Since corona hit the world, the Government has been expressing concern about a drop in remittances from some Middle East countries. This of course includes Saudi Arabia, the principal employer of Bangladeshis in the outside world. Many government officials, politicians and media persons have been saying this loudly over the last few years and insisting people should send money back home through the banks. This call of course coincides with the dollar reserve crisis.

Why the drop in remittance?

However, there is some confusion on the issue. Migration dipped in the peak corona season but recovery was relatively quick. Government data shows that after the worst phase of corona was over, a comeback was in order. External employment and sending money home was significantly restored.

But this is happening much less through the formal channels that are the banks but more through hundi or the so-called non-legit financial transaction paths. But since we don't know how big that is, we can't accurately estimate the overall remittance status inclusive of both formal and informal channels. However, the general estimation is that about 50% of the total remittance comes through the informal channels.

Hundi has always been popular but is now more so. Bangladesh Bank data on remittances indicates the trend also. Remittance from Saudi Arabia was $5.7 billion in 2020-21, $4.5 billion in 2021-22, and $3.7 billion in 2022-23. This does indicate that the remittance flow is dropping. However, other data indicates a more complex picture than the official world presents.

The plain fact is that the number of migrant workers from Bangladesh to the Gulf state has gone up four times around this period. According to the Bureau of Manpower, Employment and Training (BMET) which is the keeper of data on the topic, 161,726 Bangladeshis reached there in 2020 to 612,418 in 2022. So the crisis is not about migration but transferring money home, a financial crisis.

The ability to inspire confidence in the official channels and banks is limited it seems. Informality reigns and despite so many attempts to rein in the hundi system, it continues to hold its own.

The official position explaining why the remittance has dropped is several but it doesn't always reflect ground reality. Some argue that many of the new migrants have poor paying jobs hence the returns are low. If that is so, why they use more hundi is not explained.

Its true more non-skilled are going abroad but more means more remittance but that hasn't happened. The total number has gone up so the chances of an overall dip are cancelled by that. Being jobless, being cheated upon etc have been part of life in migration since migration began so it's not a new element in the equation. Some BB officials have also cited that "global economic uncertainty and high inflation have adversely affected migrants' real incomes and consequently remittance inflow."

Fighting hundi: a losing battle?

The Government's struggle against Hundi has been long but a rather unsuccessful one. Although, migrants get a 2.5 percent cash incentive when they send money through the banking channel, many prefer hundi and for reasons of convenience, safety and higher margins. It's difficult for the GOB to admit that the Hundi regime has in fact been gaining steady traction over the last few years and incentives have failed to deter them.

The obvious reasons can't be ignored and the hundi network is a bigger one than the banking channels in Bangladesh. On top of that, many hundi networks are used by the large scale drug dealers and betting rings which are very powerful and used by many members of the formal sector involved in such rackets.

Given the size of the drug and gaming economy such as the internet based gaming and the location based gambling is concerned, it needs the hundi system. Thus it's not just remittance sending that hundi serves but several other sectors which are also flourishing Bangladesh as well. If such "criminal" rackets can't be ended by the authorities, how can the much wider and relatively innocent act of sending money home by transferring through a long term reliable system be ended?

Basically, the migration sector is informal in nature which means that the issue is that of systems rather than individuals. The formal sector has not been effective and which has led to migration costs in Bangladesh to be one of the highest in the world. Why the GOB can't do anything that can rationalize the costs, it's not much use asking one to use official channels.

What the migrants are likely to be asking is: what has the GOB done for the migrants that it wants them to use its money home through the GOB's official banks in return? That is where the problem lies.

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