefore, it can be suggest that remittance plays a positive role in debt payment by contributing a significant amount in it. Growth rate of debt payment as percentage of remittance (Table 13 and figure 13) shows that after 1997 the remittance started to contribute more on the debt payment. If this trend continues than it can be inferred that as years passes remittance is going to contribute more to the repayment of debt of the country.

Table 13: Growth rate of debt payments % of remittance

Year Debt payments % of Remit

Growth rate of debt payments % of

remittance 1980 50 5 1985 52.78 5.56 1990 82.9 57.07 1995 68.34 -17.57 1996 59.84 -12.44 1997 51.36 -14.18 1998 50.66 -1.37 1999 54.71 8


-40

-20

0

20

40

60

80

100

1980

1985

1990

1995

1996

1997

1998

1999

Debt payments% of remittance

Growth rate ofdebt payments%of remittance


36

4.1.4 Impact of Remittance on Consumption The estimated consumption function is

C = 2226.1 + 0.944 YD

Here, C = Private consumption and YD = Disposable Income.

The estimated equation shows that the marginal propensity to consume in response to disposable income is positive and is 0.94.The multiplier effect of remittance on consumption is calculated as 2.826.This multiplier is used to calculate the proportion of private consumption expenditure induced by the flow of remittance over time. The induced component is measured by the value of remittance multiplied by 2.826.We estimate that remittance induced consumption gradually increased over the years from 1972 onwards, declining temporarily in 1984 and 1990.

4.1.5 Impact of Remittance on Balance of Payment, Investment and National Savings

The financial flows triggered by international migration have had a dominant impact on the balance of payments of all the labor exporting countries. At a time when massive increase in oil imports and international recession put severe pressure on the country’s balance of payments, remittances offered much needed relief. It has been estimated that during the late 1970s a 10 per cent increase in remittances led to a 0.32 per cent increase in private consumption in the long run and fixed investment by 0.053 per cent. GDP increased by 0.22 per cent and GNP by 0.24 per cent. It is estimated that a 10 per cent increase in remittance leads to a decrease in the ratio on the current account deficit to GNP by 0.40 percent in the long run. It is argued that the immediate effect of increase in remittances is too adversely affect exports due to increase in prices and wages but the net effect in the long run would be positive. The important point to grasp is that the increase in income attributable to remittances enables the economy to realize an excess of investment over domestic savings through a corresponding excess of imports over exports with a smaller withdrawal on external resources than would otherwise be the case. Nayyar (1984) explains, as a result of remittance financed investments it “may appear to be paradoxical – but it is gross national savings rather than gross domestic savings that would rise and the economy would be able to realize a excess of investment over the latter.” What this means is that the effective savings constraint on investment is not domestic savings but national savings, which take into account remittances. According to Nayyar (1984) in a situation where the departure of migrants does not reduce domestic output, remittance inflows should increase national income. He also stated in his research paper that, the increase in income attributable to remittances might enable the economy to realize an excess of investment over savings, through a corresponding excess of imports over exports, with a smaller drawl on external resources than would otherwise be the case. Unless the marginal propensity to absorb out foreign incomes exceeds unity, remittance inflows should always improve the balance of payments position or prevent it from deteriorating as much as it otherwise would.

The increased inflow of remittances significantly improved the balance of payment position of Pakistan’s economy during the second half of the seventies and early eighties. The foreign exchange made available because of workers’ remittances also reduced the external debt, improved debt servicing ability, and decreased the nee for additional foreign loans (Burney, 1989)

37

4.1.6 Uptick in Remittance Inflows Remittance inflows increase comparing last 5 months of 2007 and 2008. In October-November of last fiscal year, the country recorded $559 million and $617 million respectively. This uptick flow of remittance encourages workers to go abroad, especially in U.K. and in Middle Eastern countries. In current fiscal year an additional 8lakh migrant workers are projected. Table 14 and figure 14 show the uptick in remittance inflows:

