Chapter 1

Introduction

Background of the study:

In modern age foreign remittance is a buzz word 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. 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 foreign direct investment, foreign loans and grants and foreign
remittance which are earned by working labors in abroad and exporting goods in foreign
countries. We receive remittance from different developed countries that have positive role on
the socio-economic development of our country.
This study attempts to identify key issues regarding the impact of foreign remittance on our
economy as well as our entire society. We have first discussed the overview of foreign
remittance around the world and in Bangladesh. We have also discussed what foreign remittance
is, types of foreign remittance, sources & uses and impact of foreign remittance on our economy.
Objective of the study:

The main objectives of this study are:

✔ To estimate the amount of regular inflow of foreign remittance in Bangladesh.

✔ To know about the usages of foreign remittance in our country as well as in economy.
✔ To identify the impact of foreign remittance on our economy.
✔ To analyze the relevant strength, weaknesses, opportunities and threats of the
utilization of foreign remittance.

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.
Sources of Data:

We have collected all the data from secondary sources like internet (website of Bangladesh
Bank), books, journals, newspapers.

Limitation of the study:

When we doing this study we have face some limitations. The limitations of this study are given
bellow:

✔ The arrangement of data was not good in government websites

✔ The collection of data from different sources was tough


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 Chapter 2

Literature review

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Source:D_8 Organization for Economic Corporation
Published date: September 2009
Headline: Remittance boost in Bangladesh

Summury: The amount of money sent home by Bangladeshis living abroad has reached a new
record high, according to the Central Bank of Bangladesh. In August, the total sum of money
sent home reached a historic peak of $937m - up 30% from a year ago. The boost to the
Bangladeshi economy comes despite the global recession hitting overseas jobs. Remittances are
the country’s second-highest revenue earner after exports.

Authors Name: Rafiq Hasan

Published Date: December 26, 2005
Headline: Remittance growth defies manpower export decline.

Summury: Despite a sharp decline in manpower export, the country's remittance earning
increased by 27 per cent this year with the total remittance crossing $4 billion mark for the first
time, sources in the Ministry of Expatriates Welfare and Overseas Employment said. In 2004, the
earning was $3.5 billion while 2.50 lakh Bangladeshis went abroad for job purposes this year
against the source observed that the main cause of decline in manpower export was job
nationalisation policy in Saudi Arabia -- the main destination of Bangladeshi workers.
Manpower export to Saudi Arabia declined by around 30 per cent this year compared to last
year's export figure. 2.71 lakh last year, posting around nine per cent decline, the source
added.The another reason for deling the demand for Bangladsi workers are unskilled labor.

Authors name:Khawaza Main Uddin

Published Date: August 03, 2007
Headline: Remittance rises as more Bangladesi go abroad for jobs

Summary: The article portrayed a realistic scenario as far the challenges that Bangladesh might
face in exporting manpower in the Middle Eastern countries. Due to massive investment by the
Western companies, the Middle Eastern nations zre rapidly aytomating their soial life. The
potential job seekers from Bangladesh and other developing nations have to keep them abreast of
the latest technological developments to get jobs in the Middle East Bangladsh, with the
consultation of the Middle Eastern employers, can establish an academy to train the local job
seekers so that they can learn the necessary skills required for the middle eastern job market.
This is the best way to be competitive and create even greater scope for future job employment.

Authors Name: Nadim Rahman

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Published Date: December 04, 2009
Headline: Impact of remittance in development of Bangladesh

Summary:Remittances also help Bangladesh in making the balance of payments favourable, or

make up the deficit between total export and import. For example, in 2008, Bangladesh exported
$13.97 billion worth of goods and services and in turn imported $19.59 billion worth of goods
and services. This gave a deficit of $5.62 billion in Bangladesh's Balance of Payment (BOP).
Remittance has been a key driver of economic growth and poverty reduction in Bangladesh."
The migrants send back billions of dollars and the country can then use these resources for
investment for industrial development, improvement of educational facilities and services, and
extend and improve its health services. The money that is sent back is also beneficial to the
families and to the country in that it helps reduce poverty and also allows for investment in small
businesses and chances for furthering education.

