Thriving ‘hundi’ business puts further stress on forex reserves
Muhid Hasan :
The country’s inward remittance flow is showing a downward trend in recent times despite increased manpower export.
Bangladesh has achieved a remarkable milestone in its manpower export during the immediate past fiscal 2022-23, sending a record 11.37 lakh workers abroad.
By contrast, remittances only grew by a modest 2.75 per cent, reaching a total of $21.61 billion in FY23.
The amount is nearly 13 per cent lower than remittances received two years ago despite the government’s incentive of 2.5 per cent.
Migration experts and bankers have identified ‘hundi’ as one of the major reasons for the fall in remittances.
Hundi operators, who offer higher exchange rates, are luring remitters into sending their money home through informal channel instead of formal channels.
Only 51 per cent of the remittances are coming to Bangladesh through formal and legal ways.
The rest, 49 per cent are coming through hundi, they said.
“As a result, the forex reserve held by the central bank is facing further stress,” they opined.
In September 20, the total foreign exchange reserve stood at $21.45 billion, which was amounted to $23.06 billion on 31 August, this year, according to the central bank.
The central bank data showed the inward remittance has dropped by a substantial 13.5 per cent over the past two months until August of the current fiscal year of FY24.
Migration experts also said that the contribution of informal networks like ‘hundi’ and ‘howla’ is increasing day by day as local banks are yet to make the remittance sending process easy and hassle free for the migrant workers.
Besides, the current exchange rate gap between the formal channel and ‘kerb’ market is encouraging migrant workers to send their remittances home through hundi.
According to the CEO of a prominent private commercial bank wishing not to be named that, they are currently offering Tk109.50 for a dollar along with 2.5 per cent of incentive, while hundi operators are providing Tk117-119 to remitters, which could be a contributing factor to the preference for informal channels.
Dr. Salehuddin former Governor of the Bangladesh Bank said over last ten years the central kept the Taka artificially stronger than the USD.
Due to this, the remitters lost its actual exchange value that creates a friendly environment for hundi business.
Dr. Zahid Hussain, former Lead Economist, the World Bank said several government initiatives forced people to use informal channels for sending money.
The fastest way to stop hundi is to close the gap between bank and open market exchange rates.
When there is no gap, fewer people would go to the hundi traders.
Bangladesh Bank can increase its incentive to reduce the formal procedures to collect more remittances.