Table 14: Uptick in remittance inflows Source: The daily star, Dec 5, 2008

Months 2007 ($ in Millions) 2008 ($ in Millions) Jul 567.11 820.71

Aug 470.95 721.92 Sep 590.67 794.18 Oct 559.05 648.51 Nov 635.34 767.57

0

200

400

600

800

1000

$ in Million

Jul Aug Sep Oct Nov

Months

20072008


38

4.1.7 Impact of Remittance on Credit-Deposit

Bangladesh is receiving a large amount of remittances in last 2 or 3 years. It is a good sign for the economy of Bangladesh. These remittances are inflows as a deposit to the commercial banks and they are using this deposit to provide advances for various kinds of investment. In last fiscal year commercial bank received a large portion of their deposit from remittance, for this reason proportion of giving advances increases. Table15 and figure 15 shows that information.

Table 15: Credit Deposit Ratio of Remittance

Bank AB NCC Standard First Security

Trust Shahjalal Islami

BRAC

Percent 91.57 95.63 97.96 96.39 83.24 95.01 88.53


75

80

85

90

95

100

Percentage

1

Banks

ABNCCStandardFirst SecurityTrustShahjalal IslamiBRAC


39

4.1.8 Impact of Remittance on Deposits and Advances in Sylhet

On the other side, in Sylhet maximum amount of remittance inflows and deposit is increasing, but it is kept idle. Because people of this region are not much interested in investment of remittance. For this reason, proportion of advances comparing with deposit is very much low. A large amount of fund is kept idle here. Table 16 and figure 16 &17 shows the deposit and advances in Sylhet.

Table 16: Deposits and Advances in Sylhet

Year Deposit Advances Credit–Deposit Ratio

31.12.2005 9269 2106 22.72% 31.12.2006 11017 2314 21.00% 31.12.2007 12320 2570 20.86% 30.06.2008 13183 2916 22.11%


0

2000

4000

6000

8000

10000

12000

14000

31.12

.200

5

31.12

.2006

31.12

.200

7

30.06

.2008

Amount in Crore (Tk.)

Perio

d DepositAdvances


58%

22%

20%

Idle Money

Statuary LiquidityReserve RatioTotal Loan & Advances

Figure 17: Comparative Analysis of Funds of Sylhet.

40

4.2 Usage and Impact of Remittances in Families

Focusing on the individual migrants, a more detailed and heterogeneous picture of the remittance dynamics emerges. Roughly, earnings of migrants can be consumed, invested or saved in the country of destination, or remitted to the home country and subsequently saved, invested or consumed. The proportion of the income that migrants remit is dependent on a number of factors. Remittances are likely to be higher in situations where the migrant leaves broadly for economic reasons than political or social reasons, where they have temporary rather than permanent resident status, where they are young, but married with family left behind at home, and that remittances will increase as emigrant wages increase although at a certain point, further increases in wage levels do not seem to translate into higher remittances. Studies in Bangladesh seem to confirm these findings, although it is very difficult to make generalizations. Sylheties migrant workers that many migrant workers from Sylhet division are known to have large savings abroad (own emphasis). Without giving any tangible evidence of this statement, the authority of the Investment Board repeated these findings in personal interviews.

4.2.1 Individual transfers from migrants to children, wives, family members or friends Micro-level studies in Bangladesh, as well as a report of the International Group of the British-Bangladeshi Professionals Association and our interviews elucidate that this is by far the most common structure. Important to note is that – although in a lot of micro studies the household is the focus of attention – not every member receives an equal amount of remittances, or even has access to remittances. Our survey illustrates this. In the majority of the 20 researched families, only one person received remittances, while in only two families more than one people received remittances. In most families the father of the migrant received the money, followed by the wife, the mother and the brother. Interestingly, although maximum of the remittance senders were married, only minimum of the receivers were spouses. Also, according to our survey most recipients of remittances were the parents. In this case the parents were followed by the brother and the wife. Class variations seem to exist. In Upper-class the wife was the most important recipient, while in middle-class it was the father or mother. Remittance in rural area generally boots consumption. A significant portion is used for purchase of land and home construction. They also help to expand business in agriculture products and construction materials. It may be mentioned here that while going abroad a migrant worker generally collects the fund for this migration either by selling or by mortgaging land. A very small portion of the remittance is used by the recipient for investment in business or other savings. While returning home, the migrant workers bring some luxurious products which reduce actual remittances that could be sending by them. It will be mentioned here that if utilization of remittance can be categorized in productive and non productive. Very insignificant portion of it is used for productive purpose.

