While manpower export has been rising substantially since the beginning of the year, remittance inflow shows a completely opposite trend, falling drastically in September and putting foreign exchange reserves under more stress.
This paradoxical situation is blamed on two reasons – the remittance rate cap and digital hundi.
Bangladesh sent 7.84 lakh workers in the first eight months of the current year, nearly double the 2.76 lakh sent in the same period last year.
Of these workers, 88% went to the Gulf countries, which are less affected by the global crisis due to the surge in oil price, meaning the workers' earnings were not affected.
The otherwise positive numbers, however, were blighted by dipping remittance inflow, which fell to a seven-month low at $1.5 billion in September after banks fixed the remittance rate at Tk108 per dollar in the second week of that month.
The numbers have raised concern among the authorities amid faster erosion of forex reserves.
The remittance rate cap dragged down the earnings as remitters are getting Tk113 to Tk114 if sent through hundi, said a managing director of a private bank, wishing not to be named.
The banker said they set the remittance rate on 12 September and following that week remittance earnings of the bank dropped by 40%.
Though it seemed that the bankers' association set the remittance rate, in reality it was on the instructions of the Bangladesh Bank, the official added.
When bankers were not getting remittance even at Tk108, the rate was revised down to Tk107.50 per dollar in the last week of September as instructed by the Bangladesh Bank, which spelled another disaster for remittance inflow, he said.
He said the banks will review the rate further after observing the inflow in the first week of this month.
He said the remittance rate cap should be lifted for the sake of the country's reserves, which is more concerning than inflation.
Another banker said digital hundi has emerged as a new worry. Various companies abroad are collecting remittances and sending money in local currency through mobile financial service (MFS) accounts. As a result, the country is being deprived of foreign currency earnings.
The authorities should monitor unusual transaction patterns of money transactions through MFS accounts to safeguard against digital hundi, he added.
The banker highlighted how some transactions are being done at midnight while, in some cases, huge numbers of transactions are being done through just one MFS account.
The MFS operators have monitoring tools through which they can identify unusual transactions and report to the Bangladesh Financial Intelligence Unit (BFIU), he said.
The rise of digital hundi
Monthly cash in transactions in the MFS industry surged by 50% to Tk27,419 crore in June compared to the same month last year. Cash out transactions increased by 69.5% to Tk26,692 crore during the same period, according to Bangladesh Bank data.
Remittance disbursement through MFS channels surged by 73% to Tk300 crore in June from the same month of the last year.
To address digital hundi, the BFIU has set some parameters to identify suspicious transactions through MFS accounts, said a senior executive of the BFIU.
The parameters are – transactions after midnight, accounts that show only cash in or only cash out, highest four transactions in a minute in one account, and agent account with Tk3 crore only cash out or only cash in.
Operators were instructed to filter MFS accounts following the parameters and report to the BFIU.
The BFIU has identified more than 5,000 highly suspicious MFS accounts and sent details of those to law enforcement agencies as they have field level forces to detect people related to the hundi business, said Masud Biswas, head of the BFIU.
A syndicate of hundi traders has laundered around Tk75,000 crore in the past one year through different MFS operators in the country, according to the Criminal Investigation Department (CID).
Around 5,000 MFS agents have laundered some Tk25,000 crore through hundi in the last four months alone, the CID informed following the arrest of 16 members of a gang, including the mastermind, behind the money laundering in the first week of September this year.
The suspects – agents of bKash, Nagad, Upay, and Rocket – used to run a digital hundi racket to bypass the legal banking system, according to CID findings.
Kamal Quadir, founder and CEO of the largest MFS provider bKash, said formal remittance inflow through bKash has been increasing. In the last year, remittances of $280 million were channelled through bKash and this year it may be $400 million, he said.
However, if any transaction is found to be legitimate but has an unusual pattern, it is reported to the BFIU, he said.
Quadir said there are some prescribed parameters under which suspicious accounts are identified and reported to the BFIU.
The Bangladesh Bank has set the daily transaction limit for an MFS account holder at Tk25,000 for cash out and Tk30,000 for cash in.
An individual can retain deposits of up to Tk3 lakh in an MFS account.