Muhith against incentives to woo disgruntled remitters

Dhaka,  Thu,  24 August 2017
Published : 17 Jun 2017, 00:18:42

Muhith against incentives to woo disgruntled remitters

Syful Islam

The government disapproves of a proposal for providing incentives to migrant workers to encourage them to send money through official channel instead of illegal ways, officials said.

Recently, the ministry of finance (MoF) had placed the proposal before Finance Minister AMA Muhith for approving a 5.0 per cent incentive for the expatriates as remittance inflows through legal channel dropped drastically.

Mr Muhith said providing cash incentives for sending remittances would be a replication of an era-old practice and so he wouldn't take recourse to it.     

However, the minister instructed the officials concerned to devise mechanisms as to how the cost of remittance through banking channel could be reduced by way of charging only a minimum cost.  

Mr Muhith in his budget speech for next fiscal year acknowledged that various hindrances to remittance transfer and relative benefits of remitting money through informal channels are among the reasons behind fall in remittance inflows to the country in the recent months.

In the post-budget press conference the minister said remittance costs would be lowered to encourage the migrant workers to use banking channel.

The International Monetary Fund (IMF) in its Article IV consultation report said: "Another reason for the decline in remittances, while difficult to measure, could be related to a shift away from banking towards informal channels for transferring funds."

It said informal channels continue to exist in many South Asian countries, including Bangladesh, and some of the decline in remittances may be explained by a possible shift by remitters to informal channels not captured in official statistics.

Statistics show that during the July-May period of the current fiscal year, the migrants sent US$11.55 billion in remittance while the amount was $14.93 billion in the corresponding period of last fiscal year.

Saudi Arabia is a major source of Bangladesh's remittance income, accounting for 19.8 per cent, followed by the United Arab Emirates (UAE) 18.2 per cent, the United States 16.2 per cent, the United Kingdom 5.8 per cent, Kuwait 7.0 per cent and Oman by 6.1 per cent.

The IMF estimates that sustained low oil prices led to slower growth, weakening of fiscal and external positions, and a tightening of monetary and financial conditions in the GCC countries led to less employment opportunities and higher costs of living for migrant workers, reducing their ability to save and remit home their incomes.     

A senior official at the ministry of finance (MoF) told the FE that remittance-dispatch cost through banking channel is found to be higher than in informal channel, for that matter, Hundi, which encourages migrants to look for illegal conduits.

He said even the exchange rate of forex in informal channel is higher than that in the banking channel. Sending remittance through illegal channel is much faster than banking channel and so migrant workers prefer it.

The official said the ministry has started devising mechanisms to reduce the remittance cost to minimum level so that migrant workers use the banking channel for the same instead of risky informal means.

"We are hopeful about preparing the method shortly," he said. 
Editor : A.H.M Moazzem Hossain
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