41

4.2.2 Usage of Remittances in Household Level

The portion of remittance, the families use in consumption in different purposes such as food and clothing, purchase of land, marriage and ceremonies, trading, education, health care and so forth. They use maximum portion in food and clothing than in purchase of land than in home construction and decreasing in respect. The subject matter of the above discussion is expressed by the following way. Table 17 and figure 18 represents most often mentioned uses of remittances by families

Table 17: Most often mentioned uses of remittances by families

Purpose Minimum % of Received Remittances.

Maximum % of Receive Remittances.

Food and clothing 20 35 Purchase of land 3 40

Home construction and repair

2 30

Repay loans 10 19 Marriage and ceremonies 0 10

Education 0 5 Savings 5 15

Funding other people migration

0 7

Investment in Business 5 10 Health care 0 7

Source: www.iom.com (Pattern of usage)

05

1015202530354045

Food

and

Pur

chas

e of

Hom

e

Rep

ay lo

ans

Mar

riage

and

Edu

catio

n

Sav

ings

Fund

ing

Inve

stm

ent

Hea

lth c

are

Minimum % ofReceivedRemittanceMaximun % ofReceivedRemittances


42

4.2.3 Impact of Remittance in Family Income

From our survey we have found that, the families fully or partially depend on foreign earnings most of them are relied upon U.K. From our findings we can say that their family income come from two sources, only foreign and both local and foreign sources. But in findings only foreign income source is much lower than both local and foreign source. These are shown in following table 18 and figure 19:

Table 18: Income source of families

Income source Proportion in % Only foreign 17.64

Both local and foreign 82.36

0

10

20

30

40

50

60

70

80

90

Only foreign Both local and foreign

Income source

Prop

ortio

n in

%


43

4.2.4 Usage of Remittance in Families From these families we have found that they use their foreign income in several sectors, especially in household, savings and investment. These families are more interested to use the maximum portion of remittance in their household consumption. They are merely interested in savings and investment. For this reason the proportion of savings and investment is lower than the household consumption. The following table 19 and figure 20 show the expression:

Table 19: Usage of remittance in families

Sectors of usage Rate Household 56.47

Savings 25.88 Investment 17.65

0 20 40 60

Rate

1

Sect

ors

of u

sage

investmentSavingsHousehold


44

4.2.5 Rates of Income from Remittance of U.K. in Families

For the purpose of our research we have divided the rate of family income in four classes and their class interval is 25%. It is the percentage which a family receives from foreign remittance as a contribution of their regular income. We surveyed different families and got the information regarding these contributions. And we found that more families get their family income from remittance is in the range of 25% to 50%. Others are lower than it and the same percentage in the range of 50% to 75% and 75% to 100%. The following table 20 and figure 21 express the information:

Table 20: Rates of income from remittance of U.K. in families

Range of the rate of family income Percentage 0% to 25% 5.89 25% to 50% 35.29 50% to 75% 29.41 75% to 100% 29.41

5.89

35.29

29.41

29.41

0% to 25% 25% to 50% 50% to 75% 75% to 100%


45

4.2.6 Invested Sectors of the Families

Although the families of Sylhet are not much interested in investment, we found from our survey some families who invested their foreign remittances in some particular sectors. They invested a large amount in trading for a long time, but now a days their investment in Stock Exchange is gradually increasing and gain the equal position with trading. The relevant table 21 and figure 22 are as follows:

Table 21: Invested sectors of the families

Invested sectors Rate Real Estate Co. 23.53

Trading Co. 52.94 Stock Exchange 52.94 Shopping Moll 11.67

Restaurants 11.67 Others 5.88

23.53

52.94

52.94

11.67

11.675.88

Real Estate Co.Trading Co.Stock ExchangeShopping MollRestaurantsOthers


46

4.2.7 Preferable Sectors for Investing Remittance in Sylhet

By discussing with the authority of Bangladesh Bank and several commercial banks we have selected some preferable and profitable sectors in Sylhet for the availability of resources in which the families can invest their remittance. Then we prefer these sectors while surveying the families and noted their responses regarding these sectors. Maximum families show their interest to invest in juice factory comparing with other sectors. Table 22 and figure 23 show the preferable sectors for investment in Sylhet:

