Migration: Remitted money hardly used for productive use

Abdul Bayes | Published: May 26, 2018 20:54:01 | Updated: May 27, 2018 20:32:49


Migration as a livelihood strategy has duly drawn the attention of academics and policymakers as it is considered as a linchpin of economic growth. The role of remittance in Bangladesh's growth and development needs no elaboration as two Rs (RMG and Remittance) on the external account keep the country's economic wheel moving. The direct and indirect impact of foreign as well as local remittances on reduction of poverty is amply documented in the available literature. In fact, as researches reveal, had there been no remittances flowing from other countries, the incidence of poverty in Bangladesh would have been higher by few percentage points.

How many households in rural Bangladesh receive remittances from their members working inside or outside the country? A recent dataset reveals that about one-third of sample households had at least one migrant member. This implies that one in every three households appear to receive remittance as opposed to one in four or five back in the year 2000. Arguably then, migration has been on the rise over the time. This is also reflected in various official documents. Of the total migrants, inside or outside, roughly one-third are destined for foreign countries, about half for other districts and one-sixth for districts across the country. In other words, domestic migration accounts for 70 per cent of the total migration taking place.

Who are the migrants? A priori reasoning would suggest that members from relatively richer households migrate outside the country while the poorer ones migrate inside the country. It is interesting to observe that about half of the foreign migrants, as per a survey in 2014, constituted members of poor households owning up to 0.2ha of land (or 50 decimals). They are called functionally landless households. The proportion of this migrant group has doubled as the share was just 25 per cent in 2000. It could further be observed that more than four-fifths of the foreign migrants came from poor and small households, who reported to own up to 1.0ha (about two and a half acre) as against two-thirds in 2000. On the contrary, migrants from relatively solvent groups (1ha +) constituted about one-third of all foreign migrants in 2000; the share dropped to only 14 per cent in 2014. The upshot is that: (a) between 2000 and 2014, most of the migrants to overseas were from relatively poor families, and (b) the share of relatively solvent families declined over time. The scenario is almost same for domestic migrants. Remittance thus is contributing to growing resilience of households in shocks.

Where are they going? About half of the total migrants from Sylhet and Chittagong seem to leave the country. This is in contrast to three-fourths of migrants from Rajshahi, Barishal, Rongpur and Khulna, who are destined for domestic migration; again, 70 per cent of migrants from these districts migrate outside their respective districts. Apparently, higher wage and better amenities of life overseas push the former while pervasive poverty the latter to migration. Among the foreign migrants, about 70 per cent go to the Middle East (ME) countries, 16 per cent to Asia, and 12 per cent to Europe. Those who go to the ME, 70 per cent are reported to be secondary dropouts and 26 per cent to have crossed SSC/HSC. For Asia, the proportion is same. In Europe, only one-third of migrants are reported to be secondary dropouts. Among the foreign migrants, 80 per cent have no training whatsoever and the trend is same across the continents. Among the trained, drivers, electricians, welders and carpenters constitute the majority. It is thus no wonder that Bangladeshi unskilled migrants earn very low wage. The necessity of pre-migration training, if at certain costs, could be welcome.

Migration has costs - both monetary and physical. Since non-monetary costs are very difficult to measure, we shall consider the monetary cost of migration. In 2000, an overseas migrant had to spend on an average $2,406 that rose to $3,805 in 2014. What is to be noted is that the maximum amount of cost in 2000 was $16,000 and it was $23,000 in 2014, which shows the level of desperation for migration. However, against the cost of $3,805 in 2014, foreign migrants sent on an average about $2,413 back home. This possibly means that migration cost could be recouped within two to three years. However, the average remittance from domestic migration was $610. Data collected on the purpose of migration show that two-thirds of foreign migrants in 2014 left the country for services and one-fourth went for wage labour against 52 and 11 per cent respectively in 2000.

How is the remitted money channelled into the country? There was a time when migrant workers would send home money mostly through 'hundi'. The situation has now changed. For example, four-fifths of the cash transfer they made in 2014 from foreign countries was made through banks. This is a remarkable achievement as funds are now mostly flowing through official channels. No less remarkable is the change in the mode of cash transfer on the domestic front. There was a time when post office or by hand mode - taking much longer time - dominated the transaction in domestic migration. But the most recent data show that about 60 per cent of the transactions are being made through mobile phones, followed by roughly 20 per cent delivered through hand or relatives. This 'revolutionary' development helped mostly the poor segment who migrated to cities to eke out a living. Using mobile phones, they can now send money within minutes to their relatives back home.

How the remitted money is being spent? Interesting insights can be found in expenditure pattern. Food expenses account for 43 per cent of total expenditure out of income from domestic remittance compared to 27 per cent overseas and 31 per cent for all. About 12-14 per cent of the expenses (both domestic and foreign migrants) are earmarked for agricultural pursuits such as buying inputs, machines, land leasing and buying. Within agriculture, foreign migrants spend most of it on buying land (90 per cent). Construction/repairing and maintenance of households claim 15 per cent for domestic money and 20 per cent for foreign money, education and medical roughly 10-11 per cent each. Business, investment in government securities and stock market is very negligible. However, foreign migrants have 10 per cent bank savings compared to 3.0 per cent domestic migrants. By and large, remitted money seems to be used very rarely for productive investments.

Abdul Bayes is a former Professor of Economics at Jahangirnagar University. abdul.bayes@brac.net

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