Bangladesh faces a crisis in remittances amid COVID-19

bangladesh

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Amil Aneja, Lead Specialist, Migration and Remittances, United Nations Capital Development Fund & Sheikh Tanjeb Islam, Community Lead, Regional Agenda, Asia Pacific, Global Leadership Fellow, World Economic Forum


  • The coronavirus pandemic highlights the need for better cooperation over migration.
  • Bangladesh has offered incentives to encourage expatriate workers to send their money through legal channels.
  • Public bodies and remittance services providers must improve access to digital solutions.

The economic importance of the more than 10 million migrants from Bangladesh who sent close to $18 billion in 2019 cannot be overstated. International remittances normally represent around 7% of Bangladesh’s GDP. But the COVID-19 pandemic is having an acute effect on Bangladeshi migrants abroad, who are largely concentrated in countries with strict lockdown measures. Considering the large volume of Bangladeshi migrants in the Middle East, secondary economic impacts through depressed demand and falling oil prices will also likely add strain to the flow of remittances.

World Bank estimates have projected that total remittances by migrant workers from Bangladesh will fall to $14 billion for 2020 – around a 25% decrease from the previous year. Figures released by Bangladesh Bank show that year-on-year remittances for the month fell by 25%, indicating that the World Bank’s projection is, unfortunately, likely to hold true. The drop in these payments, which have traditionally averaged between $300 and $600 a month, will represent a significant loss to millions of household incomes in Bangladesh.

Crisis exposes need for better migration cooperation

The need to halt the falling flow of remittances in the country must start with a conversation about migration.

Mostly working in the tourism, hospitality and construction sectors, many migrants to the Gulf have been laid off and face limited prospects for employment. With coronavirus outbreaks emerging in the Gulf states, and more recently in Singapore, it has been reported that the pandemic has been experienced mostly among these migrant workers – living in crowded, dormitory-style labour camps, they are especially vulnerable to COVID-19.

The response to the crisis among a number of countries, including Bahrain, Kuwait, the Maldives, Qatar, Saudi Arabia and the United Arab Emirates, has been to compel or to put pressure on countries like Bangladesh to repatriate their migrant workers. Bangladesh has been hesitant to bend to these demands amid the public health risks. And when travel restrictions are lifted, the return of newly unemployed migrants could overwhelm the country’s economy.

It has therefore become imperative that Bangladesh mobilizes its diplomatic corps to ensure that there is greater migration cooperation, not only during the current lockdown phase but also during the COVID-19 recovery phase. Shahidul Haque, Bangladesh’s former foreign secretary, urged that strategies to defeat the coronavirus must emphasize “inclusiveness, courage and collaboration, without distinction or discrimination” – or they will “not succeed”. Mr Haque added: “A holistic, nuanced approach that acknowledges migrants’ economic contributions is optimal.”

Policy actions taken to ensure money flows

On the stimulation of domestic entrepreneurship in Bangladesh, the government has already taken proactive measures. It is encouraging that the government has already allocated Tk 30.6 billion ($361 million) as incentives in the budget for this fiscal year to encourage expatriate workers to send their money through legal channels. Some of the banks are also providing an extra 1% incentive for remittance beneficiaries, further increasing the attractiveness for remitters.

To finance some of its efforts, Bangladesh has been looking to mobilize its development partners. Initial financing of $150 million from the Asian Development Bank has been supplemented by a loan for another $500 million. Bangladesh Bank is making efforts to ensure liquidity in the market while keeping the foreign exchange rate stable. The central bank should be commended for also increasing the ceiling for expatriate Bangladeshis on remittances that give a 2% cashback (more than tripling the ceiling to $5,000; Tk 500,000).

Top Remittance Recipients in South Asia in 2019
Image: The World Bank Group; KNOMAD

Judging by the success of the incentive scheme introduced by the government last year, the Ministry of Finance should look to extend this out for the next fiscal year during the upcoming budget cycle. For remittances originating in key markets such as Malaysia, Saudi Arabia, the United Arab Emirates and the United Kingdom, it should also look to increase this cash incentive from 2% to 4%.