Table 22: Preferable sectors for investing remittance in Sylhet

Preferable Sectors Rate Tourism 35.29

Cold storage 29.41 Ceramics Industry 29.41

Juice Factory 41.18 Development of Tea Sector 17.65

Amusement Park 11.76 None 41.18

0

5

10

15

20

25

30

35

40

45

1

Preferable Sectors

Rat

e

Tourism

Cold storage

Ceramics Industry

Juice Factory

Development of TeaSectorAmusement Park

None


47

4.2.8 Inflow of Remittance in Families

In our survey the families may not give us the accurate information about the amount of inflow of remittance from U.K. For this reason we estimated some specific range to collect that information. And finally we found that maximum families (47.06%) receive annually less than Tk. 500000 in average. And 29.40% families receive Tk. 500000 to 1000000. The range of Tk. 1000000 to 2000000 and Tk. more than 2000000 got the equal percentage. The following table 23 and figure 24 show the expression:

Table 23: Average annual inflow of remittance in families

Range of inflow (in Tk.) Rate Less than 500000 47.06

500000 to 1000000 29.40 1000000 to 2000000 11.76 More than 2000000 11.76

0

10

20

30

40

50

Rate

1

Range of Inflow (in TK.)

Less than 500000500000 to 10000001000000 to 2000000More than 2000000


48

CHAPTER - 5.

CONCLUSION AND RECOMMENDATION

╠ Recommendation

╠ Limitations

╠ Conclusion

49

5.1 Recommendation:

We have studied about “usage and impact of regular inflow of remittance from U.K. in Bangladesh: A Study on Sylhet.” By analyzing our collected data we try to give some recommendation about the increase of investment as well as the proper utilization of U.K. remittance in Sylhet. These are given below:

I. To utilize the foreign remittance, Sylhet Chamber of Commerce and Industries should immediately strengthen its industrial capacity to implement the Economic Zone Project. As such it is important to give an institutional framework and ownership to the Proposed Industrial Zone Project.

II. Potential investors and entrepreneurs should be attracted through offering them sound

infrastructure and utility facilities under private initiative.

III. Small and medium size agro-based (especially tea sector), fisheries and livestock, mineral based and service oriented industries are having potential in Sylhet. Individual sectors having high potential are agar, betel leaf, fish processing, gas and coal based power, electric pull industries and so on.

IV. To get the privileges of maximum utilization of foreign remittance, SCCI in

collaboration with Sylhet Foundation should organize confidence building activities i.e. workshops and seminar in and outside the country where non residents are living abroad in order to attract potential investors.

V. SCCI, BOI, BSCIC, BKB, BSB, BASIC Bank should strengthen its institutional

capacity to identify activities that bring together the key stakeholders and create a strong platform which will form a regional development.

VI. Special tax incentives for FDI (foreign direct investment) especially to encourage non

residents in a number of sectors can increase investment in Sylhet. To create investors for industries by giving them attractive offer such as opportunity of giving less income taxes and giving them the honors of a CIP (commercially important person).

VII. Government can take initiative in establishing in industrial estate and different types

of plants and processing units and afterwards transfer to the interested entrepreneurs. VIII. Proper initiatives should be taken to import entrepreneurship development training

and capacity building activities for new business creation, business management and export development.

50

5.2 Limitations:

While conducting the seminar work, we have faced impediments. These are as follows:

I. Our time duration was short in case of preparing the seminar paper.

II. It was difficult to collect the adequate and real data and information from the survey conducted in the household.

III. Journal and publications related to inflow of remittance in Sylhet are not available.

IV. Branches offices of commercial banks in Sylhet are unable to provide previous year’s

information and data related to inflow of remittance in Sylhet.

