Stagnation of hundi, an illegal cross border financial transaction, during Covid lockdown periods, pushed the country's remittance up, according to a new study unveiled on Wednesday.
There are some other factors that also helped raise the inflow. They are: 2.0 per cent cash incentives by the government, additional 1.0 per cent incentive by some banks, digitalisation of banks in remittance functions, linkage between banks and bKash, and relaxation of criteria by the central bank.
As per the study, hundi activities were almost halted due to the restrictions on the physical movement of people and also cross border movement through air or land routes.
The findings were revealed at a half-day-long online research workshop.
Mr Ahmed Jamal, chairman of the executive committee of the Bangladesh Institute of Bank Management (BIBM) and also deputy governor of the Bangladesh Bank (BB), was present in the workshop as the chief guest, with BIBM Director General Dr Md Akhtaruzzaman in the chair.
Mohammed Sohail Mustafa CFA, associate professor and director (training and certification programme) of the BIBM, presented the research paper, styled 'The role of banks in managing the Covid-19 effects on inward remittance in Bangladesh'.
According to the research findings, 2.0 per cent cash incentive offered by the Bangladesh government on inward remittance along with the central bank's initiatives to ensure a time and cost-effective money transfer process encouraged Bangladeshi migrant workers to send more money in their country of residence.
The Bangladeshi migrant workers can avail 2.0 per cent cash incentives without showing any documents for incentives for the remittance amount up to US$5,000 or TK 500,000, said the study.
The central bank also increased the monthly limit for money transfers through mobile financial service providers from Tk 75,000 to TK 200,000.
BB further instructed mobile financial service providers to offer free cash-out up to a maximum of Tk 1,000.
"To attract more Bangladeshi migrant workers to remit their fund using a specific bank, some of the banks offered extra 1.0 per cent cash incentive in addition to the Government declared 2.0 per cent incentive which also made a positive impact on inward remittance," read the research paper.
It, however, said few banks in the Middle-East had a non-automated system, leading to a fall or delay in sending the remittance.
"In this 21st century, these banks failed to implement automation in the payment system, like the electronic fund transfers," the study pointed out.
These banks have limited exchange tie up, causing problems in bringing remittance, as per the research findings.
"The manual practice of these banks discouraged the Bangladeshi migrant workers to remit their fund during Covid pandemic which could be another reason behind the fall of inward remittance as compared to expectation," the study read.
It said agent banking could be widely used for remittance collection; but the marginal people in Bangladesh were not familiar with the agent-banking concept and its benefits, making them hesitant for remittance collection through this system.
The worker's remittances to Bangladesh reached $24,777.71 million for FY21, up by 36.10 per cent than in FY20.
Other members of the research team included: BIBM's Associate Professor Md Alamgir, Assistant Professor Ms Antara Zareen and Assistant Professor Ms Rahat Banu, BB Joint Director Tanveer Huda, and Senior Executive Vice President of Islami Bank Bangladesh Ltd Md Mahmudur Rahman CDCS.
A good number of participants including senior bank executives, academicians, media representatives and BIBM faculty members took part in the online research workshop.