In a welcome move, the Foreign Exchange Policy Department of the central bank, the Bangladesh Bank (BB), did reportedly issue a circular on Tuesday (November 29) permitting the local mobile financial service providers (MFSPs) to bring in overseas migrant workers' remittance. This decision by the BB, once implemented, would definitely help the migrant workers to send their earnings directly and faster to their relatives in the country.
However, according to the BB's circular, to make this digital transfer of migrant workers' money possible, the local MFSPs will have to have arrangements with internationally recognised foreign payment (gateway) service providers (PSPs) through whom MFSPs would receive the wage earners' dollars. Then the dollars' equivalent in taka would be credited to the wage earners' MFS account. The wage earners, on their part, would create their MFS account in taka using a proper e-KYC (electronic know your customer), a process of electronically verifying the customer's credentials. For the purpose, the wage earners will have to produce validated proof of their departure from Bangladesh (say, their departure or arrival date stamped on their passports). Under this system the migrant workers will be able to carry out their transactions in taka abroad. However, after returning home, the wage earners' MFS account can be converted into local MFS account, the BB notice further informed. Notably, since the introduction of the mobile financial service more than a decade ago, by now some 13 MFSPs are operating in the country and around 1.8 billion customers are learnt to be receiving their service.
But this is also not for the first time that the local MFSPs have been allowed to bring in foreign currency. It may be recalled at this point that on a similar decision in February last year (2021), the BB allowed MFSPs to repatriate foreign exchange earned especially by the freelancers in the IT sector, who export their services abroad. In that case, too, the MFSPs were required to reach agreement with recognised foreign PSPs and digital wallet providers.
But the similar opportunity as extended by the BB to the MFSP now is far wider on scale as it would involve foreign exchanges worth billions of dollars sent home by wage earners. This measure should help encourage migrant workers to use this new channel for remitting money easily without taking the trouble of going to the foreign exchange dealers abroad or illegal hundi operators. However, for the BB's authorisation of MFSPs to remit remittance to be convincing to the wage earners, the factors that prompt them to go to the illegal hundi mode of money transfer will be required to be duly addressed. For the hundi operators take advantage of the difference in the rates at which USD is sold in the open (kerb) market and that offered by the government. One needs also to keep in mind that the prevailing volatility in the foreign exchange market is largely due to rising value of USD against major currencies of the world. So, for its latest step towards further facilitating repatriation of remittances by wage earners abroad to be more effective, the central bank while fixing the official rate for USD would do well to keep tabs on the trend in the foreign exchange market.