Allowing MFS providers to bring in remittance

The country is now plagued by multifarious problems like increasing deficit balance of payment, deepening dollar crisis, LC opening being stuck and declining remittance inflow.

Of them, drop in remittance inflow has now become a stumbling block regarding increasing foreign exchange reserve as both are inexorably linked to each other.

Remittance inflow to the country began to drop roughly in May when it declined by 13.15 per cent year-on-year. The remittance inflow continued to fall until it reached 25 per cent in the month of September. In that month it was the lowest in seven months.

The declining remittance inflow has severely affected the foreign exchange reserve as the lion’s share of the central dollar reserve comes from the money sent by migrant workers from abroad. With the remittance earning declining the country’s foreign exchange reserve got a double whammy. The country’s economy began to bleed.

Why did the remittance suddenly begin to plummet? Even during corona pandemic migrant workers sent money through legal channels. Of course, they didn’t have alternatives as all other informal channels were shut due to the pandemic. They, at that time, might not have looked for other illegal channels so much as they are now doing.

The reason lies in the dollar crisis and its abnormal high rate which the authorities are yet to rein in. The government fixed the dollar exchange rate but illegal channels like hundi offers more than what they receive when they send their hardworking money through a formal channel like banks, foreign exchange houses and money transfer companies.

After the money inflation, remittance inflow began to drop as expatriate Bangladeshis got Tk 5-6 less than what they received when they sent money through illegal channels. Again with the exacerbation of their living standard because of global inflation they started to rely more and more on hundi cartels.

Since the situation has worsened the government has taken a timely decision to incentivise the flow of remittance through proper channels. On November 29 the Foreign Exchange Policy Department of Bangladesh Bank in a circular said it would now allow Mobile Financial Service Providers (MFS) like bKash, Rocket and Upay to directly repatriate wage remittances in association with internationally recognized online payment gateway service providers, banks, digital wallets, card schemes and aggregators abroad.

The decision will help migrant workers and other expatriates to send their money in much easier and faster way. People involved in the sector believe that the opportunity opened up by the government will stop wastage of wage remittance through informal channels. According to them, it will tremendously encourage the expatriates to send their money through formal channel which in turn will also bolster the central dollar reserve of the country.

People related to the MFS sector told The Business Post that the Bangladesh Bank initiative would ease repatriation of wage earners’ remittances and support local wallets like bKash, Rocket and Upay in repatriating wage remittances. It will also stop drainage of remittances through unofficial channels.

It is true that if the decision is translated into reality it will encourage the expatriates to send their money through banking channel but this is only the one side of the coin. If dollar market remains destabilised and dollar exchange rate volatility can’t be tamed this may eventually prove to be a futile effort.

Apart from the MFS, the government should devise other digital ways to increase the flow of the remittance. If the government patronizes the remitters and smoothen their ways to send remittance and the flow of the money to the country from abroad increases it will boost our foreign currency reserve.

Not only that, it will also help the government to reduce its balance of deficit payment considerably strengthening the economy of the country in the long run.