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The Bangladesh Remittance Story Reaffirmed

Zahid Hussain's picture



The Bangladesh Bureau of Statistics (BBS) has just released a Survey on the Use of Remittances. The survey provides interesting update on the demographic and economic characteristics of the 8.6 million Bangladeshi workers currently working abroad. Conducted during 12-23 June 2013, the survey enumerated 9,961 Remittance Receiving Households (RRHs) from all the seven divisions of the country.

Overall, the survey mostly reaffirms findings from previous surveys and studies about migration and remittance behavior of Bangladeshis.

Who are the migrants?
The overwhelming majority (97.4 percent) of migrants are males, married (67.1 percent), Muslims (97.8 percent) most of whom (78.2 percent) are less than 39 years old with majority (61.5 percent) having less than ten years of education.

The majority (over 57 percent) of the migrants have been staying abroad for over 5 years and a significant (22.3 percent) proportion (largely from Sylhet) have been staying abroad for over ten years. Most (91 percent) work as blue colored labor in Saudi Arabia, UAE, Malaysia, Oman, Kuwait, South Korea and Singapore.  Most of them (87.8 percent) received no formal training before leaving the country.

Whom and how do they remit?
About one half of RRHs are female headed with very low level of education and majority of them (51 percent) own less than one acre of land.  Majority of RRHs are parents (44.6 percent) and spouses (38.8 percent). Remittances constitute the lion’s share (78 percent) of income of the receiving households; the rest of their income comes from agriculture and services.

Almost all RRHs own a mobile phone (96.4 percent), a cot (88 percent), an Almirah (71 percent), a television (62 percent), and a refrigerator (34 percent).  However, majority (52.4 percent) of them live in katcha houses.
Almost all (94 percent) have access to safe (tubewell) drinking water, but less than half of them (46 percent) use sanitary toilets.

Formal channels constitute the dominant (76.1 percent) source of money transfer while non-formal channels (hundi and friends) constitute a significant (24.9 percent) source as well. Only 4 percent of remittances are made in kind.

How significant are remittances?
On average, RRHs receive Tk 205,642 per annum in remittances—more than two times the per capita annual GDP in FY14. Non-remittance income on average constitutes 21.4 percent of total income of RRHs.

Average annual expenditure of RRH equals Tk 1,66,729, of which 38.8 percent is spent on food, 38.8 percent on non-food non-durables and the remaining 22.3 percent on durables. About 78 percent of total expenditure on durables is on land. Loan repayment, education and health constitute significant elements of non-food expenditures.

Average saving is Tk 27,126 per RRH per annum. It constitutes 13.2 percent of average remittances per RRH per year—significantly lower than the 23.4 percent domestic saving rate in FY14. This is a reflection of the fact that remittances mostly benefit households at the lower end of the income scale. This evidence says nothing about how much they would have saved in the absence of remittances.  A lot less may be a good guess.

More than half (57 percent) RRHs save a portion of remittances, but 32 percent do not directly invest their savings which are held mostly (66 percent) in savings account and only 5.8 percent buy savings bond.
Of those RRHs who invest directly, 72 percent do so in dwelling house construction followed by buying flats. The size of the investment ranges from Tk 100,000 to 500,000 per year.

What have we learnt?
Due to lack of access to migrants themselves, the survey could not ask questions that would have added to our stock of evidence on migration and remittances. Questions such as income and consumption of migrants abroad, their savings and remittance propensities, and costs of migration would have added major value.

The survey does bring home the reality that migration continues to be a rewarding transition to higher income for the migrants and their families relative to opportunities in the domestic economy. It contributes to raising consumption levels and increasing the diversity of consumption. Remittances augment savings which the recipients store in land and saving deposits.

A large part of remittances are not directly invested, as is income from any other source such as manufacturing, agriculture and services. The spending and saving behavior of remittance receiving households are not different from the rest in the economy. This is sometimes seen as remittances making no difference to the economy.

Such is not the case. By augmenting consumption, saving, deposits, and asset market trades, remittances make a difference to domestic employment and income generation. The survey made no attempt to ascertain the presence of moral hazard effects such as reduction in work on the part of recipients. Existing evidence suggests these are weak at best, if not absent.

Remittances can contribute to asset price bubbles if its monetary effects are not counteracted. This is an issue for a different blog.

Comments

Submitted by Vinaya Swaroop on

Zahid -- A very interesting piece: I have the following query -- given that 25% of the remittances are not reported through official channel, what could be the likely macroeconomic effects that are not being measured? As resources come through unofficial channels, private consumption (and savings?)must be increasing and would have real effects in the economy.

Submitted by Taslim on

Does anyone have information on the market share of the Money Transfer companies in Bangladesh? Please email me the information if you have it at taslim@zamirtelecom.com with the source. Will really appreciate your help.

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