Changing the face of towns and villages

Over the last few decades the face of rural Bangladesh has been changing through the money remitted regularly by the rural people's sons and daughters working abroad around the world-especially in the Middle Eastern and South East Asian countries. In 2017, Bangladesh earned remittance worth US $13.5 billion, equivalent to 6.1 per cent of the country's gross domestic product (GDP). The maximum portion of this went to families living in rural and semi-rural areas of the country. As per the statistics released by the International Fund for Agricultural Development (IFAD), the country posted a steady remittance growth rate of 4.2 per cent over the past one decade.

However, this growth rate is still lower than some of Bangladesh's South Asian neighbours like Pakistan (10.8 per cent), Nepal (9.8 per cent) and Sri Lanka (9.4 per cent) but higher than India (3.3 percent). In 2017, migrant workers sent US$ 256 billion to their families in the Asia-Pacific region. The IFAD report stated that while remittances benefit about 320 million family members in this region, most of them in rural areas, remittance markets still need to transform to ensure that families can benefit fully from the flows. The three largest remittance-receiving countries in the world are India (US $69 billion), China (US $64 billion) and the Philippines (US $33 billion). Pakistan (US $20 billion) and Vietnam (US $14 billion) are also in the list of top 10 remittance recipient countries.

Rural remittances are particularly important in Asia and the Pacific because remittances "count" more in small towns and villages. The living expenses in such areas are lower, and typically the cost of sending remittances to rural areas is higher than to corridors linking high-volume urban markets. In Bangladesh, 65 per cent of the total value of remittances goes to rural areas when worldwide, an estimated 40 per cent of the total value of remittances goes to rural areas. In Sri Lanka, this percentage is as high as 82, in Nepal 81 per cent, India 67 per cent, Vietnam 66 per cent, Pakistan 61 per cent and in the Philippines 56 per cent. In Nepal, remittance accounts for 31.3 per cent of the country's GDP, in Sri Lanka it's 8.9 per cent of GDP, in Pakistan 7.1 per cent, Bangladesh 6.1 per cent and in India 2.8 percent of GDP.

IFAD senior remittance expert Pedro De Vasconcelos said, "The promise of technological innovation in the remittance marketplace could bring about a fundamental transformation for hundreds of millions benefiting from these flows. But this transformative change has not yet happened". The outdated regulatory barriers on both sending and receiving ends result in higher and less transparent costs for the 2 billion transactions a year - most amounting to just US $200 to US $300 each. They also make it less likely and more difficult to convert remittances into savings and investments. The cost of sending money to the region has decreased by only 0.67 per cent since 2015, reaching 6.86 per cent in 2017. This is still more than twice the 3 per cent set for high volume corridors by the international community in its Sustainable Development Goals (SDGs). Obviously lower transfer costs mean more money available to families.

As per the IFAD report, cash-to-cash transactions remain by far the most common form of transfer. It is only recently that, through digital operations, technology is beginning to move markets towards account-to-account transfers. Reflecting a greater digitalisation of transactions, there are now more than one million payment locations through the region. But further efforts are needed. For digitalisation of transfers to happen, regulators and private sector companies need to work together to harmonise legal and regulatory frameworks between countries and support the design of products driven by customer needs. The families in the region generally spent about 70 per cent of remittances to meet basic needs, such as food, clothing, healthcare and education. The remaining 30 per cent, amounting to US $77 billion, can be saved and invested in asset-building or income-generating activities, helping families to build livelihoods and their future.

If you give people the opportunity to invest, they will invest. But for that, access to financial services is a key element. And still too many families, particularly in rural areas, cannot save, borrow and invest money through proper financial services. Although financial inclusion has increased since 2011 with half of adults in the region having a bank account- excluding high-income economies-this does not represent the reality of the substantial majority of remittance receiving families where financial exclusion remains predominant. With one out of every 10 people in the region, there are 400 million people, who are directly affected by remittances either as a sender or as a receiver. By 2030, around US $6 trillion in remittances are expected to be sent to developing countries. And over 50 per cent of these flows will arrive in the Asia Pacific regions - very often in small towns and villages.

It has been observed that in Bangladesh, most rural people spend the remittance money that they receive, from loved ones working abroad, for consumption purposes and constructing dwelling houses in the absence of sufficient institutional facilities to invest the money towards productive activities.

Under the circumstances, the government should make sufficient and appropriate arrangements for the rural remittance receivers to invest the surplus money they retain after consumption spending, towards productive purposes. Such arrangements will benefit rural people by allowing them to participate in the country's development process and the country as a whole through further economic advancement.        

Prof. Sarwar Md. Saifullah Khaled is a retired Professor of Economics, BCS General Education Cadre.

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