Digitization and the role of remittance service providers

Despite the presence of many modern service providers, the most popular way to send remittances has remained taking cash in person to a sending agent – yet the pandemic has severely disrupted this.

A survey of senior executives in the remittances industry has shown acute COVID-19 impacts in South Asia. It also reveals insights for digital solutions that require no interactions with an agent. Conducted in March 2020 by the International Association of Money Transfer Networks (IAMTN) in collaboration with the United Nations Capital Development Fund (UNCDF), the survey revealed that Saudi Arabia, the United Arab Emirates, United Kingdom and United States were the countries most impacted by outbound remittances. Together, these usually account for half the remittance inflows to Bangladesh. The adoption of digital solutions at both the sending and receiving ends may ensure at least access for migrants and families who so clearly need these remittances (even while the economic conditions for Bangladeshi migrant workers in such countries will be likely to keep the amounts depressed).

The opportunity of transitioning migrants and their families to the use of digital solutions such as mobile phone apps cannot be realized by providers alone. A coordinated effort can be made between public-sector institutions and remittance services providers to reach out to migrants and their families in order to help them open bank accounts, and to improve access to digital solutions. Banks and mobile money providers should be encouraged to implement Bangladesh’s guidance on electronic “know your customer” requirements (e-KYC). Efforts are needed to ensure interoperability between mobile financial services, since this can play an important role in improving inward remittances through mobile accounts. Appropriate measures may also be needed to ensure that any transaction fees for transferring remittances from mobile wallets to bank accounts are waived.

The government can create incentives to the banks, remittance service providers, mobile operators and other enablers of the remittance flows to ensure providers can financially sustain their operations, maintain the agent networks, and also extend benefits to the customers. Remittance service providers themselves can make accounts more attractive to Bangladeshis by providing value-added services, such as linking remittances with savings, credit, insurance, payments, and other inclusive financial products tailored to the needs of migrants and their families. The termination of remittances in digital wallets, and incentives against cash-outs, can also help greatly. For example, a partnership between mobile financial services providers with local commercial banks is allowing inward flows via online-to-wallet money-transfer companies, reportedly increasing the daily average sent by expatriates by as much as 150% in April 2020.

The fact that the current crisis has had such a negative impact on migrant workers’ incomes highlights the need for digital progress to improve resilience and maintain vital flows of money for low-income populations.

coronavirus, health, COVID19, pandemic

What is the World Economic Forum doing to manage emerging risks from COVID-19?

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications – a companion for decision-makers, building on the Forum’s annual Global Risks Report.

The report reveals that the economic impact of COVID-19 is dominating companies’ risks perceptions.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

A call to action

As with other sectors, public-private cooperation will remain key in mitigating the impact of COVID-19 on the remittances industry. A high-level call to action has already been spearheaded by the governments of Switzerland and the United Kingdom, as jointly announced on 22 May 2020 by UNCDF and the United Nations Development Programme (UNDP). The “Remittances in Crisis – How to Keep Them Flowing” call to action is supported by KNOMAD, the World Bank, the International Organization for Migration (IOM) and the International Association of Money Transfer Networks (IAMTN), and International Chamber of Commerce (ICC). Since it was announced, key member states receiving a high-volume of remittances across regions – Mexico, Ecuador, El Salvador, Jamaica, Egypt, Nigeria, Zimbabwe, and Pakistan – have also joined the call to action.

The joint statement reads: “By building capacity for a conducive regulatory and policy environment, strengthening open digital payment ecosystems, and fostering innovation for inclusive digital solutions for migrants, UNCDF and UNDP are supporting governments and the private sector to ensure continuity in the remittance flows to the countries and families hardest hit by the effects of the coronavirus.” There is a lot that can be achieved in support of the Bangladeshi migrants and their families who, home and abroad, contribute so very much.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

REACT-EU: EU support to mitigate immediate effects of the COVID-19 crisis

Korea must enhance detection and reinforce sanctions to boost foreign bribery enforcement

Draghi hands over to banks €77.7 billion more

Here’s the secret to financing a greener future

Why EU’s working and unemployed millions remain uncertain or even desperate about their future

