implication of the use of information and

RESEARCH MONOGRAPH 001

IMPLICATION OF THE USE OF INFORMATION AND COMMUNICATION TECHNOLOGY IN CHANNELING WORKERS' REMITTANCES TO BANGLADESH

Dr. Shah Md. Ahsan Habib Md. Shihab Uddin Khan Md. Mahbubur Rahman Alam Kaniz Rabbi Kazi Baha Uddin

BANGLADESH INSTITUTE OF BANK MANAGEMENT Mirpur, Dhaka

Implication of the Use of Information and Communication Technology in Channeling Workers' Remittances to Bangladesh Shah Md. Ahsan Habib Md. Shihab Uddin Khan Md. Mahbubur Rahman Alam Kaniz Rabbi Kazi Baha Uddin

Published: February 2011 Coordinators

: Dr. Shah Md. Ahsan Habib : Abed Ali

Support Team

: Sharmina Nargish : Papon Tabassum : A.K.M. Shahinuzzaman : Sarder Aktaruzzaman : Md. Awalad Hossain

Published by Bangladesh Institute of Bank Management (BIBM) Plot No. 4, Main Road No. 1 (South), Section No. 2 Mirpur, Dhaka-1216, Bangladesh PABX : 9003031-5, 9003051-2 Fax : 88-02-9006756 E-mail : [email protected] [email protected] Web : www.bibm.org.bd

Printed by Olympic Products Printing & Packaging, Dhaka, Bangladesh

The views in this publication are those of authors only and do not necessarily reflect the views of the institution involved in this publication.

ii

Forewords

B

eing inspired and directed by our Governing Board, specially its Chairman, Dr. Atiur Rahman, Governor, Bangladesh Bank, BIBM faculties have started to

diversify their activities in a visible way by incorporating ‘Research’ in the mainstream activities, besides ‘Training’ and ‘Education’ (MBM) programmes. BIBM conducted a number of projects, some of which are still going on. As a part of that endeavor, BIBM is now issuing a series of Research Monographs. The present volume contains the output of one such research project: “Implication of the Use of Information and Communication Technology in Channeling Workers' Remittances to Bangladesh.” We welcome feedback from our esteemed readers in various professions regarding the relevance, analytical rigor and practical usefulness of this endeavor as well as suggestions and comments to improve upon our research activities in the years to come.

Dr. Toufic Ahmad Choudhury Director General

iii

Acknowledgments

P

reparation and publication of the project report has been a collective endeavour of our team that draws on the support of our faculty colleagues and

a large number of people working in different member banks of BIBM. In preparing the report the authors received latest available information and data from all scheduled banks of the country. In this context we would like to register our deep appreciation of the support received from relevant officials of IT and Remittance Departments of banks. We are grateful to the faculty members of BIBM for their valuable inputs and suggestions which contributed to the improvement of the final output. Finally, we are thankful to research coordinators for their meticulous editing of the manuscript.

Dr. Shah Md. Ahsan Habib Md. Shihab Uddin Khan Md. Mahbubur Rahman Alam Kaniz Rabbi Kazi Baha Uddin

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RESEARCH MONOGRAPH 001


Contents Sl. No. List of Abbreviations

Title

Executive Summery 1

2

Page No. xii xiv

Introduction

1

Objectives of the Study

3

Methodology and Data

3

Limitations

5

Organization of the Report

5

Channeling Workers’ Remittances in Developing Economies and Use of Information Technology -Literature Review

5

Remittance Service Providers and Instruments

5

Informal Remittance Systems

8

Technology Penetrations and Use of ICT Based Tools in Remittance Transfer

9

Costs and Time Factor- Important Determinants of Remittance Transfer Trend and Magnitudes of Remittance Flows- Bangladesh Perspective

24 31

Sources of Remittances

33

Channels of Remittance Flows

34

5

Banks in Channeling Remittances in Bangladesh: Changing Scenario

35

6

Do the Uses of ICT Made any Differences to Banks and

3 4

Clients? -Survey Observations 7

Summary Observations and Conclusion

48 57

References

66

Appendix Table

73

Appendix Questionnaire

85

vii

List of Tables Table No.

Title

Page No.

Table-1

RSPs Regarded as the Most Relevant for International Remittances

6

Table-2

Relevance of the Various Payment Instruments in Use for International Remittance Services

7

Table-3

Interoperability of ATMs and POS (Central Banks’ Opinion)

10

Table-4

Functionality of Technology in Remittance Transfer

11

Table-5

Use of International SWIFT Networks

12

Table-6

Top 5 Least Costly and Most Costly Remittance Corridors

27

Table 7

Time Requirements in Sending Remittances

29

Table-8

Speed of Remittances in Different Transactions

30

Table-9

Changing Market Share of Remittance Transfers among Different Survey Bank Groups (excluding FCBs)

51

Table-10

Average Cost (Direct) for the First Quarter 2010

54

Table-11

Comparing Costs (Direct) through Different Channels in Different Corridors (First Quarter 2010)

54

Table-12

Change in the Direct Cost of Transferring Remittances to Bangladesh over 20082010 (from Saudi Arabia, Singapore and UK)

55

Table-13

Time Requirement by Different Sampled Banks

56

Table-14

Change in the Time Requirement in Sending Remittances to Bangladesh over 2008-2010 (% of cases from Saudi Arabia, Singapore and UK)

56

Table-15

Time Requirement in Different Corridors by Banks and MTOs [February, 2010]

57

viii

List of Figures Figure No.

Title

Page No.

Figure-1

Remittance costs Decline as Transaction Size Increases

25

Figure-2

Remittance Flows and Growth of Remittance in Bangladesh over 1976-2008

31

Figure-3

Sources of Remittance Flows to Bangladesh from Major Countries during 1990-2008

33

Figure-4

Growth Rate of Remittance Transfers by All Banks

35

Figure-5

Growth Rate of Remittance Transfers by Government Controlled Banks

36

Figure-6

Growth Rates of Remittance Transfers by Local Private Commercial Banks

36

Figure-7

Growth Rates of Remittance Transfer by Foreign Banks

37

Figure-8

Growth Rates of Remittance Transfer by Specialized Banks

37

Figure-9

Changing Market Share of Remittance Transfers among Different Bank Groups

38

Figure-10

Remittance Business Performance of Tier-1 Banks

48

Figure-11


49

Figure-12


49

Figure-13

Changing Market Share of Remittance Businesses among Different Survey Bank Groups (Tier-1, Tier-2, and Tier-3)

51

Figure-14

Changing Market Share of Remittance Transfers among Different Survey Bank Groups (Excluding FCBs)

52

Figure-15

Use of Different channels by Banks in Channeling Remittances (cases of transactions in Per cent)

52

Figure-16

Use of Channels during 2005-2007 (Tier wise)

53

ix

List of Boxes Box No.

Title

Page No.

Box-1

Informal Remittance Transactions [Fei Chien (China), Hundi (Bangladesh, Pakistan),Hawala (India, Middle East), Padala (Phillipines), Hui Kuan (Hong Kong), Phei Kwan (Thailand), Kyeyo Money (Uganda), Mali a Mbeleko (Zambia)]

8

Box-2

Connecting Domestic ACHs Across Borders

11

Box-3

Increasing Revenue and Profitability of MTOs in Developing Countries

13

Box-4

Extensive Branch Network offers Advantage to the China Post

15

Box-5

Mobile Phone based Remittance Transfer in Philippines

16

Box-6

Remittance services through Smart Card in India

18

Box-7

E- Remittance Product by HNB, Sri Lanka

19

Box-8

A Few Instances of Adoption of Technology Based Solutions in Different Countries for Remittance Transfer

19

Box-9

Linking Customers to Financial Services through Mobile Phones and Other Options

23

Box-10

DiGiREMIT – Money Transfer by Mobile Phone

40

Box-11

Mobile-based Remittance Services Launched in Bangladesh

41

Box-12

Project to Increase Efficiency of Remittance Payment in Bangladesh The Remittance & Payments Partnership

42

Box-13

Foreign Remittance Payment Project (FRPP) of National Credit and Commerce Bank Limited

43

Box-14

Foreign Remittance Payment Project (FRPP) of BRAC Bank Ltd.

45

x

List of Appendix Tables Sl. No.

Title

Page No.

Appendix Table 1

Tier-1 Banks

73

Appendix Table-2

Tier-2 Banks

74

Appendix Table-3

Tier-3 Banks

74

Appendix Table 4

Remittance Transfers by Banks of Tier-1 [in million Taka]

75

Appendix Table 5


76

Appendix Table 6


76

Appendix Table-7

Cost of Remittance Transfer from Malaysia to Bangladesh in First Quarter 2010

77

Appendix Table-8

Cost of Remittance Transfer from Saudi Arabia to Bangladesh

77

Appendix Table-9

Cost of Remittance Transfer from Singapore to Bangladesh

77

Appendix Table-10

Remittance Transfer cost from United Kingdom to Bangladesh

78

Appendix Table-11

Time Requirement in Different Corridors Through Different Channels [From Saudi Arabia to Bangladesh]

78

Appendix Table-12

Time Requirement in Different Corridors Through Different Channels [From Singapore to Bangladesh]

79

Appendix Table-13

Time Requirement in Different Corridors Through Different Channels [From UK to Bangladesh]

79

Appendix Table-14

Time Requirement in Different Corridors Through Different Channels [From Malaysia to Bangladesh

80

Appendix Table-15

ICT Status of Banks in Bangladesh

81

Appendix -16

Questinnire-1

85

Appendix -17

Questinnire-2

86

xi

List of Abbreviations Abbreviation

Elaboration

ACH

Automated Clearing House

AFDB

African Development Bank

ATM

Automated Teller Machine

BB

Bangladesh Bank

BDP

BRAC Development Point

BIS

Bank for International Settlements

BMET

Bureau of Manpower, Employment and Training

BRAC

Bangladesh Rural Advancement Committee

CUP

China Union Pay

DD

Demand Draft

DFID

Department for International Development

DRS

Disaster Recovery Site

EFT

Electronic Fund Transfer

eMT

eXpress Money Transfer

FedACH FINCA

Fedwire Automated Clearing House The Foundation for International Community Assistance

FINO

Financial Information Network and Operations Ltd.