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 Chapter 3

Theoretical review

Foreign remittance:

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Make fund transfers abroad through an integrated Banking System. Allows for quick and
efficient payments to ensure that the funds reach the destination fast and safe.

Foreign remittance can be defined as ‘the purchase and sale of freely convertible foreign
currencies as admissible under Exchange Control Regulations of the country’.

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.

Types of foreign remittance:

Foreign Outward Remittance:

The sending country, where the wage earner is located. The sender uses a bank or foreign
exchange company to send money to foreign country. Many of the receiving banks have
established remittance relationships with currency houses and banks in other countries to better
facilitate the flow of remittances into the country.

Foreign Inward Remittance:

The receiving country, where the beneficiary resides. The bank receives the money that has been
sent from the sending person in the country in which the money has been earned.

Family Remittances:
It refers to remittances that are sent by individual immigrants working in the foreign locations to
their family, relatives or friends in their home country. These remittances are sent every month
and they assist the families of the migrants to survive. These remittances also help the poor
families to fight against the poverty. The family remittances are regarded as the major form of
remittances across the world where millions of workers are working hard in distant land away
from their home for earning their livelihood.

Community Remittances:
It refers to the remittance that is sent by individual immigrants generally and also includes the
remittance sent by various hometown associations to organizations and communities in their
home country. This money has been used for the developmental activities of communities such
as in building infrastructure, church, parks, and roads. It also offers health care to the poor. The

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community remittances are also used for offering health benefits, education; and employment to
big communities who need these facilities in the home countries.
Migrant worker Remittances:
This remittance refers to the cash transfers done by migrant workers for sending the money to the
families, friends and relatives back home. The migrant worker remittances make up a large
chunk of money inflows into home country by the people who have migrated to foreign locations
in the search of money, job or education.
Social Remittances:
These remittances basically comprise of various ideas, practices, and social capital that make up
the backbone of many remittances that flows from workers of one country to another. Thus
social remittances assist the traditions and culture of one race or community, to socialize with the
cultures and traditions of another community. Social Remittances help in the bonding of people
and do not have money associated with them.
Channel of foreign remittance:
There have two types of channel to transfer money to Bangladesh from different countries.
Those are:
1. Official channel:

Telegraphic Transfers:

Make fund transfers abroad through an integrated Banking System. Allows for quick and
efficient payments to ensure that the funds reach the destination fast and safe.

Western Union:

The fast way to send and receive money worldwide to over 200 countries.

Demand Draft:

A cheaper method for payments made overseas. Funds are cleared through our correspondents in
major cities around the world.

Travelers’ Cheques:

Travel smart with Travelers’ Cheques which are acceptable worldwide for a trouble-free and safe
trip.

Postal order:

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Postal order is an official piece of paper with an amount of money written on it, which you post
to someone who can then exchange it for the same amount of money at a post office. By this
channel one can easily cheaply transfer money from foreign countries.

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 Ltd, Janata Bank, Agrani Bank, Rupali Bank Ltd. and Bangladesh Krishi Bank
(BKB). 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 involved 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.

Other official channels:

There have some other official channel to transfer remittance. Those are as follows:

• Account to account transfer

• Electronic transfer
• Automatic teller machine (ATM) facilities

2. Unofficial channel:

Hundi system:

The hundi operator or agent is in fact an illegal foreign exchange dealer. The send the hundi
operator in a foreign country the currency of that country or dollar or pound or any acceptable
currency by the operator while his relatives or agent in Bangladesh receives equivalent amount
of money in taka. The agent in Bangladesh is conduct by the telephone, fax or e-mail by the
hundi in the host country and the sub-agent pays the money to relative of the sender. The hundi
rate is usually 1 or 2 higher than the official exchange rate.

