In recent years, remittances have become one of the primary economic contributors in recipient countries. Remittances are money transfers that international migrants send to their families in their home countries. In 2022, these money transfers to low- and middle-income countries were $647 billion. Remittance to Bangladesh has become a vital economic pillar, for a country of 171 million people.

Bangladesh’s Standing in Global Remittance

According to the World Migration Report, Bangladesh ranked as the eighth-highest recipient of remittances globally and third-highest in South Asia. In 2022, the country received a staggering $21.5 billion inflow of remittance. It is a major source of economic growth and development for Bangladesh, contributing 4.7% to the country’s GDP.

Overview of the Remittance Sector

Since independence, migration has been a significant factor in improving living standards and reducing poverty and unemployment in Bangladesh. With a huge young population and an increasing unemployment rate, many citizens have taken short-term jobs abroad.

In 2023, a record 1.3 million individuals left the country for overseas work, and many others have unregistered contracts. These migrations are mostly for unskilled or semi-skilled work.  The government aims to send an additional 1 million migrants to various countries, expanding the diaspora and increasing inward remittances by creating an “overseas employment market expansion roadmap.”

Economic and Social Factors

A mix of economic and social factors influences migration patterns from Bangladesh. Economically, many Bangladeshis migrate to escape poverty, seeking better job opportunities abroad due to limited prospects at home. The country’s high population and limited job market create pressure on local employment, pushing people to look for work in countries with higher labor demand. Socially, the desire to improve living standards and provide better education and health care for their families motivates migration, according to the Migration Policy Institute (MPI).

Remittances to Bangladesh have a profound impact on the economy. Back-home recipients use these funds to finance essential needs, education and small businesses, according to the MPI. This financial support often boosts the production of tradable and non-tradable goods and services, influences land markets and fosters the growth of banking and commerce sectors.

About 70% of remittance recipients use the funds for essential needs like food, clothing and shelter. They also invest significantly in agriculture, small businesses and housing, driving local entrepreneurship and job creation.

Improving Food Security

A World Bank analysis indicates that households in rural Bangladesh receiving remittances are more food secure compared to those that do not receive remittances. This means that remittance-recipient families are better able to afford and access sufficient food, leading to improved nutritional outcomes and overall well-being.

However, family support is not the sole driving factor of inward remittances. The migrants’ skills and education levels also play a part. A migrant with a secondary education is likely to send back more money than someone with no formal education. This highlights the importance of education and skills development in maximizing the remittance potential of future generations of Bangladeshi migrants.

Remittance Incentive Programme

The Bangladeshi government recognizes the immense contribution of its migrant workforce to the overall economic growth of the country. The Remittance Incentive Programme, launched in July 2019, is a significant initiative of the government. This program aims to encourage Bangladeshis working abroad to use official channels for sending money home, rather than informal systems. The program offers a cash reward directly deposited into the sender’s bank account for remittances sent through legal procedures. The incentive was 2% initially, then raised to 2.5% in 2022 and currently stands at 5%. This initiative promotes the use of formal channels for remittance and enhances transparency.

Remittance and the COVID-19 Pandemic

During the COVID-19 pandemic-induced global economic turmoil, the World Bank predicted that reducing inward remittance to Bangladesh would hit the economy hard. Despite that, remittance inflow started to increase in the last half of 2020 making it to the list of the top ten highest remittance recipient countries

This significant inflow has improved living standards, financed education, boosted local economies, and elevated the country’s foreign currency reserves past $46 billion. The remittances have also played a crucial role in stabilizing the balance of payments and enhancing the nation’s credit rating

Conclusion

Remittance to Bangladesh can be a powerful force to reduce poverty. Supporting education and skills development and fostering safe working conditions for migrant workers, can ensure this vital lifeline continues to flow and empower the nation for generations to come.

– Sumaiya Sultana

Sumaiya is based in London, UK and focuses on Business and New Markets for The Borgen Project.

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