FRPP

Foreign Remittance Payment Project

GBP

Great Britain Pound

GDP

Gross Domestic Product

GPRS

General Packet Radio Service

GSM

Global System for Mobile Communications

GSMA

GSM Association

HNB

Hatton National Bank, Sri Lanka

ICICI

Industrial Credit and Investment Corporation of India

ICT

Information and Communications Technology

IDB

Inter American Development Bank

IFC

International Finance Corporation

ITCL

Information Technology Consultants Limited

KYC

Know Your Customer

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Abbreviation LAN MFIs MIS MOF MT MTO NCBs NCCBL NDPC OCBC OECD PBOC PIN POS RCBE RMB RPCF RPP RSP SME SMS STP SWIFT TMSS TT USD VOIP WAN WB WTO

Elaboration Local Area Network Micro Finance Institutions Management Information System Ministry of Finance Mail Transfer Money Transfer Organization / Operators Nationalized Commercial Bank Ltd. National Credit and Commerce Bank Ltd. National Development and Reform Commission Oversea-Chinese Banking Corporation Limited Organization for Economic Cooperation and Development People’s Bank of China Personal Identification Number Point of Sale Rizal Commercial Banking Corporation Renminbi (Currency of the People's Republic of China) Remittance and Payments Challenge Fund Remittance and Payments Partnership Remittance Service Provider Small and Medium Enterprise Short Message Service Straight Through Processing Society for Worldwide Interbank Financial Telecommunication Thengamara Mohila Sabuj Sangha Telegraphic Transfer United States dollar Voice Over Internet Protocols Wide Area Network World Bank World Trade Organization

xiii

Executive Summary Over the years, policies and initiatives of banks and policy makers to improve banking access and the technology of money transfers have helped increase the flow of remittances through formal channels and the efficiency of service providers. Banks and MTOs, the major Remittance Service Providers (RSPs), have been very active in recent years to adopt new technology in the pursuit of offering quality and cost effective services. Though charges of channeling remittances are diverse and less transparent, it is more or less recognized that the costs of money remitting through MTOs and banks/financial institutions are generally higher than that of the informal channels. There have been growing initiatives for the reduction of time and cost in remitting funds by the formal channels in many economies and the outcome is apparent. The use of Internet-based technology for messaging and advanced clearing and settlement has reduced time and cost of remittance transactions in some cases. In some countries, new remittance tools have emerged, based on cell phones and smart cards, that have contributed to reducing time and cost of channeling funds. Worker remittances have been a consistent source of foreign exchange in Bangladesh that has been playing an important role in improving supply side in the foreign exchange market and reducing supply gal. With the advent of computerized banking business in local banks and development of ICT based remittance services in global economies, there is scope to offer better services to the Bangladeshi expatriates in remitting fund to their families/relatives. The present study is about “Implications of the Use of ICT in Channeling Workers' Remittances to Bangladesh”. More specifically, it attempts to identify the extent of the use of ICT in channeling worker's remittances in developing economies and in Bangladesh; to examine the relationship of using ICT with cost and time requirements of channeling remittances; and to examine the possible link of the use of ICT and growth of remittance businesses of banks of Bangladesh. The secondary published sources created the backdrop of the study and major sources of information for data analyses. For gathering primary information, banks were categorized into different tiers: Tier-1, Tier-2, and Tier-3; and survey samples were selected purposively. The observations of the study are summarized in the following paragraphs. Globally, commercial banks and, to a lesser extent, international MTOs are considered by far the most relevant RSP types. Other than Latin America and the Caribbean, in all other global regions commercial banks are ranked ahead of international MTOs in their role as RSPs. MTOs play a relatively larger role in remittance receiving countries where there are inadequate developments of the banking industry, particularly with regard to the deployment of technology based infrastructure and access points. The technology based fast services of MTOs are getting popularity in a number of low-income countries in recent years. The market share of post office in remittance services is very limited.

xiv

Informal money transfer system exists and operates parallel to conventional regulated banking and financial channels. The element of trust is a defining characteristic of most informal remittance systems. For improving services, the locally operated credit unions and MFIs are increasingly getting involved in the process of remittance transfer with the formal RSPs in a number of developing economies. These organizations and business entities commonly work with MTOs and banks as part of their agency arrangements and have basically been playing roles in distributing remittances among recipients. Of the different instruments, cash and account to account transfers are regarded as the most relevant payment instruments used for remittances; payment cards and other instruments are still at a very distant second place. Technology penetration effort by financial firms and other institutions are evident in almost all global economies. Some financial firms have been engaged in modernizing their prevailing technology platforms to process international wire transfers and online data management. Existing technologies can offer a good number of advantages to the remittance and financial/money transfer industries in their functionality, value added innovative abilities, business and development impact, and cost effectiveness. Although most of the developing countries use agent based cash to cash transfers, the increasing flexibility offered by technology provides the choice of adopting attractive transfer mechanisms for account-to account-transfers. As a whole, SouthAsia has remained far behind other regions of the world in terms of technology penetration. Costs or fees for remittance services can be complicated for senders and receivers to understand. Pricing is sometimes based on a percentage and sometimes a flat fee is charged. In both cases, a minimum floor fee has been discouraging to small remitters. Traditionally, there is a tradeoff between cost and quality. Quality indicates speed, reliability, security and convenience. Now, technology may enable better quality services at lower cost. The global average cost of sending remittance has dropped consistently since 2008. There are wide scale differences in the prices of different country remittance corridors. Though large volume of remittance typically implies lower average cost, as the amount of the cost does not change proportionately in all corridors. Cost also varies among different channels: banks, MTO, post offices etc. In most corridors, it is relatively expensive to send remittance through commercial banks. Banks and MTOs have been working hard to improve the quality of the remittance services, and role of new technologies have been playing major roles in this connection. The available information clearly indicates the improvement in the speed of remittance transfers by MTOs and banks in between 2008 and 2010. Overseas remittances have been one of the most remarkable aspects of Bangladeshi labour exports. Worker remittances have consistently increased over the years. The remittances

xv

flows assumed a speedier pace mainly since the early 1990s. Like in other developing countries, money is sent in cash or in kind and using both formal and informal channels in Bangladesh. Though remittance flows from Middle Eastern countries to the developing countries is only 8 per cent, it accounted for 63 per cent of the remittance inflows to Bangladesh. A good number of Bangladeshis have been working in the Middle Eastern countries like Saudi Arabia, UAE, Kuwait, Oman, etc. who send a considerable volume of worker remittances every year. A considerable volume of remittances also flows in from USA, UK and other developed EU countries. Most official remittances are transferred into Bangladesh through banks. Growth rates of transfer of remittances by different broad categories of banks have been inconsistent over the years. All broad groups have maintained positive growth rates over the period 2001-2008. A number of factors might be responsible for the inconsistencies. Different banks have good businesses in different sending countries and there is growing competition among different banks and MTOs. In Bangladesh, banks with large number of branches have traditional advantage due to their huge branch network in rural Bangladesh. However, over the years, the situation has changed and the composition of market share altered. Alongside using ICT tools, banks have started using the services of each other networks/branches. Bangladesh Bank has also allowed banks to use the services of MFIs in distributing the remitted fund in remote areas of the country. Trend of using official channels for sending remittances has improved in recent years, and thus despite some negative trend of export of manpower, growth of remittances earnings through official channel increased remarkably. The improvement may be attributed to the enforcement of Money Laundering Prevention Act, 2009 and a series of measures by Bangladesh Bank and the commercial banks. For improving ICT based remittance services, BB has been engaged in different projects with donor agencies. Under the auspices of the RPP (Remittance Payments Partnership), DFID, in association with Bangladesh Bank, has established the Remittance and Payment Challenge Fund (RPCF) to provide grant to selected private and non-governmental organizations. NCCBL and BRAC have availed of the facilities. Recently, two banks launched mobile-based remittances services in the country for the first time. The study observes inconsistent and positive growth of remittance business among different broad categories of banks (Tier-1, Tier-2 and Tier-3). Calculations based on Bangladesh Bank data indicate that Tier-1 banks have annual average growth rate of 35.15 per cent, Tier-2 have growth rate of 41.14 per cent and Tier-3 banks have growth of 14.35 per cent over 2001-2008. If the foreign banks are excluded, the annual average growth rates of banks of Tier-1, Tier-2, and Tier-3 banks stand at 45.92 per cent, 43.62 per cent, and 14.35 per cent

xvi

respectively. The remittance market also experienced remarkable change in the market share over 2000 -2008. In 2000, the market share of Tier-3 banks was 61 per cent that came down to 27 per cent in 2008, whereas market share of both Tier-1 and Tier-2 banks increased remarkably over the period. Though the market share of these banks (Tier-1 and Tier-2) remained very small in terms of branch networks, their use of ICT and strategies of networking did the magic. Growing reliance on ICT based channels by banks are evident from the survey information. Before the year 2005, DD was the most popular form of remittance transfer mode. Over the years, banks increasingly started relying on SWIFT or E-mail technology. Differences in the use of channels by different categories (Tier-1, Tier-2, and Tier-3) of banks in Bangladesh are remarkable. Tier-1 banks used DD for a very insignificant number of remittance transfer cases during 2005-2007. However, Tier-2 and Tier-3 banks used DD for considerable number of cases during the period. Especially, Tier-3 banks used DD for more than half of the cases of total remittance transfers by these banks. The average costs in different remittance corridors vary significantly, as found by the World Bank. The World Bank data show competitive remittance price/rates for banks and MTOs in sending remittances to Bangladesh from different destinations like Saudi Arabia, Singapore, Malaysia, and UK. Some banks have arrangements with MTOs and also offer more or less similar price. There is evidence that the remittance costs/prices decreased over time. The speed of remittances through formal sector market players (MTOs and banks) improved remarkably during recent years. The survey information reveal greater reliance of all types of banks (Tier-1, Tier-2 and Tier-3) on the ICT based systems like e mail, SWIFT etc. The change in the use of alternative ICT based instruments made it possible by banks to deliver quick service to the migrants/recipients in recent period. Especially, a number of banks are now in a position to deliver remittances instantly or same day as a number of MTOs do. Both MTOs and banks have attained improvements, though, the extent of change of banks is remarkable. For better and more efficient remittance services, banks are required to be sufficiently aware of the potential of integrating new customers into the formal banking system.Although small payments continue to face relatively high prices, one of the major developments in remittance markets in recent years is the sharp decline in remittances price with increased competition. For better services, local banks cannot keep away from ICT based tools and innovative technologies. Innovative technology based initiatives coupled with central bank's policy and regulatory support may revolutionize the remittance service market of Bangladesh in the near future.