Relatives and friends:

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Migrants and their relative or friends often bring consumer resilient, gold, electronics etc and
also foreign currency without declaring it to appropriate authority. These are often sold in the
local market and dollar in the local market.

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 Chapter 4
Sources & use of
Foreign remittance
In Bangladesh

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Sources of remittance:

Countries from which most of our wage earners remittance comes are as follows:

Bahrain Australia

Kuwait Hongkong

Oman Italy

Qatar Malaysia

K.S.A. Singapore

U.A.E. U.K.

Libya U.S.A.

Germany Iran

South Korea

Use of foreign remittance:

Use in households:

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.

Savings/Fixed deposit:

The portion of remittance received by our country people save in different banks. They deposit
big amount of money as fixed deposit for their future needs.

Investment in Business:

They also use remittance money in existing business or to open a new business. The business
may be small of big. It depends on the remitted money them received.

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Repayment of loan:

Most of the cases remittance money is use for payment of lone that takes from different banks or
people. Because most of the people who go abroad as worker financed the migration process by
taking lone from different banks and people.

Gift/donation to relatives:

This money is use for present gift to relatives or for donation for a while.

Furniture:

Most of the low or middle classes people depend on this money to obtain home furniture.

Home construction / repair:

In major cases most of remittance money is used for construction of new home and repairing of
house.

Wage earners remittance in graph:

Wage earners remittance was not good after the first time of our independence. Then year after
year it was changing and it going up and up. Now the entire scenario has been changed. Now big
amount of skilled workers working in different developed countries and sending huge amount of
foreign remittance to our county. That changes their family condition as well as our economy.

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Export remittance in graph:

Increase in export remittance is going higher then in every year as well as every decade. In the
last decade export increases about twice in every year. Graph shows that, export earning is
increasing gradually and it increasing highly after 2000 when garments industries are emerged.
But our country also earn a massive amount of money by exporting jut, frozen food, vegetable,
fish, chicken, tea etc.

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Comparison and interpretation:

Our country’s export earning is going highly up day by day. It indicates that, the products of our
country have a good demand in foreign countries. It is helping to boost country’s industries and
helps in economic development as well as employment

Workers who work outside the country send huge amount of remittance and have a good
contribution in our country’s economy. It also increases day by day as increasing our competent
workers.

Graph showing that, export remittance is increasing highly than wage earners remittance though
both were very close in previous few years.

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 Chapter 5

Impact on the
Economy

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Impact on the economy:

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.

Impact on the GNP:

Increase in foreign remittance also increase the national income. As the national income increase
the consumption of goods by the country people also increase. So, production of goods by the
different organizations increases as well. It increases our country’s GNP.
Impact of remittance on consumption:
As the remittance increase the consumption of goods by the country people also increase.
Increase savings:
Foreign remittance that comes from different developed countries is increasing the level of our
savings. The remittance received by our country people is saving in different banks by making
long term or short term deposit.
Increase capital:
Remittance received from different developed countries which is saving in different banks a big
source of capital. This huge amount of money is investing is different project by the bank.
Impact of remittance on investment:
Foreign remittance is increasing the investment of our country. The remittance is using for small
and big investment in different project, establishing firm or industry, small or big shop which
increases the proper utilization of money.
Increase employment:
As the investment increase, the employments of our country also increase. The people of our
country are getting jobs in different project, firm or industries.
Impact of remittance on import:
It has a bad impact on our economy. By increasing remittance, it also increases consumption of
foreign product. It increasing the import of foreign product day by day as well, Peoples have
enough money to buy foreign product, although government is trying to save our domestic
companies by implementing necessary rules and regulation.

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 Chapter 6

Findings, recommendation
& conclusion

Findings:

1. Most of the cases workers who work in abroad use informal channel like hundi
2. The government policies are not efficient and have not enough data about foreign
remittance.
 3. Government is not capable to attract investors and entrepreneurs.
4. The workers are not skilled as much they need.

