27 Sep 2023
Many developing nations, including Bangladesh, rely heavily on remittances to support their economies. The country has a massive diaspora population of 13 million, with over 145,707 alone living in Italy. These expatriates send money to Bangladesh from Italy to their loved ones and for some investments in the home country. In addition to lowering poverty and improving household welfare, they are a significant source of foreign exchange earnings. A number of financial sector reform initiatives have been put into place by the Bangladeshi government in recent years with the goal of increasing the effectiveness and efficiency of remittance inflows.
Bangladesh's financial sector includes commercial banks, non-bank financial institutions, insurance companies, etc. In Bangladesh's financial system, banks, however, are crucial. In Bangladesh, the banking industry has prospered over the past thirty years or so due to rising demand brought on by the expanding national economy.
Resolving two major challenges— increasing the number of remitters, particularly skilled and professional ones, and ensuring the sustainability of remittance inflow—is essential to reaping ongoing benefits from remittances.
With $21.61 billion in FY23, $21.03 billion in FY22, and $22.1 billion in remittances received in FY21, Bangladesh ranks seventh remittance recipient in the world and third in South Asia, according to the World Bank. Almost 17.39% of the remittances go toward the purchase of land, making up 18.84% of the total spent on durable and other expenses. According to the Bangladesh Bureau of Statistics, 13.74% of remittances are allocated to savings, and 33.45% are allocated to investments.
Remittances are a vital part of Bangladesh's economy, contributing significantly to its GDP and foreign exchange reserves. There are a lot of migrant workers from Bangladesh living abroad, mostly in the Middle East, North America, and Europe. These migrant workers send money home to their families, which boosts consumption, raises living standards, and promotes economic growth.
Financial reform measures have been implemented repeatedly by many nations. Others have pursued them sporadically, frequently in haste, over a relatively short time. Some have done so consistently over a long time. All of these reform initiatives share the same goal: boosting the financial system's effectiveness and stability.
Harnessing the potential of remittance inflows and ensuring their optimal utilisation has been largely made possible by financial sector reform policies. By promoting formal channels, increasing transparency, and lowering transaction costs, these policies hope to foster an environment that is supportive of remittance transfers.
Another crucial trait of a reform activity is that its costs tend to be incurred primarily in the short term, while its benefits tend to be largely long-term in nature. Another crucial trait of a reform activity is that it is invariably fraught with significant risk and uncertainty. Therefore, when weighing your options, you should consider the expected discounted present value of benefits and costs. Also, consider a secure financial institute to send money to Bangladesh online from Italy or other countries.
The following are some of the primary objectives of financial sector reforms that can help boost remittance inflows to Bangladesh.
Encouraging remittances to flow through official channels is one of the main goals of financial sector reform policies. Higher transaction costs, less transparency, and a greater risk of money laundering and terrorism financing are all factors that are connected to informal remittance channels.
The Bangladeshi government has taken steps to make licensed remittance service providers and banks more reliable, efficient, and secure by strengthening formal channels through them.
Remittance transfers have been made easier thanks in large part to financial technology (fintech). Remittance transactions are now quicker, more convenient, and less expensive, thanks to the use of digital platforms and mobile banking. To enable recipients to receive remittances directly into their accounts and access funds easily, the government has encouraged the use of mobile banking and other digital financial services.
The majority of remittance recipients live in rural areas, so financial sector reforms have prioritised promoting financial inclusion and increasing access to banking services in these areas. Access to financial services has become simpler and more affordable thanks to the establishment of agent banking, mobile banking, and banking booths in outlying areas. Additionally to increasing remittances, this has increased financial inclusion overall and aided in economic growth.
In response to the unique requirements of remittance recipients, financial sector reforms have sparked the creation of products and services linked to remittances. Savings accounts, insurance plans, investment opportunities, and microfinance services are all provided by banks and other financial institutions specifically for recipients of remittances.
These programs help remittance-receiving households become more financially independent, build wealth, and promote entrepreneurship. And online money transfers from Italy to Bangladesh have become easier because of it.
Consumer protection and financial literacy have received a lot of attention in financial sector reforms. Remittance recipients have been given instructions on how to handle their finances, make wise choices, and guard against fraud. People can now make the most of their remittance income and steer clear of potential pitfalls thanks to financial literacy programs and awareness campaigns.
Government organisations, central banks, financial institutions, and companies that offer remittance services must work closely together and coordinate financial sector reform policies. To guarantee that these policies are implemented effectively, the Bangladeshi government has put in place regulatory frameworks, oversight procedures, and interagency coordination. It is possible to spot problems and opportunities with regular monitoring and evaluation, which results in timely policy changes.
Remittance inflows to Bangladesh have increased significantly as a result of financial sector reform policies. These policies have facilitated effective and secure remittance transfers by enhancing formal channels, fostering technological advancements, increasing financial inclusion, and offering remittance-related products and services. Learn how ACE Money Transfer supports Bangladeshi diasporas to uplift remittance inflows to Bangladesh.
Remittances have a positive effect on household welfare and economic development, which has been further enhanced by government initiatives to increase financial literacy and consumer protection. For remittance inflows to Bangladesh to remain stable and grow in the future, continued attention must be paid to financial sector reforms. People who are living in any corner of the world can take benefit of ACE Money Transfer's offers while making a money transfer from Italy to Bangladesh or from other developing countries.
Why are remittance inflows significant to Bangladesh's economy? what are they?
Remittance inflows, in this case to Bangladesh, refer to the funds that migrant workers send home. These influxes are essential to Bangladesh's economy because they significantly increase the country's GDP and foreign exchange reserves. Remittances support increased spending, higher standards of living, and economic expansion.
What steps have been taken to improve authorised remittance channels?
Bangladesh's government has taken several steps to strengthen official remittance channels like banks and authorised remittance service providers. Among these steps are ones that increase efficiency, accessibility, and remittance transfer security. Remittances are meant to be sent through official channels because they are more open and less likely to be used for illegal purposes.
How does technology help to increase remittance inflows?
Technology has transformed remittance transfers, especially financial technology (fintech). Thanks to the adoption of digital platforms, mobile banking, and other fintech solutions, remittance transactions are faster, more practical, and less expensive. These technological advancements have made sending money directly to recipients' bank accounts easier, reducing the need for cash-based remittances and increasing financial inclusion.
Is it secure to send money to Bangladesh through digital providers?
Yes, it is secure to send money to Bangladesh through digital providers as long as you choose a trusted service, like ACE Money Transfer. When sending money home online, ensure that the platform you use is completely secure and free of any threats or scams.
Does ACE Money Transfer charge high fees for remittances to Bangladesh?
No, ACE Money Transfer is known for the lowest transfer cost and better exchange rates than other providers in the market. The company also brings several promotional campaigns for customers that further cut down your expenses on global money transfers.