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1. Introduction Over the years, migration has enabled many people of the underdeveloped economies to obtain productive and creative job in foreign countries and have been proved to be beneficial for their families. In response to an increasing manpower exports from developing economies, foreign remittances increased considerably. The growing importance of remittances as a source of foreign exchange is reflected in the fact that remittance growth has outpaced private capital flows and official development assistance over the last decade. However, appropriately capturing workers' remittances is a daunting task in view of substantial under recording of flows through formal channels. It is true that recorded remittance flows have surged over last few years mainly driven by a combination of factors such as better data collection, greater awareness of the development potential of remittances, concerns about money laundering and terrorist financing, lower costs and time, etc. Moreover, congenial policies to improve banking access and the technology of money transfers have helped increase the flow of their transfer through formal channels. Banks and Money Transfer Organizations (MTO), the major remittance service providers (RSPs), have been very active in recent years to adopt new technology in the pursuit of offering quality and cost effective services. Although most RSPs of the developing countries use agent based cash to cash transfer, the increasing flexibility offered by technology provides the choice of adopting attractive transfer mechanisms for account to account transfers. The data payment transmission systems through Automated Clearing House (ACH), credit and debit cards, cell phones, and online transfers have brought remarkable change in this connection. These technologies provide firms with alternatives to shift and transform their business into fully electronic based transfer systems with both back and front-end capabilities (Orozco and Hamilton, 2005). Though charges of channeling remittances are diverse and less transparent, it is more or less recognized that the costs of money remitting through MTOs and banks/financial institutions

1

are generally higher than that of the informal channels such as Hundi/Hawala. Moreover, in spite of the greater risk involvement, the informal channels are popular among the remitters/recipients because of 'less time requirement'. There have been growing initiatives for the reduction of time and cost in remitting funds by the formal channels in many economies and the outcome is apparent. The use of Internet-based technology for messaging and advanced clearing and settlement has reduced time and cost of remittance transactions in some cases (Suki, 2007). In some countries, new remittance tools have emerged, based on cell phones and smart cards that have contributed to reducing time and cost of channeling funds (World Bank, 2008). Worker remittances have been a consistent source of foreign exchange in Bangladesh that has been playing an important role in improving supply side in the foreign exchange market and reducing poverty level. Like in many other developing countries, it is very difficult to estimate the magnitude and volumes of true size of the remittance flows as a considerable portion of the foreign remittances are entering into the country through the informal channel. Available literature (Siddiqui andAbrar, 2001; Azad, 2006 etc.) suggest that Hundi channel remained very popular for sending money to rural Bangladesh by expatriate Bangladeshi workers. The system has proved to be efficient and dependable in general over the period that involves significantly less time and require comparatively less cost in channeling fund as compared to official channel such as banks. Lack of knowledge about banking procedures and involvement of paperwork and documentation are also notable hindrances for using official channels. Banks are the major formal channel used by the remitters to send their money in Bangladesh. Demand Draft and electronic method i.e. SWIFT (Society for Worldwide Interbank Financial Telecommunication) have been commonly in use in transferring funds by the formal sector banks. Banks generally use branch networks in the process of channeling funds to the rural areas. In remittance businesses, the government controlled commercial banks especially Sonali Bank, Agrani Bank, and Janata Bank have been heavily engaged in remittance business using their advantage of huge branch network in rural Bangladesh. Some private sector banks (such as Islami Bank Bangladesh Ltd., Uttara Bank Ltd. and Pubali Bank Ltd.) are also doing relatively good with the advantage of their bigger branch networks. To ensure quick delivery, banks use services of networks of other banks in addition to their own branch networks. Bangladesh Bank has allowed banks to use services of micro finance institutions (MFIs) in distributing remitted fund in the remote areas of Bangladesh,

2

and, accordingly, some banks (for example, BRAC Bank, and NCCBL) have usefully engaged the branch networks of MFIs (such as, BRAC and TMSS). In this process of transferring funds, the foreign counterparts are mainly the exchange houses with which the banks have arrangements. Moreover, some banks established subsidiaries in a few countries for safe and speedy transfer of remittances. With the advent of computerized banking business in local banks and development of ICT (Information and Communication Technology) based remittance services in global economies, there is scope to offer better services to the Bangladeshi expatriates in remitting fund to their families/relatives. Experiments in a number of developing countries have been producing evidences that use of modern and innovative technology may push remittance price/fees downward and improve quality of remittance services in terms of quick and secured transfer. It might also work as an incentive for the migrants to use formal channels in remitting funds in place of informal channels. In the backdrop of the above factors, the study is about examining the implication of the use of ICT in channeling workers' remittances to Bangladesh. It identifies the following research questions: What is the current status of the use of ICT in developing economies for remittance services? What is the extent of use of the ICT in channeling worker remittances in Bangladesh? Is the growing use of ICT contributing to reducing cost and time of remittance? Can the use of ICT be linked to the growing remitting business of banks of Bangladesh? Objectives of the Study

On the way to find answers of the research questions, the following objectives were identified for the study: One, to discuss the use of ICT in global economies in remittance services with special reference to the developing countries; Two, to identify the modes and use of ICT in channeling workers' remittances from abroad by banks in Bangladesh; Three, to examine the relationship of using ICT with cost and time requirements for channeling workers' remittances; and Four, to examine the possible link of the using ICT and growth of remittance businesses of banks. Methodology and Data

Keeping in mind the background and the specific objectives of the research project, data/information have been collected from both primary and secondary sources.

3

Literature and secondary information on the use of ICT in remittance services, and published data sources on the remittance businesses of commercial banks have formed the backdrop of the study. Tabular and graphical analyses were used in order to achieve the objectives of the study. To understand the use of ICT by different banks and their remittance businesses, the banks of the country were categorized into different levels/tiers based on their state of automation, as defined by the Bangladesh Bank in its “Guideline on Information and Communication Technology for Scheduled Banks and Financial Institutions” (first circulated in 2005). According to the Guideline, banks with centralized IT operation of data center including Disaster Recovery Site (DRS) to which all other offices, branches and booths are connected through Wide Area Network (WAN), 24x7 hours attended operation, belong to Tier-1; banks with head office, zonal office, branch or booth having server to which all or a part of the computers of that locations are connected through Local Area Network (LAN), belong to Tier-2; and banks with head office, zonal office, branch or booth having stand alone computer(s) or Automated Teller Machine(s) (ATM) belong to Tier-3. With the objective of categorizing banks and finalizing sample distribution, a schedule was prepared regarding the ICT status of banks in Bangladesh (appendix-16). Based on the collected primary information using the schedule, banks were categorized (appendix-15). Of the commercial banks considered for the study, 25 banks belong to the category of Tier-1 (19 private commercial banks, 5 foreign bank branches and 1 specialized bank), 13 banks to Tier-2 (9 private commercial banks, 3 foreign banks, and 1 specialized bank) and 8 banks to Tier-3 (4 public sector banks, 2 private commercial banks, and 2 specialized banks). From different types of banks of Bangladesh, 9 banks were selected considering the following factors: volume of international banking transactions (sum of exports, imports, and remittances); representation of banks of different generations; representation of banks of different sizes; and representation of both public and private sector banks. One public sector and one private sector bank (Sonali Bank Ltd. and Islami Bank Bangladesh Ltd.) with wide branch networks and high volume of international banking transactions were chosen. Three private sector banks (Uttara Bank Ltd., Prime Bank Ltd. and Exim Bank Ltd.) were selected from three different generations1. Three private commercial banks (Southeast Bank Ltd., Bank Asia 1

Generation 1 banks are those established in 1980s; Generation 2 banks are those established in mid 1990s; and Generation 3 banks are the banks those started operation in the end 1990s or early 2000.

4

Ltd. and Dutch-Bangla Bank Ltd) and one foreign commercial bank (Citibank N.A.) were chosen considering their relatively better ICT setup. Of the nine banks, 6 banks belong to Tier-1, 1 bank to Tier-2, and 2 banks belong to Tier-3 categories. Limitations

Unavailability of reliable information was the basic limitation of the report. The study team could not gather complete information on all the relevant issues that were identified and intended. Especially primary data on the costs of remittance transfer were unavailable or unreliable. Secondary information supplements the primary information in drawing major conclusion of the study. Organization of the Report

The study report is divided into seven broad heads. After narrating the background and methodological aspects in section-1, section 2 and 3 cover reviews of relevant literatures. Section-2 discusses the issues on the use of information technology in channeling workers' remittances in developing economies and section-3 covers issues related to time and cost aspects of remittance services. Section-4 captures trends and magnitudes of remittance flows to Bangladesh. Roles of banks in channeling remittances are discussed in section-5. Section-6 deals with the survey information on the use of ICT by banks in channeling remittances and the time and cost aspects. Observations are summarized in section-7, which concludes with some suggestions. 2. Channeling Workers' Remittances in Developing Economies and Use of Information Technology -Literature Review Remittance Service Providers and Instruments

Any person or institution providing remittance service as a business is called a remittance service provider or RSP. In the two ends, two agents are responsible for capturing and disbursing in the process of remittance transfer. Depending on the services, remittance payments can be made by cash, by debiting or crediting a bank account, or by use of prepaid funds like electronic money. The capturing and disbursing processes involve the transfer of information as well as funds (BIS and WB, 2007). In the formal sector, remittances are commonly transferred by commercial banks, MTOs, non-bank financial institutions, and post offices. Now a days, locally operated credit unions and MFIs are also increasingly getting involved in the process of remittance transfer in a number of developing countries. According to a World Bank Survey (2008), commercial banks and to a lesser extent international MTOs are considered by far the most relevant RSP types.

5

Table-1: RSPs Regarded as the Most Relevant for International Remittanc Central Banks’ Opinion

Commercial Banks

MTOs

Post Office

Worldwide (128) High Income (41) Upper Middle Income (27) Lower Middle Income (37) Low Income (23) East Asia and Pacific (10) Europe and Central Asia (16) Latin America and Caribbean (23) Middle East and North Africa (12) Sub-Saharan Africa (20) European Union (15) South Asia (6)

57% 59% 63% 57% 48% 80% 50% 43% 75% 60% 47% 50%

32% 22% 26% 46% 35% 30% 38% 52% 34% 30% 27% 33%

5% 0% 4% 8% 9% 10% 6% 0% 8% 15% 0% 0%

Note: The table indicates the use of RSPs in different countries based on the opinions of their respective central banks. There are multiple answers by a number of central banks. Source: Compiled from World Bank Survey (2008)

Tabel-1 shows that commercial banks and international MTOs are the most widely used RSPs in the world i.e. 'Most Relevant'. Other than in Latin America and the Caribbean, in all other global regions commercial banks are ranked ahead of international MTOs. From a country income perspective, commercial banks, in their role as RSPs, are deemed most relevant by 59 per cent and 63 per cent of central banks of high income countries and uppermiddle income countries, respectively, and only by 48 per cent of central banks of low income countries. The opposite trend is true for international MTOs. The fact is evident that international MTOs play a relatively larger role in the remittance receiving countries where banking industries are not very developed particularly with regard to the deployment of technology based infrastructure and access points. World Bank (2008) identified five different payment instruments: cash, current account transfers, payment cards linked to a current account, prepaid cards, and mobile payments. The survey results summarized in table-2 show very clearly that cash and current account transfers are regarded as the most relevant payment instruments used for remittances; payment cards and other instruments are still at a very distant second place. As for prepaid cards and mobile payments, only China rated any of these options as the most important instrument used in remittances. Four central banks (Bhutan, Bulgaria, Egypt and Kuwait) did rate prepaid cards as the second most relevant, and there is also one case (South Africa), which rated mobile payments as the second most relevant.

