Remittance mostly used in consumption: ILO

Use of remittance in Bangladesh is still more in consumption than investment even after receiving billions of dollars from migrant workers for over three decades, according to a latest finding.

The International Labour Organisation (ILO) in its study found out the causes of such unproductive state of the foreign exchanges the country’s overseas workers send home, thr Financial Express reports.

ILOIt points out lack of policy and programmes, including absence of awareness-building campaigns and training for migrating workers and families dependent on remittance.

Remittance use in investment could be linked with income-generating activities to have its greater contribution to the economy, the UN agency observes.

The ILO study, entitled ‘In the Corridor of Remittance: Cost and Use of Remittance’, finds trickledown effect of remittance in investment as the lion’s share of it is still used for poverty alleviation and meeting basic consumption needs like food, health, education and so.

Due to poverty status of many recipients, the marginal propensity to consume remittances is high and expected to remain high in future, the study says.

Over the three decades, remittance from Bangladeshi workers overseas has been pinpointed as an economic variable of increasingly greater priority but a large amount of remittance is not utilised in an efficient manner to produce expected economic returns for overall development of Bangladesh, the UN agency noted.

From the focus-group discussion, the ILO study finds 75 per cent of the families use remittance for food, followed by education, health, payment of loan, purchase of property, marriage-ceremony expenses and repair of house.

Some 21 per cent recipients do saving, 13 per cent did investment in saving schemes and 12 per cent in self-owned enterprise.

Use of remittance in a partnership-based business and stock market are found very ignorable, with a single-digit percentage.

Showing an old study finding, the ILO says two-thirds of remittances received have been used for consumption and, at best, one-third has been invested.

The survey conducted for this study showed investment of remittance made mostly through the purchase of land and other fixed assets, not for entrepreneurial development.

Inflows of remittance into Bangladesh mostly take place in four forms—transfer to family and friends, transfer to save and invest, transfer to charity of community development, and collective transfer to charity and community development.

“Typically, remittances are spent to meet basic survival, consumption, housing, health and education of poorer recipients. Once these needs are met, remittances can be invested to create income-generating activities,” says the study report.

The ILO focus-group discussion arranged by the research team with returning migrants shows remittance, if used for community development, was for infrastructure development of local religious centres.

The ILO study was conducted in aid of the ministry of expatriates’ welfare and overseas employment to research key issues on labour migration under the Asia-Pacific Decent Work Decade 2006-2015.

Presently the government has three investment tools for the expatriates—wage earners’ development bond, the US dollar investment bond and the US dollar premium bond.

But none of these are found attractive to expatriate Bangladeshis.

Bangladesh Bank during 2013 and 2014 organised remittance fairs in both developed and developing countries with the objective to disseminate information about remitting money through proper channel than investment.

A central bank official concerned, however, said during the fairs it was found expatriate Bangladeshis hardly send money home and keep it idle in foreign bank account.

“They are also ignorant about the government investment tools,” he told the FE.

The ILO study also found the wage earners’ development bond has lost momentum in their sales among non-resident Bangladeshis by interviewing the central bank officials.

The disincentives found out include the introduction of 5 per cent source tax on interest, lack of confidence due to fluctuation of interest rates, loss of interest in investment following the stock-market scam and government’s inability to recover the investors’ money.

Over 8.0 million Bangladeshis are now working overseas, representing more than 5.0 per cent of the total population.

Flow of remittance has increased nearly six times in last one decade, being the sixth top recipient country and second receiver in south Asia.

Its contribution to the gross domestic product (GDP) is found very positive—with a 1.0 per cent rise in the remittance inflow reflecting a rise of 0.12 percentage point in the per-capita GDP in the short run (usually 3 years).

In the study report, the ILO has put forward a set of recommendations for productive use of the hard-earned money.

Those include introducing different facilities like developing special schemes to promote small and medium enterprises targeting the households of migrant workers, integrated approach by the wage earners’ welfare fund and the Probashi Kalyan Bank, promoting bonds for non-resident Bangladeshis, road shows in labour-migration-prone districts in a more concerted form and involving all relevant stakeholders and encouraging non-resident Bangladeshis to be a part of the development activities in Bangladesh to change the scenario.

It also recommends introducing facilities for migrant workers at the airports, telegraphic transfer arrangement between public-and private-sector banks, financial education for remitters as well as recipients in Bangladesh, assistance for migrant workers in opening bank accounts, decentralising Bangladesh electronic fund-transfer network, making Bangladesh missions/labour wings accountable and the formation of special cell to improve the process of remittance sending and its utilisation.