V. Branch office of Bangladesh Bank in Sylhet has not sufficient information and data about the country wise amount of inflow of remittance in Sylhet.

51

5.3 Conclusion:

Foreign remittance sent by the wage earners and other expatriate Bangladeshis to their families and relatives at home are growing rapidly and now contributing a major portion of income earned by Bangladesh from abroad. The volume of remittance receipts by Bangladesh usually coming through official channels. But the unofficial channels are still playing a major part in transferring the remittance, thereby depriving the government of a huge sum of foreign currencies every year. In this situation, the government needs to give a closer look at the performance of the formal vehicles of money transfer including the banks already in operation. There are some arguments that remittances may create dependency, increase consumer goods expenditure, generating inflationary pressures and so on. These remittances have strong and positive impact on investment, national income and other significant sectors. At the end of our research we find that the families in Sylhet fully or partially depend on foreign earnings most of them are relied upon U.K. Most of the families use the remittances in their household consumptions as well as in savings. But some families already invested in some particular sectors. And they are very much interested to invest our selected preferable and profitable sectors in Sylhet by using their remittance properly.

52

REFERENCE

1. www.bangladeshbank.com

2. www.mof.gov.bd

3. www.iom.com

4. www.bbcc.com

5. www.currencyworld.com

6. Economic Review-2006



9. Foreign Exchange- by L. R. Chowdhury

10. Economic Trend- Online Edition

11. www.dailystar.net

12. The Daily Star

13. www.prime-bank.com

14. www.nationalbank.com

15. A Report on ‘Problems and Prospects of Investment in Sylhet Region’- organized by Bank Officers Club, Sylhet.

16. CPD report of Prime Bank

17. Financial Express.

53

Appendices

Appendix a:

Questionnaire

Appendix b:

Addresses of the family respondents

54

Appendix a: Questionnaire

1. Questionnaire for the Bangladesh Bank: Department of Business Administration Shahjalal University of Science & Technology Sylhet, Bangladesh

Topic: Usage and impact of regular inflow of remittance from U.K. in Bangladesh: A Study on Sylhet.

Name of Interviewee: Designation: Contact No.:

Please answer the questions to help and support our study- (Information is only used to prepare the report & must be confidential)

1. Which countries have taken position as the top 10 countries to send remittance in

Bangladesh? 2. How much amounts are received by Sylhet on previous years?(According to top listed

countries) 3. How many commercial banks are authorized by Bangladesh Bank in the dealings of

foreign remittance?

0-25 25-50 50-75 75-100

4. Which commercial banks can be said as the top listed banks according to receive foreign

remittances in Sylhet region?

55

5. How much portions are filled from foreign remittances in our GNP?

10-20 20-30 30-40 40-50 6. Do you follow over the inflow of minimum annual limit of remittance?

Yes No

7. Do you think that the foreign remittances are properly used in Sylhet?

Yes No 8. If yes, then where it is invested? 9. If no then what are the reasons? 10. Have you taken any encouragement policy to inspire the commercial banks regarding

foreign remittances utilization?

Yes No

11. What are the policies for commercial banks to come forward in the industrial

development in Sylhet? 12. What types of initiatives are taken by Bangladesh Bank regarding the reduction of money

laundering? 13. What’s your opinion regarding the proper utilization of foreign remittances in Sylhet

region?

Thank you for cooperating us.

56

2. Questionnaire for the Commercial Banks: Department of Business Administration Shahjalal University of Science & Technology Sylhet, Bangladesh


Name of the Bank: Name of Interviewee: Designation: Contact No.:

Please answer the questions to help and support our study-

(Information is only used to prepare the report & must be confidential)

1. From which sectors maximum foreign remittance inflows have occurred? □ Working Labor □ Export Proceeds □ Foreign Loans and Grants □ Others

2. In your bank, which countries have positioned in the top ten places in remitting currencies?

3. Which financial organizations act as the channels in the foreign remittance transferring with your bank?

4. How much inflow of remittances has occurred in the previous years on your bank?

5. To increase the inflow of foreign remittance which policies are taken by your bank?

6. What is the rate of foreign remittance on deposit money in your bank?

57

7. On which sectors your bank has already invested in Sylhet region?

□ Real Estate Co. □ Trading Co. □ Shopping Mall □ Others

8. From your point of view, which sectors are profitable but proper investments aren’t happened?

□ Tourism Sector □ Cold Storage □ Ceramics Industry □ Juice Factory □ Development of Tea Sector □ Amusement Park □ None

9. Have you any initiative to develop these sectors?

10. What are the barriers of your bank to invest in Sylhet?

11. What’s yours encouragement policy to people so that they contain inspiration to make investment in more productive sectors?


