When Iqbal Ahmed set out to launch Bangladesh’s first-ever bank with the specific mission of tapping into diaspora funds, his biggest challenge seemed obvious: to convince other non-resident Bangladeshis that their country of origin was an attractive investment destination.
Returning to invest in Bangladesh—a country that Henry Kissinger once called a basket case — seemed unthinkable just a few years ago. But relatively steady economic growth of roughly 6% over the past 20 years, fueled partly by textile exports to the West and remittances sent home by migrants, has raised living standards and created demand for goods and services. Despite chronic political uncertainty, per-capita annual income has nearly tripled to $1,314 from $440 in 2004.
“This is a growing domestic market of 160 million people with an emerging middle class,” says Ahmed, who migrated to the U.K. with his family as a teenager in the 1970s and went on to build a $300 million seafood business. “We could have taken our money elsewhere, but we decided to come to Bangladesh.”
In 2013, Ahmed and a group of other non-resident Bangladeshi businessmen launched NRB Bank Limited, with paid-up capital of $50 million. Two other banks with similar missions—NRB Commercial Bank and NRB Global Bank—received regulatory approval to start operations at roughly the same time, underlining the Bangladeshi government’s determination to attract diaspora money.
The total initial investment in the three banks was $150 million and the banks have collected more than $700 million in deposits so far. All three banks turned a profit after one full year in operation, with most of the operating profits coming from interest and service charges on loans to the private sector.
As well as collecting deposits from non-resident Bangladeshis, the banks help Bangladeshi businesses access international markets.
Non-resident investors like Iqbal Ahmed are a big part of a recent push by the government of Prime Minister Sheikh Hasina to reduce dependence on foreign aid by mobilizing internal resources and tapping diaspora funding.
The roughly 10 million Bangladeshis who are living in other countries are estimated to send about $14 billion in remittances to Bangladesh annually—around 6% of GDP—according to Bangladesh Bank, the country’s central bank.
Although research has shown that much of that money goes to household consumption and the purchase of land, the government is taking steps to channel diaspora investment to more productive areas.
Earlier this month, Bangladesh’s Board of Investment organized roadshows in London to promote Bangladesh as a viable investment destination, showcasing opportunities in infrastructure development and power generation.
Atiur Rahman, the governor of Bangladesh’s central bank, says contributions from non-resident Bangladeshis are at the heart of the government’s plans to reach middle-income status by 2021. “[Non-resident Bangladeshis] have always been very creative entrepreneurs and since they know Bangladesh so well, they are able to locate appropriate channels for investing their money in productive initiatives,” he said.
In order to boost development financing through a much-hyped public-private partnership, the government has issued several U.S. dollar-based bonds aimed at the diaspora. All initial public offerings at the Dhaka Stock Exchange have a 10% quota for Bangladeshis living abroad. Non-resident Bangladeshis can send money to Bangladesh tax-free and in December, the central bank relaxed a ban on outward remittances, allowing diaspora members to take earnings from investments back to their country of residence.
NRB’s Ahmed, who was named Businessperson of the Year at the 2015 Asian Achievers Awards in London, believes the diaspora has a lot to offer besides money. “We want to help NRBs invest in Bangladesh in a focused and sustainable way and also use our networks to help Bangladeshi businesses access international markets,” he says.
Ahmed built business networks in Europe and North America while running his frozen seafood company, Seamark, which has offices in London, New York and Dhaka. One of the wealthiest Asians in the U.K., he features regularly on British rich lists and was honored by the Queen in 2001.
Ahmed thinks diaspora businessmen like him could provide valuable skills as entrepreneurs and leverage trade networks that could counter “brain drain” from Bangladesh. He says Bangladesh lacks top corporate managers in the financial sector and “new generation NRBs can step in to fill the gap.”
Despite Bangladesh’s attractions as an emerging economy, bureaucratic red tape, endemic corruption and political instability remain significant stumbling blocks for non-resident investors.
Ahmed is unfazed: “You have to worry about things like political ups and downs, corruption issues, physical security and exchange rates, but if you can stick it out, there is potential for real growth here.”
-Frontiers, WSJ