Recommendation:

For the problems showing above we are recommend the following ways:

1. Government and the different official channels should make them concern that the
channels are more easy and safe to send money from abroad.
2. Government policy about foreign remittance should easy and favorable to the migrant
worker and should efficiently collect and organize the data about foreign remittance.
3. Government can catch the attention of potential investors and entrepreneurs attracted through
offering them sound investment policy.
4. Government can start a project for unskilled workers so that unskilled workers can take training
to make them skill and skill workers can make them more efficient.

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.
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 country by using their remittance
properly.

Reference:

www.google.com

www.bangladesh-bank.org

www.scribd.com

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www.epb.gov.bd

The daily star, www.thedailystar.net/

www.un-bd.org/.../IOM--A%20Study%20on%20Remittance%20Inflows%20and
%20Utilization.pdf

Appendix:

Wage earners remittance:

Financial Year US $ (In million)

2008-2009 9689.26
2007-2008 7914.78

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 2006-2007 5998.47
2005-2006 4802.41
2004-2005 3848.29
2003-2004 3371.97
2002-2003 3061.97
2001-2002 2501.13
2000-2001 1882.10
1999-2000 1949.32
1998-1999 1705.74
1997-1998 1525.43
1996-1997 1475.42
1995-1996 1217.06
1994-1995 1197.63
1993-1994 1088.72
1992-1993 944.57
1991-1992 849.66
1990-1991 769.30
1989-1990 781.54
1988-1989 757.84
1987-1988 763.90
1986-1987 747.60
1985-1986 576.20
1984-1985 500.00
1983-1984 500.00
1982-1983 627.51
1981-1982 409.77
1980-1981 304.88

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 1979-1980 301.33
1978-1979 172.06
1977-1978 106.90
1976-1977 82.79
1975-1976 23.71
Source: www.bangladesh-bank.org/& Bureau of Manpower, Employment and Training (BMET)

Export earnings:

Financial Year US $ (In million)

2008-2009 15565.19
2007-2008 14110.80
2006-2007 12177.86
2005-2006 10526.16
2004-2005 8654.52
2003-2004 7602.99
2002-2003 6548.44
2001-2002 5986.09
2000-2001 6467.30
1999-2000 5752.20
1998-1999 5312.86
1997-1998 5161.20
1996-1997 4418.28
1995-1996 3882.42
1994-1995 3472.57
1993-1994 2533.90
1992-1993 2382.89

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 1991-1992 1993.92
1990-1991 1717.55
1989-1990 1523.71
1988-1989 1291.56
1987-1988 1231.20
1986-1987 1073.77
1985-1986 819.21
1984-1985 934.43
1983-1984 810.99
1982-1983 686.60
1981-1982 625.89
1980-1981 709.85
1979-1980 749.44
1978-1979 618.82
1977-1978 493.74
1976-1977 417.01
1975-1976 380.47
1974-1975 382.68
1973-1974 371.76
1972-1973 348.42
Source: www.epb.gov.bd/.../Bangladesh_Export_Statistics%202006-2007_PDF%20file.pdf

Use of foreign remittance in bangladesh

Purposes Remittances used (%)

Food and Clothes 20.45
Medical Treatment 3.22

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 Child Education 2.75
Agricultural land purchase 11.24
Homestead land purchase 0.96
Home construction / repair 15.02
Release of mortgage land 2.24
Taking mortgage of land 1.99
Repayment of loan(for migration) 10.55
Repayment of loan (other purpose) 3.47
Investment in Business 4.76
Savings/Fixed deposit 3.07
Insurance 0.33
Social ceremonies 9.07
Gift/donation to relatives 0.94
Send relatives for pilgrimage 0.92
Community development activities 0.09
Sending family members abroad 7.19
Furniture 0.69
Others 1.05
Total 100
Source: www.ifc.org/ifcext/mifa.nsf/.../Bangladesh.../Bangladesh_20090920.pdf

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