Sunday, October 17, 2010

Banks and the foreign remittance business

Published in The Independent, October 16th., 2010
M. Serajul Islam

Foreign remittance is one of the major economic success stories of Bangladesh. Last year, nearly 7 million Bangladeshis have sent almost US$ 11 billion in foreign exchange to the country. Major part of the money remitted has come from the Middle East where the overwhelming majority of our expatriates lives and works in conditions that are sometimes too sad to describe.

There is no dearth of praise for the efforts of the expatriates, particularly from the Government. We even have a Ministry of Expatriate Welfare. Other major manpower exporting countries in South Asia and Philippines have nothing like what we have. Yet, we all know our expatriates suffer in every step of their epic journey to go abroad, serve there in conditions that are often inhuman and then send almost all they earn expect what is required to keep them alive, and then return home to find the same poverty awaiting them as the one from which they wanted to escape by deciding to go overseas. Those who speak of the role of our expatriates in glorious terms in reality offer very little help to them when they grapple with unscrupulous manpower agents, loan sharks and their unfair employers in their work places abroad.

It is true that the expatriates remit a mind boggling amount of foreign exchange to the country. By offering us far less than that amount, our development partners behave as our masters, humiliating us publicly in any manner they like. Yet those who contribute so much to the economy of the country have not even been given a policy transparent enough for them to understand and seek protection within its provisions when they are subjected to fraud and miseries at every step of their effort to go abroad and during their stay abroad.

It has now common knowledge that the average Bangladesh expatriate worker spends 2 to 3 times more money for a job abroad than an expatriate from other countries where the job is the same type and the workers have the same qualification and experience or the lack of it. When they land in their work places, many of our expatriate workers sadly find out that the pay given to them is substantially less than what they had been promised. Given the fact that many of the expatriates borrow money from loan sharks or by selling whatever possession they have, the discrepancy in salary has two serious effects. In quite a few cases, these poor expatriates fall sick both physically and mentally and some even die from heart attacks. In many cases, the workers try to change jobs because they have no other alternative but to seek a job at better pay so that they can repay the loan that they have incurred at home. Such efforts to change jobs are illegal in the Middle East. In Saudi Arabia alone, there are reportedly over 2 hundred thousand Bangladeshis running from Saudi police for seeking a better paying job.

There are just too many things that need to be done to bridge the gap between the lip service that our Government provides and what is actually offered to the expatriates to help them in their efforts. Our expatriates literally take their hearts in their hands to send us those mind boggling sums of foreign exchange. The nation owes them a big debt but doing very little to pay it back.

The private banks are pillars of our economic strength. It is their role that has allowed our RMG exporters turn what was initially a petty business into a multibillion US dollar success story. It is time that the banks should play a similar role with the manpower export industry. The present Governor of Bangladesh Bank has shown us where his priorities are by encouraging the banks to allow poor farmers to open bank accounts by paying a nominal amount of Taka 10. This initiative will allow the farmers to take advantage of the huge loans that have been diverted to the banks for benefit of the farmers. This initiative of the central bank could change dramatically the lives of the farmers and their ability to invest more into the farming sector.

The central bank now needs to look the same way at the Bangladeshis who go abroad to work. It should encourage the private banks to extend the same cooperation that it has asked for the farmers by asking them to extend private loans to them so that they can be saved from the loan sharks. By bringing the banks into the process, the central bank would also bring the banks’ legal expertise with it. This would let a stake holder of tremendous credibility bring transparency to the manpower business by examining the legal documents of the expatriates so that they are not subjected to fraud at the hands of unscrupulous manpower agents.

Southeast Bank, a leading private sector bank is currently taking part in a pilot project financed by the DFID and backed by Bangladesh Bank where it is working with a consulting firm, a manpower agency and a NGO. The objective is to let the manpower agent select and send to the consulting firm expatriates for training before they leave for their jobs. After the training or simultaneous with that process, the consulting firm will send these potential expatriates to SEBL for loan to pay the manpower agent and other related expenses at a rate of interest around 12% where the Bank under a policy will take guarantees for repayment of the loan . The potential expat will also open an account with the Bank and while remitting money home to his beneficiary, will also pay back the Bank’s loan in installments.

The project is being run as an experimental one. Its possibilities are immense. Bangladesh Bank’s initiative for the project renders it instant credibility. It would save the potential expatriates from the money sharks and also give them the opportunity to check their job related documents by the Bank’s legal department. These workers would be going to jobs after initial training. In such a transparent process, the ills that now rule the manpower business would be tackled effectively. There is just a small risk that the Bank would be taking related to the repayment of the loan. But when these poor expatriates are paying back loans at much higher rates of interest to loan sharks, there is no reason to suspect that they would default on loans from Banks at much less interest where the Banks would also have their legal papers examined to guard them against fraud.

The project has great potentials. All it would require is for the Bangladesh Bank to encourage all banks in the remittance business to follow the SEBL’s initiative and build it into a part of a national policy on remittance. For a small risk, the banks could bring dramatic transformation to the current problem ridden; untrustworthy and intransparent remittance business. It would be just s small step for the banks; but a giant step for remittance business.

There are of course a lot more areas in the remittance business that needs to be regulated but that is another story. As a starter, bringing the banks into the remittance loop, the Government could bridge the huge gap between reality and lip service in the hugely important remittance business.

The writer is a former Ambassador to Japan and Egypt may be reached on email

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