12/08/2024
Over the past decade, Bangladesh has seen a significant rise in the outflow of its citizens abroad, yet remittance growth has lagged, increasing from $15 billion to only $24 billion. A recent World Bank study highlights that a mere 1% difference between formal and informal exchange rates can divert 3.6% of remittances to informal channels. In 2023 alone, such a deviation could shift nearly $792 million outside formal channels, with larger gaps potentially moving billions.
Despite incentives, many Bangladeshi expatriates prefer informal methods like *hundi* due to higher exchange rates and convenience. The government's efforts to curb these unofficial channels, such as cash incentives and enhanced banking policies, have had limited success. Challenges include the complexity of banking services, the unattractiveness of pension schemes, and the persistence of the *hundi* system.
To address this, the government must close the exchange rate gap between formal and informal markets, simplify banking processes, and create a strict monitoring mechanism for money transfers. Without these measures, efforts to increase formal remittances and stabilize the economy may fall short.