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Table-2: Relevance of the Various Payment Instruments in Use for International Remittance Services

Ranking

Cash

Current Account Transfer

Payment Cards linked to the Current Account

Pre paid cards

Mobile Payment

1 (Highest Relevance)

48

56

5

1

1

2

28

33

16

4

1

3

14

5

21

11

2

4

2

2

10

15

9

5

1

4

11

10

10

6 (Lowest Relevance)

5

3

19

19

33

No Rating

30

25

46

68

72

Source: World Bank Survey (2008)

In some countries, local level organizations, business entities, and MFIs have been playing important role in disbursing or distributing remittances among the recipients. These commonly work with MTOs and banks as part of their agency arrangements. For example in Guatemala and Ecuador, Credit Unions and MFIs have been taking part in remittance channeling. These are also offering financial products designed for both remittance senders and recipients (Hastings, 2006). In Brazil, post offices and other business firms act on behalf banks where there is no bank branch. These are known as 'correspondentes bancarios'. There are about 16000 such bancarios in Brazil-almost the same number as bank branches. Other bancarios include lottery houses, supermarkets, drugstores and small retailers. The activities of the correspondentes bancarios are regulated by the National Monetary Council, a government body in which the Central Bank of Brazil participates. Brazil has specific rules on the kinds of institutions that can be correspondents bancarios, the types of services they can provide, and the settlement procedures between the correspondente bancario and the bank for which it acts (BIS and WB, 2007). In the context of developing countries, wide networks have been playing a major role in the remittance services by banks and other service providers. Over the period, the use of new channels such as the Internet or mobile phones has been creating remarkable change where there would be hardly any need for physical access points. However, at the moment many senders and receivers have limited access to such channels. Or if they do not have access to

7

an account and can only use cash, they may have no means of making and receiving payments to and from an RSP offering a purely internet or mobile phone service (i.e. with no physical access points). Until these changes, there are limits on the usefulness of these ICT based remittance channels (BIS and WB, 2007). Informal Remittance Systems

Informal money transfer system exists and operates outside of (or parallel to) conventional regulated banking and financial channels. Although these are operated in various communities over time, the current system basically evolved from two original types, namely the Hawala (hundi in Pakistan), which developed in South Asia (Bangladesh, India, and Pakistan) and the feich'ien, which started in China. In addition to these two systems, several money transfer systems have developed through the years, most notably, the Colombian system, which has arisen in the context of the black market for pesos (Buencamino and Gorbunov, 2002). Box-1: Informal Remittance Transactions [Fei Chien (China), Hundi (Bangladesh, Pakistan),Hawala (India, Middle East), Padala (Phillipines), Hui Kuan (Hong Kong), Phei Kwan (Thailand), Kyeyo Money (Uganda), Mali a Mbeleko (Zambia)]

Local Agent/ Shop Keeper

Workers/Remitters

Cash

Telephone/Fax Cash

Middleman

Family Member

Reference

Source: Based on Samuel Munzele Maimbo (2004)

There are many terms used to describe informal remittance systems including, 'alternative remittance systems,' 'underground banking,' 'ethnic banking,' etc. Highly trust-based,

8

informal remittance systems have a long history of being reliable, inexpensive, speedy, and accessible and a convenient way of transferring funds in Asia and in some developing countries. The element of trust is a defining characteristic of most informal remittance systems. Trust has ensured that rarely, if ever, customers lose their money. Informal dispute resolution processes among service providers have also made it an efficient payments system that attracted little interest or attention by regulators in developed countries until recently. Especially, the anonymity that is possible with transactions of this kind has been raised concern in the law enforcement community, in general. It was inevitable when journalists and others have made putative connections between the financing of terrorism and informal remittance systems, that calls for more effective regulatory and supervisory frameworks would follow. Technology Penetrations and Use of ICT Based Tools in Remittance Transfer

Technology penetration effort by financial firms and other institutions are obvious. Some financial firms have been considering modernization of their prevailing technology platforms to process international wire transfers and other important features such as card processing, regulation compliance, telecommunication via Voice Over Internet Protocols (VOIP), and online data management. However, the investment, administration, maintenance and training costs of such a task are sometimes not financially viable to many small institutions. Moreover, the decision to adopt the technology depends on the size of the target market, and the commercial partner on the sending side (Orozco and Hamilton, 2005). As a whole, South Asia has remained far behind other region of the world in terms of technology penetration. Table-3 shows that South Asia can be comparable only with Sub Saharan Africa in terms of technology penetration. Alessandro Zolla (2009) measured technology penetration of selected developing countries in terms of the use of mobile phones and ATMs. The study placed Bangladesh among the countries of very low technology penetration (alongside Pakistan, Nigeria, and Ghana). Position of India is slightly better as compared to the other South Asian Countries. China, Philippines are relatively better in terms of technology penetration. Romania, Thailand, Poland, and South Africa are among the best performers of the lot (Alessandro Zolla, 2009).

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Table-3: Interoperability of ATMs and POST (Central Banks' Opinion) Interoperability of ATMs (Automated Teller Machines)

Interoperability of POST (Point of Sale Terminal)

Full

Partial

Low

Full

Partial

Low

Worldwide Totals [128]

52%

27%

12%

51%

23%

16%

European Union [15]

80%

20%

0%

100%

0%

0%

Europe and Central Asia [16]

25%

63%

6%

25%

56%

13%

East Asia and Pacific[10]

40%

10%

30%

0%

30%

50%

Latin America and Caribbean [23]

48%

22%

22%

48%

26%

13%

Middle East and North Africa [12]

67%

17%

0%

42%

335

8%

Sub Saharan Africa [20]

6%

40%

15%

40%

15%

25%

South Asia [6]

33%

17%

33%

33%

0%

50%

World/Regions

Source: Garsia (2009)

An increasing number of institutions argue that technology solutions are the current frontier in remittances (Migrant Remittances, 2007). Enabling remittance transfers and payments using technologies such as the Internet and mobile phone holds considerable promise for increasing access to improved and less costly services for remittance senders and receivers, including those in remote or under serviced areas. The linking of services and technologies in new ways has emerged across the globe, enlisting new names and increasing competition in a market originally dominated by a few service providers (Abeywickrema, undated). Moroever, it is now more or less accepted that the use of ICTs has been contributing in shifting remittances from informal to formal channels (Koncept Analicts, 2009). Orozco and Hamilton (2005) pointed out at least four advantages of technologies to the remittance and financial/money transfer industries: functionality, value added innovative abilities, business and development impact, and cost effectiveness. The functionality of the technology is such that, whether for the back or front end of the business or institutions, technologies are easily adapted to the current transfer mechanisms (table-4). The technological innovation has offered RSPs the choice of adopting attractive transfer mechanisms for account to account transfers. These technologies include data payment transmission systems through typical Automated Clearing House (ACH) software platforms, prepaid, debit, or fully functionally multipurpose credit and debit cards, cell phones, and online transfers (Orozco and Hamilton, 2005).

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Table-4: Functionality of Technology in Remittance Transfer Data Payment Transmission Applications

Back End

Front End

ACH Software Platforms

Card issuing [for closed or open networks]

Online Platforms


Payment System cards [Prepaid, Debit, Store Value]

International Payment processing, Settlement and Data Management


WiFi for Closed and Open Networks

N/A

Others [SMS, etc.]

Data Transmission through Cellular Phone

Source: Orozco and Hamilton (2005)

In some countries, domestic Automated Clearing Houses (ACHs) have been connected with other cross border payment systems to accommodate the needs of the remittance market. For example, the Federal Reserve Banks in the United States have undertaken a number of initiatives to offer low-cost cross-border ACH services by linking the US ACH system to that of several other countries. The cross-border service between USA and Mexico began operating in February 2004 as part of this effort (Box-2).These services are currently limited to outbound transactions from the United States. Incoming transactions are prohibited. Box-2: Connecting Domestic ACHs Across Borders In 2001, the Federal Reserve Banks in partnership with a private sector bank in Canada began offering a cross-border ACH service to Canada. The Canadian ACH service permits depository institutions in the United States to send ACH credit and debit transactions to depository institutions in Canada. In 2003, the Federal Reserve Banks began offering a trans-Atlantic ACH service to five countries in Western Europe (Austria, Germany, the Netherlands, Switzerland and the United Kingdom). The trans-Atlantic ACH service is limited to credit transactions only, with transactions originated in US dollars in the United States and received in the domestic currency of the European country. United States Mexico automated clearing house was created as part of the U.S.-Mexico Partnership for Prosperity to reduce the cost of sending remittances between the two countries. In 2002,the central banks of the United States and Mexico undertook a cooperative effort to link their automated clearinghouse (FedACH) systems. The cross-border service began operating in February 2004 under the name 'Directo a Mexico'. It uses the exchange rate published daily by the Bank of Mexico. The Federal Reserve Banks charge depository institutions in the United States (Continued)

11

Box-2: (Continued)

Less than one dollar per payment. The Bank of Mexico does not charge banks in Mexico for the service but receives part of the fee charged by the Federal Reserve Banks. While the vast majority of the payments are US government payments to individuals in Mexico, the channel is available for use by depository institutions offering cross-border remittance services to Mexico. As of 2006, the cost of a remittance transaction was just $0.67; the exchange rate spread was only 0.21 per cent. Sources: BIS and WB (2007); and World Bank Global Economic Prospect (2006)

Use of SWIFT networks for remittance services has got popularity among the small banks of developing economies in recent years. According to World Bank (2008) experience, banks and other users connecting to SWIFT via the central banks' own connections to this network had been a common practice less than a decade ago. Survey information by World Bank shows that only 9 per cent of central banks do this at the moment. On the other hand, SWIFT Service Bureaus are an increasingly popular way for smaller banks and other types of financial institutions (many for which direct access to SWIFT is difficult to obtain) to access the network. Indeed, 46 central banks, the majority of which are in low income countries, reported this practice is common in their countries. Table-5: Use of International SWIFT Networks

Worldwide (142) High Income (41) Upper Middle Income (34) Lower Middle Income (37) Low Income (30) East Asia and Pacific (10) Europe and Central Asia (16) Latin America and Caribbean (30) Middle East and North Africa (12) Sub-Saharan Africa (27) European Union (15) South Asia (6)

78% 78% 82% 68% 87% 60% 81% 57% 100% 96% 87% 83%

15% 17% 12% 24% 3% 30% 6% 37% 0% 0% 7% 0%

Source: Compiled from World Bank (2008)

