Money transferred by Bangladeshi expats from the United States to their country was the highest at $1 billion in the first quarter of the current financial year, according to Bangladesh Bank data.
For the past two years, the United States ranked second in the prospects of remittances to Bangladesh.
People in the industry said that investment opportunities in the United States before permanent residency have diminished, which has boosted remittances to the country of origin. Additionally, many Bangladeshi students who have migrated to the country to study also send dollars home, possibly contributing to remittance earnings.
According to central bank data, remittances from the United States fell 23% in September compared to August.
Still, U.S. remittance performance helped drag Saudi Arabia from the top spot for years to second in FY23. Bangladeshi workers, mostly unskilled, are the main source of income from remittances of the country located on the Arabian Peninsula.
Remittances from Saudi Arabia also fell in September compared to August. But the drop is less than the 10% mark, as the overall drop in remittances in September is more than 24% compared to August.
But September’s drop in remittances from the UAE shows a drastic drop of 41% – more than the overall tally.
Towfiqul Islam Khan, a senior fellow at the Center for Policy Dialogue (CPD), points to Hundi – an informal monetary transaction channel for expats.
“The UAE acts as a Hundi hub,” Towfiqul told The Business Standard.
He said Bangladeshi businessmen are now investing in various sectors including real estate in the Gulf countries which is driving up the demand for foreign currency. Hundi rises naturally to meet demand for currencies.
However, bankers attribute the drop in remittances to setting a uniform remittance rate for banks at Tk 108. The rate fell further to 107.50 Tk. Prior to the uniform rate setting by the central bank, banks collected remittances at Tk111-Tk112 amid global volatility in the greenback.
Banking data from Bangladesh corroborates the bankers’ account. Bangladesh received $1.12 billion in the last 13 working days of August, or $86 million a day on average. In the 15 days of September after the rate setting, remittances registered a total of $944 million, or just $63 million a day.
Bankers already feared that remittances would decline if a uniform rate was set. Money changers also echoed the same as they said the fixed rate would deter them from offering senders more. Currency changers said the move could further revitalize the Hundi.
On the United States coming in first place, Towfiqul Islam Khan said Bangladesh’s remittances from the Middle East have decreased compared to before. This led to the United States grabbing the top spot although the influx did not increase significantly.
Remittances from Japan – which ranks 18th in the remittances rankings – fell by almost two-thirds in September compared to August. In August, more than $13 million came in from the country in the form of remittances which dropped to $5 million in September.
Kazi Sarwar Habib, a Bangladeshi who has been in Japan and also a Commercially Important Person (CIP), told The Business Standard that the number of Bangladeshi nationals coming to Japan is low compared to other countries.
He said fixing the dollar rate could have hurt remittances from Japan. Apart from this, Bangladeshi expatriates in the island nation are also reducing their investments as there are too many conditions for investing in employee bonds.