Importance of remittance in Bangladesh economy
Remittance refers to transferring money by a person living in a foreign country to their home country. It typically involves migrant workers sending part of their earnings back to their families or relatives in their country of origin. Exporting overseas manpower is the main source of earning remittance in Bangladesh.
As a leading overseas manpower agency in Bangladesh Ifthi Group plays an important role in the economic landscape of Bangladesh by exporting manpower. This blog explores the significance of remittances, their impact on the economy, and the broader implications for development and welfare.
Economic significance
Bangladeshi remittance is one of the largest sources of foreign exchange earnings next to ready-made garments and textiles. The figure was estimated to be $22 billion in 2023 and the remittance was known to be 6 percent of its GDP. This has benefited in poverty eradication, increasing the consumption basket at the household level and in economic growth.
Poverty reduction and household welfare
Reducing poverty is one of the most notable positive effects of remittance. The information provided by the World Bank concludes that remittance has pulled millions of the people of Bangladesh out of poverty. The money families receive often goes into enhancing living standards, education, and access to better health facilities.
Research indicates that consumption expenditure as well as investment in human capital increases; hence it results in better socio-economic welfare among the households with condiment income in the form of remittances.
Employment and migration
Being an exporting country Bangladesh has many of its people employed in foreign countries. By 2023, about 10 million Bangladeshi people are estimated to work in several countries such as Saudi Arabia, United Arab Emirates, and Malaysia. These are the Migrant workers who fast earn and remit a large part of their wages back to their families as well as to the national economy.
- 2023: $22 billion
- 2022: $21.03 billion
- 2021: $24.77 billion
- 2023: 6% of GDP
- 2022: 6.2% of GDP
- 2021: 7% of GDP
Top source countries for remittances
- Saudi Arabia: $5.8 billion
- United Arab Emirates: $4.5 billion
- United States: $3.2 billion
- Kuwait: $1.8 billion
- Malaysia: $1.5 billion
Foreign exchange reserves
Remittances play a crucial role in bolstering Bangladesh's foreign exchange reserves. The steady inflow of foreign currency helps stabilize the exchange rate, manage the balance of payments, and reduce reliance on external borrowing. In times of economic uncertainty, such as during the COVID-19 pandemic, remittances provided a much-needed buffer against economic shocks.
Education and skill development
Remittances have a positive impact on education in Bangladesh. Families receiving remittances often prioritize spending on education, leading to higher school enrollment rates and better educational outcomes. Moreover, returning migrant workers bring valuable skills and knowledge gained abroad, contributing to the development of a more skilled workforce.
Healthcare Improvements
Access to quality healthcare is another area where remittances make a significant difference. Families with remittance income can afford better medical care, leading to improved health outcomes. This investment in health not only benefits individuals but also enhances overall community well-being and productivity.
Gender empowerment
Foreign earning also helps to empower gender in Bangladesh. Especially women remain the key receivers of this income as it enhances their authority in decision-making due to their receipt of the cash remittance. It promotes gender inequality and socio-economic development of both rural and urban regions, due to the shift of focus.
Challenges and opportunities of remittance flow
Despite the numerous benefits, there are challenges associated with remittances in Bangladesh. High costs of remittance transfers, reliance on informal channels, and the vulnerability of migrant workers to exploitation and abuse are significant concerns. To maximize the benefits of remittances, Bangladesh can explore several opportunities:
- Reducing Transfer Costs: Encouraging competition among remittance service providers and leveraging digital technologies can reduce transfer costs, ensuring more money reaches recipients.
- Formalizing Channels: Promoting the use of formal remittance channels can enhance the security and efficiency of transfers while reducing the risks associated with informal methods.
- Skill Development: Providing training and support for migrant workers can enhance their earning potential and ensure better job opportunities abroad.
- Financial Inclusion: Expanding access to financial services for remittance-receiving families can promote savings, investments, and economic stability.
Future prospects
The prospect of remittance in Bangladesh seems healthy. Due to the consistent policy in government to continue to promote labor migration and the expansion in the development of digital remittance systems, we shall continue seeing high remittance inflows.
Besides, in the wake of equality the COVID-19 pandemic had on the global economy demand for Bangladeshi workers in foreign countries is expected to rise, thus enhancing remittances inflows.
Remittances are one of Bangladesh’s key resources where millions of households sought support and contributed to the development of the country. To this effect, the remittances received by migrant households, boost the living standards and improve the social well-being of the targeted groups.
All in all, by handling both the problems and benefits of the remittance flow, Bangladesh will be in a favorable position to see this vital ink source continuing as a springboard for the future development and prosperity of the country. Ifthi Overseas plays an important role in this regard.
Frequently asked questions
How do remittances impact Bangladesh's foreign exchange reserves?
Remittances help bolster Bangladesh's foreign exchange reserves by providing a steady inflow of foreign currency. This stabilizes the exchange rate, manages the balance of payments, and reduces the country's reliance on external borrowing.
How do remittances empower women in Bangladesh?
Women often receive remittance income, which enhances their decision-making authority. This promotes gender equality and the socio-economic development of both rural and urban regions.
What challenges are associated with remittance flows in Bangladesh?
Challenges include high transfer costs, reliance on informal channels, and the vulnerability of migrant workers to exploitation and abuse.
What opportunities exist to maximize the benefits of remittances?
Reducing transfer costs through competition and digital technologies Promoting formal remittance channels for secure and efficient transfers Providing skill development and support for migrant workers Expanding access to financial services for remittance-receiving families
What are the prospects of remittances in Bangladesh?
The future of remittances in Bangladesh looks promising, with consistent government policies promoting labor migration and the expansion of digital remittance systems. As global economies recover, the demand for Bangladeshi workers abroad is expected to rise, enhancing remittance inflows.
