The inflows smashed all projections
Migrant workers did what was unthinkable about ten months ago: they have sent a record amount of remittance in 2020.
In December, $2.1 billion flew in from expatriate Bangladeshis -- up 23.5 per cent from a year earlier -- to take the year’s tally to $21.9 billion, according to data from the Bangladesh Bank.
Last year’s inflows were up 19.7 per cent year-on-year.
As coronavirus was tearing through the globe in February, fear gripped Bangladesh that remittance, which has gone on to become one of the lifelines of the economy, would take a massive hit.
The World Bank in April had forecasted that remittance inflows to Bangladesh may plunge as much as 22 per cent in 2020 to about $14 billion.
And then in July, the Asian Development Bank had made a similar grim forecast: Bangladesh would be among the five worst-hit developing Asian economies in terms of remittance inflows.
In the worst-case scenario, Bangladesh's remittance will decline 27.8 per cent from its 2018 level, when about $15.5 billion flew in.
While remittance did decline between February and April when the pandemic was putting down its roots all over the world, from May onwards the inflows have been on the rise as countries all over the world gradually started to ease their movement control orders to flatten the curve on coronavirus.
In July, the inflow of remittance hit the single-month record as migrant workers sent home $2.6 billion. July's inflows were up 62.5 per cent from a year earlier.
In August, remittance inflows rose 35.9 per cent and in September 45.6 per cent.
Then in October, the WB revised its forecast and projected that the country would receive about $20 billion in 2020, making it the eighth highest remittance-receiving country in the world.
But the inflows beat that projection too.
In October, the inflows were 28.1 per cent higher and in November 33.7 per cent.
The remittance had hit the new record mainly due to the 2 per cent cash incentive on inflows through the official channel, said Md. Serajul Islam, spokesperson of the BB.
The objectives of the incentive, when introduced in July last year, were to mitigate the burden of increased expenses in sending foreign remittance and to encourage the Bangladeshi diaspora to remit more money through the legal channels, said Islam, also an executive director of the BB.
The Bangladeshi expatriates send a record amount of remittance owing to the government incentives, digital banking services and the disruption of the hundi business, said Faruq Mainuddin Ahmed, managing director of Trust Bank.
Besides the 2 per cent incentive, banks and mobile financial services providers have taken several initiatives to increase remittance amid the pandemic.
The collapse of the hundi system, an illicit cross-border transaction network, thanks to the travel ban brought on by the raging coronavirus could explain the gush of remittance, said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.
The hundi network was moored on international travel, import business and medical tourism. All have been in the slow lane since the pandemic began in February.
“But the expatriate Bangladeshis still need to send in money home and they turned to the legal channel,” Hussain added.
Although the Bangladeshi expatriates are facing various disruptions due to the struggling economies they reside in, they did not stop sending money to their relatives in the country, said Zaid Bakht, chairman of Agrani Bank.
As a result, the inflow of remittance has increased in 2020 even amid the pandemic.
The inflow of remittance would maintain a standard flow in the upcoming days as migrant workers are already used to the legal channels and getting benefits due to the incentives, said Bakht, also the research director of the Bangladesh Institute of Development Studies.
Ahsan H Mansur, executive of the Policy Research Institute of Bangladesh, echoed the same.
“There will not be much growth in remittance in the upcoming days but it would not decline.”
The technological transformation seen in recent times that has made receiving remittance within minutes via mobile financial services might have posed itself as a viable alternative to hundi amid the pandemic, said Mansur, also the chairman of BRAC Bank.
Another reason for the spike, particularly from the US, could be the higher returns on savings in Bangladesh.
In much of the developed world, the interest rates are close to zero or even negative in some cases.
“A portfolio reallocation might be happening here,” Mansur added.