Companies that put employees first perform better

38th ACP-EU Assembly: dialogue on cooperation challenges in Kigali

Privatization as a symptom of health inequity

WEF Davos 2016 LIVE: “If we do not do properly the Paris agreement, then all 16 remaining goals will be undermined”, UN Secretary General Ban Ki-moon cautions from Davos

To beat hunger and combat climate change, world must ‘scale-up’ soil health – UN

In visit to hurricane-ravaged Bahamas, UN chief calls for greater action to address climate change

Trade with the United States: Council authorises negotiations on elimination of tariffs for industrial goods and on conformity assessment

Iran: BBC and other broadcast journalists harassed; families threatened – UN experts

Why developing new antibiotics is a matter of life and death

7 shocking statistics that show the cost of corruption

Lithuania finds the ways to maintain its energy security

Migration crisis update: The “Habsburg Empire” comes back to life while EU loses control

Under fire, UN refugee agency evacuates 135 detained in Libya to Niger

State of the Union 2018: The Hour of European Sovereignty

Alarming level of reprisals against activists, human rights defenders, and victims – new UN report

Infrastructural and system barriers to Universal Health Coverage: get in my patient’s shoes

Some truths about the coronavirus, according to the World Health Organization

Visa-free access to the EU for UK nationals and to the UK for EU nationals

Improving Italy’s capital market will boost growth opportunities for Italian companies and savers

Cyber-Risk Assessments: the vaccine for companies in the Fourth Industrial Revolution

These Asian economies invested in their people – and it paid off

Progress made at COP25, despite lack of agreement to increase climate ambition

4 innovation hotspots in the Arab world

This Scottish forest is both a home for wildlife and a boost for the local economy

EU mobilises immediate support for its Western Balkan partners to tackle coronavirus

Boris Johnson’s no-deal Brexit to differ when issued from 10 Downing St.

“There are many converging visions and interests between the One Belt One Road initiative and the Juncker Investment Plan”, Ambassador Yang of the Chinese Mission to EU highlights from Brussels

Humanitarian aid: EU steps up support in Nigeria for conflict victims

The EU Commission openly repudiates the austere economic policies

No hard drivers in sight to remodel the stagnating affairs of the EU

Chart of the day: These countries have the highest share of electric vehicles

Successful carbon removal depends on these 3 conditions

ISIS fighters fleeing Mosul for Syria can topple Assad. Why did the US now decide to uproot them from Iraq?

“Is Europe innovative? Oh, Yes we are very innovative!”, Director General of the European Commission Mr Robert-Jan Smits on another Sting Exclusive

UN must bring more women police officers into the fold to be effective – UN peacekeeping official

The Free World Experience Report – LGBTQI+ health on the spot

Trump badly cornered at home by agribusiness and steel consumer lobbies: Trade

ZTE @ MWC14: ZTE excels in all areas at this year’s Mobile World Congress

Egypt: The road to hell paved with western advices for democracy

UN launches new framework to strengthen fight against terrorism

Syria war: executions condemned as violence continues ‘on both sides’ of border with Turkey

This UK footballer just won free school meals for kids in the summer holidays

MWC 2016 LIVE: Zuckerberg warns mobile industry not to ignore the unconnected

CO2 emissions around the world

COP21 Breaking News: China has promised to cut emissions from its coal power plants by 60% by 2020

Rising landmine blast toll in Afghanistan highlights long-term care needs of survivors

Topic: Mental Health in times of pandemic: What can each individual do to lessen the burden?

25 years on from landmark conference, millions of women and girls still in danger: UN deputy chief

Nigeria: UN chief ‘appalled’ by killing of aid worker; calls for release of remaining hostages

How a new approach to meat can help end hunger

Why social working cultures are happier and more productive

EU: Divided they stand on immigration and Trump hurricanes

TTIP: why it is worth not to pull the covers over your head?

Leading Palestinian legislator calls for ‘new international engagement’ in two-state solution

UN mosquito sterilization technology set for global testing, in battle against malaria, dengue

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s