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New evidence reaffirms that migration is costly but still worthwhile for Bangladeshis

Zahid Hussain's picture

The International Organization for Migration (IOM) presented their Final Report on The Bangladesh Household Remittance Survey 2009 in a workshop held in Dhaka on May 12, 2010.  This survey collected data from a nationally representative sample of 10,926 migrant households.  The findings of the survey confirm most of what we know about migration and remittance based on smaller surveys and anecdotal evidence.  In particular, the findings are in line with the ones from the World Bank Survey (2007), which was smaller in scope. 

I summarize below what appears to me as some emerging stylized facts about the profile of Bangladeshi migrants and their remittance behavior.

Migrants tend to be young (32 years old on average) married males who have at least completed primary education (over 75 percent). They go to the Middle-East (nearly 73 percent) and Asia (22) with the help of relatives (55 percent) and intermediaries (45 percent) after obtaining a low skilled or semi skilled job contract (79 percent) for which they had to wait for about 6 months.

Migrants come from non-poor households. About 87 percent of migrant households have access to tube well and borehole; 74 percent have improved latrine facility; 83 percent have tin as main roof material; 35 percent have cement/stone as wall materials in addition to 43 percent who have tin as wall material and 34 percent have ceramic tiles/cement/carpet as flooring material.  Almost all migrant households owned their homestead land, although a sizable proportion do not own any other land.  Thus, migrants generally appear to come from the lower band of Bangladesh’s middle class.

Migration is a costly process.  It costs on average nearly Tk 220,000 (over 5 times GDP per capita) to migrate. Over 52 percent reported paying more than Tk 200,000 (nearly US$2900).  Only the non-poor can afford such high costs. Nearly 60 percent of this cost comprises of payment to the intermediary (commonly known as Dalal).  Migration cost is financed mostly by borrowing, support from family and selling assets, particularly land.

Yet, it is economically worthwhile to emigrate.  On average migrants earn Tk 21,363 per month (6 times our FY09 GDP per capita), although the majority (54.3 percent) earn between Tk 10,000 to 20,000 (2.8 to 5.6 times GDP per capita). Migrants save 62 percent of their income on average and the amount they save per month constitutes 3.7 times our monthly GDP per capita.

Migrants remit half of their savings on average. Migrants remit on average Tk 81,710 per annum (1.9 times per capita annual GDP and 32 percent of migrants’ average income) in three to four installments.  The amount remitted comprises 1.6 times the recipients’ pre-remittance income.  Also, the average amount remitted constitutes 51 percent of migrants’ average savings, suggesting a significant part of their savings is not remitted. This is a new insight.  The highest amount remitted on average come from migrants in Canada/USA, followed by Europe, Africa, Middle East and Asia (excluding ME).

There are some notable regularities:

  • The amount remitted varies positively by the amount of income migrants earn, the duration of stay, and the level of education.
  • Not all migrant households receive remittance. The total local income of recipient households is on average 34 percent lower than non-recipient households. 
  • Remittances are mostly sent through banks (73 percent). Only 18 percent migrants reported using informal channels. 
  • It takes on average 8.6 days to receive remittances from banks and shorter (4.7 days) through informal channels.  The good news is that 87 percent receiving remittances through formal and informal channels reported not requiring to pay any fee and the other transaction costs (transport) are not very significant.

 


Remittance enhances the standard of living of the recipients.  The recipients use the remittance money to finance household needs that include durables, nondurables, education and health. Remittances contribute to strengthening households’ net wealth position through de-leveraging—that is paying off loans (over 42 percent). Remittance income enables improving diversity in diet; buying books, papers, other learning materials and tutorial services; and obtaining better medical care. It also contributes to insulate the recipient households from local market shocks.

A lot more can be done with this rich dataset.  The survey provides an adequate data base to do a more rigorous analysis of the determinants of migration and the volume of remittances.  It is the largest dataset on migrant households that I am familiar with.  In the workshop the IOM authorities announced that will make the dataset available in the public domain so that researchers can use it to produce richer information on the determinants of migration and remittances.  I would like to congratulate the IOM for their invaluable contribution to this public good.

Comments

Submitted by Paolo on
Thanks for this post. For those interested further, Michael Clemens of CGD does back-of-the-envelope calculations to show what this means for migration as an investment: "Hussain reports that the average Bangladeshi pays about $3,150 to migrate—mostly to the Middle East—covering costs of travel, intermediaries, and so on. A stint abroad earns the average migrant $3,690 per year, or about $11,050 total for a typical three-year spell. Of that, about $6,850 is either remitted home or brought home as savings." "That’s a stunningly profitable investment. The large, up-front cost of emigration is yielding these migrants a 117% annual return... For many of the poor, migration may be the most profitable investment on their menu, by far. Limiting access to such an investment on the grounds of social costs is something that should be pondered only with solid and extensive evidence that those costs are enormous." Congrats to the IOM and looking forward to this large dataset being made public! The link to Michael's post is http://bit.ly/bL3CcD.

Submitted by lemonque on
October 4, 1975, China formally established diplomatic relations with Bangladesh. After the establishment of diplomatic relations, bilateral friendly cooperative relations have been healthy and smooth development. Both sides in the political, economic, military, and cultural fields have carried out fruitful cooperation. Two in a seriesEd Hardy Jeans of major international and regional issues consistent view, close coordination in international affairs. Frequent exchanges of visits between senior leaders, various exchanges increasing cooperation continues to expand.

Submitted by Md. Sohag on
According to Hussain, as migration is a profitable investment for non-poor Bangladeshi households and large portion of investment (60 percent) goes to the hand of intermediary (Dalal), Bangladesh can accrue more benefit from migration of poor households by curving profit of intermediary.

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