12

9% 7% 6% 11% 13% 0% 19% 13% 8 7% 7% 17%

32% 27% 29% 52% 27% 40% 25% 17% 33% 56% 53% 33%

Remittance market witnesses growing competition among banks and MTOs in an increasing number of developing economies. MTOs like Western Union, MoneyGram, UNI Stream, Euronet etc. have been increasing their networks, revenue and market shares in developing countries (Box-3). Till now their market share has been behind commercial banks, however, their technology based fast services are getting popualarity in a number of low income countries. For example, in Africa, since the mid-1990s, MTOs benefited the most from the growth in formal remittances. The MTOs have responded to the growing market by tailoring their services to the needs of migrants, with the emphasis on rapidity and security, within a context of low access to banks. However, coverage vary from country to country. For example, 100 per cent in Senegal with a dense, diversified and competitive network; 75 per cent in Morocco where the MTOs compete with banks; and just 29 per cent in Mali where MTOs operations are more recent and the vast territory seems to complicate the extension of their networks. The MTO market is quite robust and the large MFIs play a specialist role by acting as intermediaries between the MTOs and the beneficiaries in some countries. Their involvement at the end of the payment chain accounts for 8 per cent of the total MTO market. The conventional postal network (excluding Western Union) commands 8-15 per cent of the market share in Senegal and Morocco (African Development Bank, 2008). Box-3: Increasing Revenue and Profitability of MTOs in Developing Countries In the first quarter of 2008, Western Union's revenue increased by 12 per cent and in the third quarter of 2008, its operating income increased 14 per cent. The company's international consumer-to-consumer segment, which represents 69 per cent of the MTO's revenue, reported a 15 per cent revenue growth and 9 per cent transaction growth. The company added 50,000 locations in India, where it experienced over 50 per cent revenue growth. In Mexico, revenue grew by 1 per cent and continues to improve. Moreover, Western Union is expanding in South Africa through an agreement with a South African financial service organization, and in the U.S.Latin America and Caribbean corridors, the company is adopting mobile technology with a prepaid mobile phone supported by Trumpet Mobile and available through Radio Shack. The product will allow users in the United States to send money from their phone both domestically and to LatinAmerica and the Caribbean through Western Union. MoneyGram International announced an 18 per cent increase in money transfer revenue for all of 2008 to $1 billion; in the fourth quarter, money transfer revenues increased by 6 per cent from $234 million in 2007 to $249 million in 2008. Growth in 2008, and especially in the fourth quarter, was largely attributed to the agent network (Continued)

13

Box-3: (Continued)

Expansion of more than 33,000 new locations. One of these agents includes M. Lhuillier Financial Services, Inc., which has partnered with MoneyGram International to allow Filipino workers abroad to transfer money in either dollars or in Philippine pesos. The MTO expanded its service to Luanda, Angola. The company reports that expanding service to many areas of some countries is a challenge due to the underdeveloped technology and poor infrastructure. MoneyGram also now offers money transfers and last-minute bill payments through kiosks in different countries. In 2008, UNI Stream's total transactions grew by 33 per cent to total $4.91 billion. The number of transactions also grew to 5.55 million in 2008. UNI Stream has seen particular growth in Central Asia in 2008: its transactions in Uzbekistan grew by 88 per cent to $787 million; in Tajikistan, transactions grew by 58 per cent to $694 million; and in Kyrgyzstan, transactions grew by 41 per cent to $586 million. Over the past year, UNI Stream increased the number of service points in Russia (from 226 to 280) and strengthened its position in Armenia, Kyrgyzstan, Ukraine, Uzbekistan and Tajikistan. In addition to securing a leadership role in nearby markets, UNI Stream has opened an affiliate in the UK, which has tripled the number of transactions to 2.2 million since the beginning of 2008. Euro Net Worldwide, Inc. recorded slightly over $1 billion in revenues for all of 2008, up by 16 per cent from 2007. Gross margins increased by 9 per cent, due in large part to steady revenue growth from transactions not originating in the United States and to the management of exchange rates. The number of transactions in this period increased by 300,000 to 4.3 million compared to quarter 3 of 2007. Sources: Compiled form Different Issues of Migrant Remittance News Letter (December 2008; April 2009)

The market share of post office in remittance services has been very limited (World Bank, 2008). However, remittance through post offices is popular in a few countries because of their wide networks. For example, in China, postal services has been performing well. Remittance products offered by China Post are generally more expensive than that of the commercial banks. However, the extensive branch network, access to the payments network, and lack of a need for a bank account at China Post contribute to its larger market share (Isern et al., 2007). Postal departments in some countries are also making arrangements with international MTOs. Electronic Postal Order has got popularity in Africa in recent time. This new product which falls between the postal order and rapid transfer seems well adapted to the demands of the customer, since it combines moderate cost (close to that of informal channels) with a measure of rapidity (12 hours). It draws inspiration from the second

14

semi-rapid product that Western Union already proposes on certain corridors (especially departing Great Britain). The Post Office Bank (Banque Postale) launched the product in March 2007 (African Development Bank, 2008). Box-4: Extensive Branch Network offers Advantage to the China Post China Post's extensive branch network of 57,136 points of service, of which almost 42,000 in rural areas, gives it considerable advantage in the money transfers market. Of these points of service, approximately 24,000 are connected electronically to headquarters, thereby facilitating more rapid money transfers. In 2004, China Post made an estimated 180 million remittance transactions for a total volume of 213 billion RMB (USD 27.3 billion), of which 70 per cent went to rural areas. Migrant workers are believed to be the main client group sending remittances through China Post, and they may account for over 90 per cent of total transfer volume to rural areas (Zhu, 2003). In contrast, the big four banks have retreated from rural areas over the past ten years. The option of remitting through commercial banks is basically available only to migrant workers and their families who are already clients of commercial banks or who live near branch offices. China Post offers three major products for money transfers in China: post money orders, electronic express money transfers and green card (debit card) services. Compared to remitting through the commercial banks, postal money orders are slower and in some cases, branches at the receiving end charge an additional fee for delivering cash to the recipients, with or without notification or approval of recipients. In Renshou and Shimei counties of Sichuan, the post offices acknowledged that some post offices in their counties charged 5 per cent to deliver cash. The express service offered by China Post is more expensive than similar services provided by commercial banks. The Post Office charges an additional USD 0.13 to 1.28 for its express services, which are only available in offices, connected to their national electronic network. Nevertheless, one does not need a postal savings account to send and receive remittances, and this is a major advantage over services offered by commercial banks. Compared to China Post, commercial banks in China usually charge a low fee for their remittance services. The fee structure on money transfers offered by commercial banks has been subject to the regulations set by the People's Bank of China (PBOC) and the National Development and Reform Commission (NDPC). Compared with the similar products, remittance products offered by China Post are generally more expensive. The extensive branch network, access to the payments network, and lack of a need for a bank account at China Post contribute to its large market share. Source: Isern, Jennifer et al. (2007)

Technological innovation and success stories have opened new avenues to the RSPs in developing economies. It is time to adopt or customize the available technology commensurate to the local circumstance and customers' need. Mobile Money Transfer is positioned to exercise considerable transformational effect on developing economies. It has

15

great potential due to the relationship between a mobile subscriber and their handset, where the mobile device is often with the end-user for most of their walking time. Mobile remittance services is expected to form a commercially viable and sustainable opportunity to reach the unbanked with low cost, no-frills financial services. In Philippines, remittance services through Smart Card and G-Cash can emerge as one of the most popular and exciting uses of mobile money (Box-5). Major operators with international and inter-regional footprints such as Vodafone and Orascom Telecom have announced their intention to deploy mobile remittance, which they hope would act as a catalyst for the wider adoption of mWalletenabled transaction services. Most importantly, mobile remittance presents a way for these interregional players to further maximise revenue potential through a greater proportion of their respective footprints, leveraging their assets in Europe and the Middle East in synergy with those in South Asia, Africa and the Asia Pacific (MobileIn.com, 2009, Mobile Money Transfer, A Management Report). According to an article in Migrant Remittances (2007), revenues derived from mobile money transfer services are expected to exceed $5 billion globally by 2013. In the third report of its Mobile Payments Series, Juniper Research predicts that Western Europe, Africa & the Middle East, and East Asia and China will represent over 60 per cent of the gross mobile money transfer transaction value by 2013 (See Publications; Also see Guest Article “Remittances and Mobile Banking” in July 2007 issue of Migrant Remittances). Different countries and regions have started experimenting mobile phone based remittance system and other ICT based arrangements for fast and cost effective remittance tarnsfers. In some instances, the primary obstacle to offering mobile remittance services is regulatory rather than technological (Global Technology Forum, 2007). Since remittances qualify as a banking transaction, mobile operators would have to comply with banking and financial regulations in both the sending and receiving countries. International laws relating to money laundering, terrorism financing, and fraud are also other issues to address. In a recent policy report published with Nokia, Vodafone highlights the strong potential of mobile-based financial services in Africa and Asia. However, because current banking regulations are not conducive to the growth of mobile-based ventures, in their assessment, Vodafone and Nokia call on regulators to review deposit-taking rules and increase access to the clearing system, among other suggestions (Mobile News Bulletin, 2007). The following boxes summarises some ICT based exeriments, success stories, and global developments (box-5 to box-9). Box-5: Mobile Phone based Remittance Transfer in Philippines · SMART, the leading mobile operator in the Philippines with 22.6m subscribers, has been offering an SMS-based remittance service known as SMART Padala since 2004. This service allows expatriates to deposit money with partnering banks in areas where high concentrations of Filipinos live, such as Hong Kong, Yokohama, and Abu Dhabi, and to specify the SMART (Continued)

16

Box-5: (Continued)

Subscriber in the Philippines who is to receive the money. The service sends a text message to both the sender and the recipient, notifying them that the money has been transferred. The recipient can then use his/her mobile account to specify the desired withdrawal amount and pick it up at a partnering institution in the Philippines. Remittances sent on the 'SMART Padala' service are charged a 1 per cent commission on all transactions, and subscribers pay US$0.04 per minute for airtime used in the transaction. This price is considerably less expensive than that of traditional wire services and related courier costs. The service generated 45,000 transactions in its first month, creating additional revenues for SMART via increased usage and commissions. · The Philippines' second mobile operator, Globe Telecom, offers a similar service known as G-Cash. At participating remittance companies in the US, the UK, Australia, and Taiwan, Filipino workers can send money via an SMS message to Globe subscribers in the Philippines. The recipient can pick up the cash from any Globe Telecom store by showing his mobile phone (with the SMS message) and a form of personal identification. The remittance companies pay a commission to Globe of approximately US$0.97 per transaction, and the recipient, upon collecting the money, pays US$0.21 for transactions below US$21 (Php 1,000), or 1 per cent of the transaction amount for larger transfers. The service can also be used to send money within the Philippines. As of March 2006, approximately 1.3m of Globe's subscribers had registered as G-Cash users, and the G-Cash system was handling about US$100m per day. Globe plans to make the service even more convenient for users in the near future by allowing many of its Mobile Communications 700,000 airtime-loading retailers in the Philippines to dispense G-Cash to clients, thus obviating the need for a trip to a Globe Telecom store. The mobile remittance services introduced by the Philippines' operators in recent years have proven highly successful for all parties concerned: the operators are taking commissions on cash transfers, while expatriate Filipino workers are sending money home to their families faster, more cheaply, and more securely than previously possible. The success of the Philippine operators' SMS remittance services can be attributed to three factors: One, The huge flow of remittances from abroad offered a very attractive opportunity to Philippine mobile operators: about 10 per cent of the country's 86m people work abroad, and the Philippine Central Bank estimates that remittances reached US$13.4bn in 2006. Two, The familiarity of Philippine mobile users with SMS messaging was another key factor. Because text messaging, at under US$0.02 per message, is so much cheaper than prepaid voice minutes, 90 per cent of the country's 35m subscribers use SMS services regularly, and the average user sends about seven text messages every day. Three, The flexibility in the regulation in allowing a product which blends banking and mobile services also deserves some credit, although the government was no doubt also interested in maximizing the amount of remittances which enter the country via formal rather than informal channels. Source: Pyramid Perspective-Africa/Middle East, 17Apr 2007, Global Technology Forum, and Economist Intelligence Unit