58

3. Questionnaire for the Families:

Department of Business Administration Shahjalal University of Science & Technology Sylhet, Bangladesh


Name: Age: Address: Contact No.:

Please answer the questions to help and support our study- (Information is only used to prepare the report & must be confidential) 1. How many members are in your family? □ Less than 6 □ 6 to 9 □ More than 9 2. What is the income source of your family?

□ Only foreign earning □ Both local & foreign earnings

3. How many family members are involved in sanding remittance?

□ 1 □ 2 □ 3 □ More than3

4. Which commercial bank you use as a medium for receiving remittance? □ …………………

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5. What is the rate of usage of remittance?

□ In family- ………..% □ In savings-…………% □ In investment-…………%

6. What is the rate of your family income that comes from foreign remittance?

□ 0% to 25% □ 25% to 50% □ 50% to 75% □ 75% to 100%

7. Do you face any difficulties in case of inflow remittance?

□ Yes □ No

8. If ‘Yes’, than what are the difficulties?

9. In which following sectors you will invest your money?

□ Real Estate Co. □ Trading Co. □ Stock Exchange

□ Shopping Mall □ Restaurant □ Others

10. From your point of view which sectors are preferable to invest in Sylhet?

□ Tourism Sector □ Cold Storage □ Ceramics Industry □ Juice Factory □ Development of Tea Sector □ Amusement Park □ None 11. Which is the interval of time of receiving the remittance?

□ Monthly □ Quarterly □ Semi-annually □ Annually

12. What is the annual average inflow of remittance in your family?

□ Less than 500000 □ 500000 to 1000000 □ 1000000 to 2000000 □ More than 2000000


60

Appendix b: Addresses of the family respondents

Name Address Contact Number Jebunnesa Nurani 74, Muglitula,

Subidbazar, Sylhet. 0821718596

Afiya Begum Nurani 13/1, Muglitula, Subidbazar, Sylhet.

0821716384

Shakila Mahmuda Nurani 3, Muglitula, Subidbazar, Sylhet.

0821717009

Noor Ahmad Pushpayan 40, Shibganj, Sylhet.

0821814099

Fatema Nahrin Chowdhury House-23, Block A, Road-4, Upashahar, Sylhet.

01913023634

Abdus Fahad Shahid Kumarpara, Sylhet. 01717190514 Nilkanta Dey Senpara, Sylhet.

Kishore Chowdhury Kashtaghar, Sylhet. 0821816105 Abul Lais Pushpayan 40/1, Shibganj,

Sylhet.

Shekh Azad Nurani 70/1, Muglitula, Subidbazar, Sylhet.

Abdul Jabbar 57 Surovi, Tilagor, Sylhet. 01717458285 Sekh Rezaul Karim 23 Mousumi, Mirabazar,

Sylhet. 0821713744

Ataur Rahman Bosundhara 92, Raynagar Sylhet.

01916248368

Jahidul Islam Tofadar Tafadar Vila, Tilagor, Sylhet.

01711580324

Jahanara Begum Pushpayan 84, Shibganj, 01710943658 Sadi Ahmed Waves 33/A, Chandantula

Rathiraj Bhattacharjee Alpona 31, Shibganj, Sylhet.

01196166363

Hasanul Amin Murad 29, Shahjalal Housing, Upashahar, Sylhet.

01716731009

Mahibul Hasan 11, Paira, Darshandeuri, Sylhet.

01920087338

Ahmed Maksud Kumar Para, Sylhet 01712710839

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usage and impact of regular inflow of remittance from u.k-a study on sylhet

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