Increased role of mobile financial services
It is good to see policymakers, experts and economists agreeing on the vital role mobile financial services (MFS) can play in increasing the rapidly declining flow of remittances through formal channels. As it stands, it is estimated that around half of all incoming remittances are routed through illicit channels and this is costing the government billions of dollars in lost foreign exchange earnings. Policymakers and pundits were on the same page at a recent roundtable hosted by the Economic Reporters Forum that focused on taking immediate action to encourage our expatriate workers to use the official channel that would see their precious earnings take the legal route to reach the money to their dependents back home.
The country currently has several proven MFSs, but dissemination of this news to our overseas expatriate workers has not been made. Bangladesh has missions in all major foreign labor markets where economic migrants work and there is a need to engage officials from embassies and high commissions to spread the possibility of using MFS to send their earnings safely in the country. Beyond the modalities at stake, the question of the significant gap between what is offered in terms of exchange rates by the government and the hundi operators (unofficial channel) must be addressed. Expatriate workers will not be weaned off Hundi operators if the difference remains Tk5 to Tk6 against 1 US$. One way could be to increase the cash incentive until it makes up the difference and the cash back process is instantaneous, i.e. integrated into the MFS platform.
Most of the Bangladeshi workers who go abroad are blue collar workers who are not sufficiently educated. Yet they understand smart phones and are generally familiar with digital devices. Smartphones are used to keep in touch with family at home via online voice/video services. This makes it easy to transition to digital payment systems like MFS, provided a well-thought-out campaign is designed and executed to make them aware of such a service that only takes a few clicks on their mobile phone devices.
If this can be done, then the country will gain an additional US$10-12 billion in remittances that are currently lost to informal channels. Even if half of illicit transactions can go through formal channels, the remittance basket is expected to earn at least $5 billion a year. This is going to be extremely helpful for the economy. Because as things stand, the war in Europe has undermined the purchasing power of European consumers who have less to spend on our main export products, namely clothing. With a general slowdown in the global economy, there has been a corresponding loss of exports for the country and as a result, the increase in remittances has become all the more significant.
With foreign exchange reserves dwindling at the rate of around $1 billion a month, it is now a national priority to launch a comprehensive campaign to reach out to migrant workers. Without considering their problems and tribulations, it will be difficult to get them to use formal channels to send their hard-earned currencies. Contributions received must go into the design of the digital platform that will potentially be used by MFS to channel remittances to the country.