17

Box-6: Remittance services through Smart Card in India Financial Information Network and Operations Ltd. (FINO) has launched the revolutionary Remittance services enabled on its smart card technology which can potentially change the way remittances are done in the country. FINO, a Mumbai-based biometric-enabled smart card solutions provider, engaged in providing financial, non-financial products and services to the unbanked rural & urban masses has enrolled about 6 million customers to avail them basic banking and insurance services. Since its inception, FINO has meticulously reached out to the non banked sectors of the country and has played a pivotal role in strengthening the banking radar of India. FINO is on rapid growth journey and is working with Andhra Bank, Corporation Bank, ICICI Bank, ICICI Lombard, Oriental Bank of Commerce, Punjab National Bank, State Bank of India, Union Bank of India, Sewa Bank, and other financial institutions. The remittance solution aptly named Fino-Tatkaal is acts as a bridge between the remitter and beneficiary, providing the geographical coverage, scalable technology platform and processing capabilities for remittance transactions. In simple terms FINO Tatkal enables domestic (city to village) and International (overseas workers to Villages) remittances through a formal remittance delivery channel using FINO Smart Card technology to the last unbanked mile. These services are currently made available to the existing customer base of FINO in the areas of Shivaji Nagar and Dharavi in Mumbai with the help of Union Bank Of India. FINO Tatkal provides various advantages over non-formal channels with a combination of convenience, safety, speed and cost effectiveness. So it comes as no surprise that the service has proved to be a major hit among the migrant works living in these areas that have the unique remittance needs with lower ticket size and variable frequency. The service has been live for more than just a month and has already seen sizable volumes. The service has been developed using FINO's proven solution of biometric authentication based Transaction processing system and provides a 100% safe, fast, electronic and convenient way to deliver remittances to the doorstep of beneficiaries in the remotest areas. Currently FINO rolled out 1200 locations in 16 states with strength of 4000 Business Correspondent in India. The product has currently been rolled out in all areas of Mumbai with the help of Union Bank of India and families of Migrant workers in UP and Bihar are already benefitting from these services''. He further added that due to Manual agent based collection and disbursal system, the timing can be adjusted to suit the convenience of both remitters and beneficiaries Remitter can keep depositing money into Beneficiary account as and when he has surplus, so this avoids need to carry cash around and wait to save a lump sum. Wide network of FINO enables the customer to access the services in seamless manner even if he moves to different parts of the city or country. Source: www.fino.co.in (June 04, 2009)

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Box-7: E-Remittance Product by HNB, Sri Lanka HNB (Hatton National Bank) has developed an innovative e-product, the Money2Home remittance service. The Money2Home system transfers funds from any country to any designated account at any branch of HNB in real time. The striking feature of Money2Home is that the transfer can be done through the Internet. The transfer can take place if one is a member of HNB's Internet banking service, or by visiting an appointed money agent where clients can obtain the same service for a nominal competitive rate. The IT Research & Development Division of HNB has been successful in keeping the initial development costs to an extremely low level. This has enabled the Bank to offer a competitive pricing structure. Features of the service include: Maintaining money agent's accounts in different currencies by the bank; Maintaining customer accounts for regular clients by the agent; A magnetic card is issued to the customer for easy identification & speedy service; Regular beneficiaries are identified and linked to the agents account in the system; Money agent maintains daily currency rates; Non-account holders also can carry out transactions where the beneficiary is requested to provide a form of identification; System provides beneficiary details, currency conversion rate & commission amount when the customer account number is entered by the money agent. These features are expected to reduce the processing time at the money agent's end. Customer receipt and agent daily transaction details can be obtained through the system. And money agent could view the status of the transaction at the receiving end (confirmation that the money has been received by the beneficiary). The banks targets the following development in near future: When the money is received to the account the beneficiary can be informed through mobile SMS (Short Message Service) Customer could transfer funds online using Credit or Debit card through HNB Internet banking. Senders could make an online payment using a credit card, and the recipients will be issued with a debit or credit card. This card is reloadable or funds could be received in real time. Recipients can use the card to withdraw cash at anATM or to purchase items at any card merchant Source: C PAbeywickrema, Remittances, Microfinance and Technology Hatton National Bank, Sri Lanka.

Box-8: A Few Instances of Adoption of Technology Based Solutions in Different Countries for Remittance Transfer ¨ Mobile operators join forces with banks and MasterCard to allow people to send remittances through mobile phones. In February the GSM Association, which represents many of the world's mobile carriers, launched a pilot program that could reduce the cost of sending small remittances by combining the extensive networks of mobile phone networks with financial services. Nineteen mobile operators active in more than 100 countries are partnering with banks at the local and regional levels, and linking to convey international transfers through a global MasterCard hub. (Continued)

19

Box-8: (Continued)

¨ Microsoft Philippines and Rizal Commercial Banking Corp. launch new Wi-Fi technology to facilitate money transfers. The service uses phones equipped with the Windows operating system to connect users to a Microsoft server in a wireless area. Customers can then manage funds in a bank account from their mobile phones. To use the service, workers abroad must open an account with RCBE TeleMoney; they can then transfer money from one account to another from their cellular phones. ¨ ICICI Bank launches “Money2India” remittance card and Money to Home services. Money2India is a service available to Indian remittance recipients at any Visa-affiliated ATM. ICICI maintains over 25 per cent market share in the Indian remittance sectorthe largest remittance-receiving market in the world. The Money to Home service will enable remittance transfers from any country to another. Money to Home is currently available in the United Kingdom and Canada and will soon expand to other regions. ¨ Citigroup and Obopay Inc. partner on mobile banking. Citigroup agreed to a pilot person-to-person mobile payment service with mobile-payment processor Obopay Inc. for new and existing card holders. This service will allow instant transfers via mobile phones into mobile payments accounts that also allow for account management, including viewing balances and payment histories and making payments. ¨ Orlandi Valuta has teamed up with Transferunion to offer money transfer services in Ecuador. Transferunion, acting as Orlandi Valuta's agent, will enable consumers to receive money in more than 91 ACTIVA locations in 49 cities in Ecuador. (Activa is Transferunion's payment network, based in supermarkets and other retail stores.) Furthermore, Ecuadorians in the United States can send funds to Ecuador from any Orlandi Valuta agent location nationwide. ¨ New system opens in Nepal's market: eXpress Money Transfer (eMT). Laxmi Bank of Nepal launched its internet-based online remittance service to facilitate international and domestic money transfers. The eMT service is designed to formalize and streamline the money transfer market and reduce reliance on informal channels, a process known as “hundi.” ¨ Card-based transfers are available to Brazil. American Cash Exchange, Inc. and Banco Redimento have introduced Poni Card, a stored-value product that deposits money into an account in Brazil through use of a PIN provided by the purchaser of the Poni Card in the United States. Banco Redimento is the premier remittance payer through deposits to accounts in Brazil; it processed more than 800,000 remittances in 2006 and serves 300,000 Brazilians living abroad. ¨ Western Union teamed up with the mobile phone operator that serves 77 million subscribers in the Middle East, Africa and Asia. Orascom Telecom operates in several top remittance-recipient countries in the world, including Bangladesh ($6.6 billion in remittances in 2007), Pakistan (Continued)

20

Box-8: (Continued)

($6.1 billion) and Egypt ($5.9 billion). Orascom Telecom networks reach areas where access to financial services is limited; its partnership with Western Union is expected to extend money transfer services to many families. ¨ Tigo, Paraguay's largest mobile phone operator, has attracted 50,000 users to its electronic payment system, called Tigo Cash. The mobile phone company has over 2.6 million subscribers in Paraguay, a 44 per cent share of the market. Tigo's mobile banking system is being tested in Paraguay before it is launched at other subsidiaries around the world. ¨ Moneybookers, a European online payment system provider, partnered with SendMoneyHome.org, the UK money transfer comparison website, to allow instant online money transfers. Moneybookers also launched a remittance service with Mukuru, an online remittance company founded by Zimbabweans based in the United Kingdom. Instead of money, the recipients receive a “TXT coupon” to their mobile phones. The coupons can be redeemed for actual goods across a network of local stores, banks and petrol stations. People across 230 countries and in 32 different currencies can access this service. ¨ SWIFT launches Workers' Remittances 1.0. The money transfer platform's pilot project ran from October 1, 2008 to March 31, 2009. More than 20 banksseveral of which were based in Colombiahave agreed to test the pilot, which promises to cut the cost of other remittance methods by removing the middleman. ¨ First Data Corp., electronic payment operator, and mFoundry, mobile platform provider, have teamed up to deliver mobile banking services to financial institutions and mobile subscribers, and Western Union has joined GSMA, the global trade association of 700 mobile phone operators. In specific corridors, international remittances processing provider MonetaExpress signed a venture with Cyphermint to provide the technology for electronic payment solutions between the United States and the countries of the Former Soviet Union, Eastern Europe, and Israel. ¨ Indian bank ICICI launched the “Call and Remit” service for Indian expatriates living in Bahrain. Through this service, a customer of ICICI Bank in Bahrain can transfer money to his/her family in India by phone. ¨ China Unionpay (CUP) and Singapore OCBC Bank, in partnership with four Chinese banks, launched a real-time remittance service to China. The service allows overseas Chinese to deposit money through banks, ATMs, or mobile banking and to immediately withdraw funds from over 7,000 bank branches or almost 500,000 ATMs throughout China. CUP cards can also be used for purchases at over 870,000 merchants worldwide. Other large banks, including the Agricultural Bank of China, are planned for inclusion in the program. (Continued)

21

Box-8: (Continued)

