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Probashi Kallyan Bank (PKB), the state-owned financial institution devoted to serving non-resident Bangladeshis, has fallen short of its promise to boost remittances from abroad since its inception over a decade ago.
Despite being established in 2011 with the aim of providing essential resources such as collateral-free loans for migration and rehabilitation after overseas job losses, the bank has made little to no visible efforts in this regard.
According to insiders, top officials at the bank have shown little interest in pursuing initiatives to bring in remittances through PKB, leading to its lacklustre performance in this segment.
For instance, take PKB's urgency for opening a nostro account - an account that a bank holds in a foreign currency in another bank. If a bank desires permission to bring in remittances from abroad, it must first open a nostro account.
As of yet, PKB has not taken all of the necessary preparations required for the process, which includes the implementation of the Core Banking Solution (CBS) and initiation of foreign trade.
Remittances are the second largest source of forex earnings in Bangladesh, accounting for approximately 12 per cent of the country's gross domestic product (GDP) after readymade garment exports.
However, the country has recently experienced a downward trend in remittance inflow, which has impacted its foreign exchange reserve. According to Bangladesh Bank data, Bangladeshis transacted home US$ 21 billion in 2022 and US$ 24 billion in 2021.
To increase remittance income through official channels, the government has implemented various initiatives. To encourage remitters to use the formal banking channel instead of the informal but widely used 'Hundi', the government is offering a 2.50 per cent cash incentive for remittances.
Currently, there are 59 banks enlisted for bringing in remittances from abroad. To help boost the country's remittance outlook, insiders are urging PKB to make arrangements as soon as possible.
Md Mazibur Rahman, managing director (MD) of PKB, said that they are still unable to bring in remittances on their own. However, they have agreements with other banks to bring in foreign currencies for PKB.
Those banks are National Credit and Commerce Bank Ltd, Agrani Bank Ltd and Bangladesh Krishi Bank.
The PKB MD, however, acknowledged that the outsourcing method is not "viable" as they are not yielding "desired benefits".
The MD said that they have begun the process of bringing remittances through PKB, but it requires a "significant purchase". Full implementation of CBS is necessary to apply for a Nostro account.
He claimed that they have initiated this process, and anticipated significant progress within the year. Additionally, new officers with experience have been appointed to various branches to aid in foreign trade.
In reply to another query, the managing director admitted that if they had gradually worked on bringing in remittances over the past 11 years, significant development would have been achieved by now. Unfortunately, this was not the case.
According to Dr Khondaker Golam Moazzem, the research director of the Centre for Policy Dialogue (CPD), PKB was established to provide necessary resources to expatriates. However, the structural weaknesses of the bank make it difficult to offer these services efficiently, particularly in a competitive market like remittance.
"Disbursing loans and bringing in remittances is a highly competitive task. Thus, it is impossible to accomplish without developing a competitive structure," he added.
Private banks have already started agent banking to reach villages and advanced technological activities such as mobile financial services are now being implemented. But PKB is still a long way from attaining this level of integration.
"Now the government has to think how it wants to see this bank," said Khondaker Golam Moazzem.
Around 700,000 Bangladeshis go abroad each year. The surging outbound manpower flow has spurred the demand and disbursement of PKB's migration loans in recent years.
The bank provided loans worth Tk 9.0 billion in FY22, while the target for FY23 stands at Tk 10 billion.
A total of 107,529 migrant workers received loans from PKB since its inception, of whom the majority are migration loan receivers.
It now runs more than 100 branches across the country and has a plan to set up branches in every upazila.