¨ Afric Xpress expands mobile phone payment and domestic remittance services. Afric Xpress Services Inc. will use Cyphermint Inc.'s “txtNpay” technology to expand services available to subscribers in Ghana. Using the mobile wallet technology, subscribers will be able to purchase goods, pay bills, and transfer funds between bank accounts. ¨ M-Paisa becomes Afghanistan's first mobile money transfer service. Vodafone and Roshan, an Afghan mobile phone operator, are forming a partnership to provide financial services, such as loan disbursement and repayment, in collaboration with microfinance institutions such as the First Micro Finance Bank and FINCA, among others. Roshan's retail outlets will serve as points of service to pay in or withdraw money. To serve clients who are illiterate, the companies are developing a voice recognition system. ¨ Anam Mobile, a company that provides SMS services to global mobile operators, signed a partnership with TR2 Communications that will provide the transaction application for money transfer operations via mobile text messages. Another venture, formed by Mobile Plus and FEMobile, allows expatriates to purchase and transmit pre-paid vouchers, and recipients in the origin country to either use them to make low-cost calls or redeem them for cash at a local participating outlet. Mobile Plus Ltd. provides low-cost international call credit and remittance services using a dual-purpose card, while FE Mobile Ltd provides a mobile security platform. Also, First Data Corp., electronic payment operator, and mFoundry, mobile platform provider, have teamed up to deliver mobile banking services to financial institutions and mobile subscribers, and Western Union has joined GSMA, the global trade association of 700 mobile phone operators. In specific corridors, international remittances processing provider MonetaExpress signed a venture with Cyphermint to provide the technology for electronic payment solutions between the United States and the countries of the Former Soviet Union, Eastern Europe, and Israel. Sources: Migrant Remittances News Letter (Different Issues)

Development of domestic payment infrastructure is the pre condition for development of efficient remittance transfer system. Suki (2007) observes, the recipient countries require a consistently well-functioning communications and information technology infrastructure; however, financial institutions find it overly costly to establish and maintain liquidity in remote ATMs. Considering the wide scale use, mobile phone banking is perhaps the best financially viable option that is easily scalable across geographies (Bueno, 2008). With mobile phones, customers do not have to walk miles to find a banking branchthey are instead carrying the banking branch in their pockets. Some mobile phone based models have already got popularity in a few countries (Box-9). However, it is important to note that mobile phone banking is not the only good option available for linking customers to financial services. Other options can utilize point-of-sale agents/devices in manners such as post offices, mobile vans, and ATMs. Central banks should facilitate and provide leadership, where necessary, in developing the domestic retail infrastructure. BIS and WTO (2007) have

22

suggested some actions in this connection: One, business models that profitably support the expansion of the branch, agency or electronic banking networks (eg ATMs and internet banking schemes) of existing and potential RSPs into rural or smaller urban areas, especially in receiving countries, could be encouraged; two, increased interoperability of networks for specific types of payment instruments, notably payment card and ATM networks, can provide increased access to remittance services when such technologies are employed by RSPs; three, organisations that have large branch networks, such as major banks or national postal services, particularly in receiving countries, could be encouraged to play a bigger role in providing remittance services; four, in both sending and receiving countries, banks and other deposit-taking institutions could be encouraged to develop basic low-cost payment accounts and services for retail clients (which could then be used for remittances); Five, banks or other deposit-taking institutions should hold the account but access to those accounts for payment services should be decentralized. For this purpose, banks should contract with other types of institutions such as the post office, lottery houses, drugstores and other small retailers that are willing to act as agents to provide payment services to end users. Box-9: Linking Customers to Financial Services through Mobile Phones and other Options Mobile phone banking is one of remarkable financially viable option that is easily scalable across geographies. Till date, there are two broad types of mobile banking came into operation: Bank-led model and Non-bank led model. In bank led model a banking service provider delivers financial services through a retail agent who can communicate with the bank using a mobile phone or a point-of-sale (POS) device. The bank maintains the customer account. The retail agent operates it. In case of Non-bank led model (also called telco-led model), customers exchange cash at a retail agent in return for an e-money account. This virtual account is stored on the server of a nonbank, such as a mobile operator or an issuer of stored-value cards. Commercial banks are often used to hold the net proceeds of e-money issued by the firm, which offers e-money accounts. It is sometimes argued that there is a third model, a hybrid between the two previous models, in which customers have both a bank relationship and an e-money account. The difference is that in the bank-led model, commercial banks are the ones at the driving wheel, while in the non-bank led model, the mobile operator is the one in charge. For example, Wizzit, owned by The SouthAfrican Bank of Athens and based in South Africa, and XacBank, based in Mongolia, are M-banking bank-led models. M-Pesa, owned by Safaricom (which in turn is owned by Telkom Kenya, 60%, and Vodafone, 40%) and based in Kenya, and G-Cash, owned by Globe Telecom and based in the Philippines, are examples of M-banking non-bank led services. The most important problem facing the mobile banking business nowadays is the general lack of regulatory guidance and oversight in its activities. No one really knows who is responsible if some thing goes wrong. This issue poses the possibility of an increased risk to M-banking customers and to the financial sector in general if less responsible actors were to enter the field.An additional (Continued)

23

Box-9:(Continued)

Problem within the legal framework is that banking and non-banking agents who are engaged in similar activities are subject to totally different regulatory regimes in the same country. It is important to note that mobile phone banking is not the only good option available for linking customers to financial services. Other options can utilize point-of-sale agents/devices in manners such as: Post offices: Banco de Crédito in Peru has started creating new banking agents in post offices. In 2006, it managed to roll out 1.5 banking agents per day (more than 1,000 banking agents on that year). Mobile vans: Both Credibanco (Colombia) and BASIX (India) have started using mobile vans to access potential customers. These vans function as mobile banking branches. ATMs are also a well-known alternative to gaining access to unbanked customers. However, they are saddled by high fixed set up costs, maintenance costs and, sometimes, unreliable services. Source: Compiled from Bueno (2008); Porteous (2006); Sultana (2010)

3. Cost and Time - Important Determinants of Remittance Transfer Available literature clearly recognized cost and time as among the most crucial determinants and key concerns of remittance transfer. Ratha (2009) rightly points out, key problems in global remittance flows are: these are usually expensive, sometimes slow, sometimes inconvenient and occasionally unreliable. Actually, the criteria determining the mode of transfer depend on constraints faced by both parties beneficiaries and migrants. The beneficiary's decision is predicated on: (i) rapidity and (ii) accessibility of funds (geographic coverage of the distribution network). The beneficiary informs the migrant about the options available. The migrant's subsequent decision is principally contingent on: (i) accessibility, (ii) cost, and (iii) security of the remittance (AFDB, 2008). Costs or fees for remittance services can be complicated for senders and receivers to understand. Pricing is sometimes based on a percentage and sometimes a flat fee, in both cases usually with a minimum floor fee to discourage small transactions. The fee structure tends to be regressive in that small transfers face proportionately higher fees (Suki, 2007). The transaction fee and the charge of a foreign exchange spread are the two most common components of the price of a remittance. Receiving institutions may occasionally charge an additional fee for home delivery or receipt in a remote area. It may also be difficult to know if a remittance transferred through correspondent banks will require an additional processing charge on the receiving side (CPSS 2006). The new money transfer service offered by certain

24

banks also does not provide a fixed foreign exchange rate at the time of the transaction's origination, but rather only at settlement, worsening the lack of transparency to the customer (Suki, 2007). The average charge is reported to have been around 12 per cent of the principal in 2004, a study by Kalan andAykut (2005) noted. Prices are believed to have declined recently but are still very high in case of low-volume. Currency-conversion charges are even less transparent than remittance fees (Kalan andAykut 2005). Major money transfer agencies such as Western Union and MoneyGram apparently charge higher remittance fees than banks and other financial institutions. Informal channels such as Hawala are reported to be cheaper than formal services. Some heavily traveled remittance corridors, such as United States Mexico and South Africa-Mozambique, are much cheaper than others. Urgent transactions delivered in minutes cost much more than next-day transfers, and electronic transfers cost more than bank checks or drafts, because they also clear much faster than the latter. The use of Internetbased technology for messaging and advanced clearing and settlement has reduced the time and cost of remittance transactions in some cases (World Bank, 2006). For remittance low cost has often been very important. Traditionally there is a trade off between cost and quality. Quality indicates speed, reliability, security and convenience. Now technology may enable better quality services at lower cost (Cirasino, 2007). Average remittance fees, as a percentage of money sent, decline rapidly as the transaction size increases (Figure-1). Ratha (2009) observes that exorbitant fees - 13 per cent on average and frequently as high as 20 per cent charged by money transfer agents are a drain on hardearned remittances.And these fees especially affect the poor. Figure-1: Remittance costs Decline as Transaction Size Increases Cost of Money Transfer from Brussels by a Major MTO 25% 20% 15% 10% 5% 0% 0

200

400

600

Amount in Euro Source: Ratha (2009)

25

800

1000

Ratha (2009) observed that even with the existing cost structure, there may be scope to reduce average remittance costs by 'bundling', i.e., by enabling senders to remit more money but less frequently. According to the above figure (Figure-1), for example, if a person sends 150 euros per month for a period of six months, the total remittance cost would be 10 per cent or 90 euros. If on the other hand, this person were able to send the entire 900 euros in one transaction, the remittance cost would fall to just over 4 per cent or under 40 euros. The difficulty, of course, is that many poor remittance senders typically do not have sufficient funds to be able to 'bundle' remittances. Banks and microfinance institutions could play a role in alleviating such liquidity constraints and reduce the effective cost of remittances. Unfortunately, a large number of migrants, especially those who are poor or undocumented, do not have bank accounts. Improving migrant workers' access to banking in the remittance-source countries (typically developed countries) would not only reduce costs of remittances, it would also lead to financial deepening in many receiving countries. Remittance flows could be facilitated by using existing retail financial infrastructure, such as postal savings banks, commercial banks, or microfinance institutions in rural areas (Ratha, 2009). Higher cost has been one of the reasons for choosing informal channels by many remitters. In case of Africa, migrants prefer less expensive informal circuits (8-10% on average for rapid transfer systems, with a proportionately higher cost for smaller amounts, up to 20%). A reduction in the transaction cost would bring this market share to formal channels, similar to what Western Union achieved on the ItalySenegal corridor. Here, a 50 per cent reduction in cost resulted in a sharp increase (+30%) in the use of the formal channel (AFDB, 2008). Use of ICT has made possible to reduce transaction cost in a number of instances. The Philippines experiences with SMART Money and G-Cash have shown that for a USD 20 remittance, as much as 6 per cent transactions costs can be saved (details in box-5). Bilateral initiative between the U.S. and Mexican authorities and industries (and integration of ACH) encouraged shifting customers from informal to formal systems and was successful in reducing transfer costs. In this area of remittance, the goals of the agreement were to: to reduce the cost of transactions; and to facilitate the transformation of remittances into productive activities, generating access to more integrated financial services (World Bank, 2005). One of the lessons of US-Mexico Remittance Corridor is that, technological change has helped new competitors to successfully enter the market and help reduction of transaction costs. As a result of the initiatives, major advances have occurred in the development of new network platforms for facilitating and clearing transactions. The proliferation of ATM machines and the implementation of card-based remittances products have improved access and reduced the costs of serving clients. The FedACH has also provided a public network platform for account-to-account remittances among bankers.

26

World Bank (2010) summarizes how much it costs, on average, to send money from one country to another. The total cost includes transaction fees plus the exchange rate margin or 'spread'. The World Bank data show that the global average cost of sending remittance has dropped consistently since 2008. Measured at 9.21 per cent of total amount in September 2008, the average total cost reduced to 9.67 per cent in quarter 1 of 2009; to 9.40 per cent in quarter 3 of 2009; to 8.72 per cent in quarter 1, 2010 (World Bank and IFC, 2010). The information also clearly reports the differences in the prices of different country remittance corridors. Table-6 shows that Singapore-Bangladesh is the cheapest remittance corridor in the world for the remitting small amount like USD 200 or USD 500. However, this may not be true for all volumes. Large volume of remittance typically implies lower average cost (World Bank and IFC, 2010). However, as the amount changes the cost does not change proportionately in all corridors. Table-6: Top 5 Least Costly and Most Costly Remittance Corridors USD 200

USD 500 Least Costly Corridors

Corridors

Cost [USD]

Corridors

Cost [USD]

Singapore to Bangladesh

4.48


6.19

United Arab Emirates to Pakistan

4.87

United Arab Emirates to Pakistan

6.75

Singapore to Philippines

6.12

Singapore to Philippines

9.09

United Arab Emirates to Sri Lanka

6.29

United Arab Emirates to Sri Lanka

9.13

Malaysia to Philippines

6.88

United Arab Emirates to Philippines

10.08

Most Costly Corridors Australia to Papua New Guinea

43.32

Australia to Papua New Guinea

76.21

Tanzania to Rwanda

40.78

United Kingdom to Brazil

65.77

Brazil to Bolivia

31.88

United States to Brazil

61.32

United States to Brazil

31.37

Singapore to Pakistan

57.25

United Kingdom to Rwanda

30.72

United Kingdom to Zimbabwe

51.81

Source: World Bank Web (http://remittanceprices.worldbank.org/RemittanceCosts)

27

Cost varies among different channels: banks, MTO, post offices etc. Generally, it is relatively expensive to send remittance through commercial banks. The global average cost for sending remittances was 12.38 per cent in quarter 1, 2010, compared to the global average of 8.72 per cent. On average, post offices and MTOs were the cheapest with averages 6.72 and 7.09 per cent respectively (World Bank and IFC, 2010). There are also evidences of increase in average cost of sending remittances in some countries/corridors. Ratha (2009) notes, it is difficult to see why remittance fees should be so high, and why they should increase - rather than stay fixed - when the amount of transfer increases. It appears that the regulatory framework is flawed. Fixing this problem would involve policy coordination especially harmonizing regulatory and compliance requirements - in both source and destination countries (Ratha, 2009). World Bank and IFC (2010) estimates, if the cost of sending remittances could be reduced by 5 per cent point relative to the value sent, remittance recipients in developing countries would receive upto USD 16 million more each year than they do now. AFDB (2008) notes that the vast majority (90%) of beneficiaries are unaware of the cost of remittances. Such costs are solely the burden of migrants, who often have to meet the demand for urgency and rapidity. Most of the migrants themselves (70%) are unaware of the various costs; hence, cost is not always the principal factor in the choice of the mode of transfer. Most remittances (around 80%) are made in response to emergency needs of beneficiary households, to cover food etc., or because of an exceptional situation (illness, ceremonies, etc.). Thus, one of the principal factors in the choice of transfer operator is the speed of the transfer to respond to the emergency (AFDB, 2008). Since the cost is not the prime factor influencing decision-making, operators generally do not highlight this factor. Instead, they emphasize the quality of services proposed (proximity, rapidity), and after ensuring the quality, a remitter's focus shifts to the cost aspect (AFDB, 2008). Banks and MTOs have been working hard to improve the quality of the remittance services, and role of new technologies have been playing major roles in this connection. Informal sector has its traditional advantage of being quicker than the formal sector operators. Ahmed (2006) notes, Hawala transfers remain fast, generally quicker than any official system, so funds can be collected by recipients in as little as two hours. This can be contrasted with the week or so (from two to seven days to complete) required for international wire transfer involving official sector, as delays due to holidays, weekends or time differences (US Department of the Treasury, 2003). In case of informal transfer, funds are often delivered 'door to door' within 24 hours by a correspondent who has quick access to villages even in remote areas (El-Qorchi, 2002). There are evidences that services using new technologies by RSPs (banks and MTOs) have reduced the time gap or speed differences between formal and informal operators (Table-7).

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Table-7: Time Requirements in Sending Remittances Sending Country: Saudi Arabia; Recipient Countries: Egypt, India, Jordan, Yemen, Pakistan, Philippines, and Bangladesh Players MTO (2010) Bank (2010) MTO (2008) Bank (2008)

Instantly/Same day 24 (80%) 13 (65%) 12 (75%) -

1 day 3 (10%) 6 (30%) 2 (12.5%) 8 (45%)

2 days 3 (10%) 1 (5%) 2 (12.5%) 6 (33%)

3 days 4 (22%)

3 days plus -

Total 30 (100%) 20 (100%) 16 (100%) 18 (100%)

Sending Country: Singapore; Recipient Countries: China, India, Indonesia, Malaysia, Pakistan, Philippines, Thailand, and Bangladesh Players

Instantly/Same day

1 day

2 days

3 days

3 days plus

Total

MTO (2010) Bank (2010) MTO (2008) Bank (2008)

46 (43%) 7 (28%) 24 (56%) 2 (20%)

28 (26%) 6 (24%) 8 (19%) 3 (30%)

6 (6%) 2 (8%) 4 (9%) 1 (10%)

2 (5%) 2 (20%)

27 (25%) 10 (40%) 5 (11%) 2 (20%)

107 (100%) 25 (100%) 43 (100%) 10 (100%)

Sending Country: Malaysia; Recipient Countries: Indonesia, Philippines, and Bangladesh Players MTO (2010) Bank (2010) MTO (2008) Bank (2008)

Instantly/Same Day 14 (82%) 2 (13%) 4 (57%) -

1 day 2 (12%) 3 (43%) 1 (14%)

2 days 5 (31%) 3 (43%)

3 days -

3days plus 1 (6%) 9 (56%) 3 (43%)

Total 17 (100%) 16 (100%) 7 (100%) 7 (100%)

Sending Country: UK; Recipient Countries: China, India, Jamaica, Kenya, Nigeria; Pakistan, Philippines, Sri Lanka and Bangladesh Players MTO (2010) Bank (2010) MTO (2008) Bank (2008)

Instantly/Same Day 55 (55%) 5 (30%) 34 (49%) 2 (25%)

1 day 31 (31%) 3 (16%) 30 (44%) 2 (25%)

2 days 6 (6%) 4 (24%) 1 (12.5%)

3 days 2 (3%) 1 (12.5%)

Note: Calculated from World Bank web (http://remittanceprices.worldbank.org)

29

3 days plus 9 (9%) 5 (30%) 3 (4%) 2 (25%)

Total 101 (100%) 17 (100%) 69 (100%) 8 (100%)

In the year 2010 (quarter 1), most of the MTOs transfers were accomplished instantly or on the same day (Table-7). Table-7 shows that 80 per cent of remittance transfers by MTOs from Saudi Arabia in the first quarter of 2010 reaches to the recipients of the major destinations (Egypt, India, Jordan, Yemen, Pakistan, Philippines, and Bangladesh) immediately or on the same day. Even a good number of banks are now in a position to deliver remittances on the same day. The data clearly indicates improvement in the speed of remittance transfers in between 2008 and 2010 by MTOs and banks (Table-7). And there is no doubt that use of ICTs made it possible. Table-8: Speed of Remittances in Different Transactions Transaction

Any Client

Participants

Payment

Speed

Any

MTOs, some credit unions on a limited basis

Cash, money order, stored value debit card

Instant or within hours

Clients with access to credit

MTOs, including online MTOs

Credit card

Instant or within hours

Banked recipients, also to build unbanked clients

Some MTOs, some credit unions on a limited basis

Banked senders, also to build unbanked clients

Banks and credit unions in US and Europe, esp. Spain; online MTO providers

Sending account debit; debit card sending side; cash, stored value card or ATM for recipient

Banks and credit unions in US and Europe, esp. Spain

Sending account debit; debit card sending side; ATM card for recipient

Cash-to-cash

Credit card-to-cash

Cash-to-account

Account-to-cash

Account-to-account

Banked on both sides, also to build unbanked clients

Note: Compiled from Suki (2007)

30

Cash, receiving account credit

Normally next day; can be as long as 2-3 days Instant or within hours for MTOs; Hours, next day or longer for banks/credit unions Next day or longer for banks/credit unions; can be as long as 2-3 days

The speed varies in various services and products offered by RSPs (Table-8). Most RSPs offer similar service point-to-point cross-border money transfer, available instantly for the largest firms or within hours for others, both payable and disbursed in cash, with access to multiple points of service for both origination and distribution. Still there are service innovations related to payment instruments currently on offer in the market. This service differentiation relies on more intensive use of technology to ensure precision and speed in messaging and execution, as well as to connect banking networks across borders (Suki, 2007). 4. Trend and Magnitudes of Remittance Flows- Bangladesh Perspective Overseas remittances have been one of the most remarkable aspects of Bangladeshi labour exports. Worker remittances have consistently increased over the years (Fig-2). From less than USD 25 million in the mid-1970s, the volume of workers' remittances surpassed USD billion mark by the early 1990s. The remittances flows became speedier mainly since the early 1990s and reached at the figure of USD 10.721 billion in the year 2009 (BMET Web, 2010). According to the World Bank (2009), Bangladesh was among the top ten recipients of migrants' remittances during the year 2008. Despite the slowdown of overseas jobs in response to the 2008-9 global crises, inflow of remittances has maintained an upward trend in the country. Figure-2: Remittance Flows and Growth of Remittance in Bangladesh over 1976-2008 Remittance Flow s in Banglades h over 1976 - 2008

10000.00 9000.00 8000.00 7000.00 6000.00 5000.00 4000.00 3000.00 2000.00 1000.00 0.00

Year

(Continued)

31

Figure-2: (Continued) G r o w t h Ra t e o f Re m itt a n ce s d u r in g 1 97 6 - 2 008

80

60

40

20

0

-20

-40 Ye ar

Source: BMET Web

Worker remittances have registered consistent growth over the years (Figure-2). During 1980-85 the annual average growth rate was around 7 per cent that has become double during 2001-05. During FY 2006-2008, the country registered an annual average of over 20 per cent rise in the worker remittance flows. In FY 2008, the remittance growth through formal channel increased to over 37 per cent as compared to less than 20 per cent of the previous year (Figure-2). The World Bank (2009) data show that remittance flows to developing countries reached USD 328 billion in 2008, up 15 per cent from USD285 billion in 2007. South Asia registered a 33 per cent growth in remittance flows, sharply higher than the earlier estimate. India, China and Mexico retained their position as the top recipients of migrant remittances among developing countries, the top 10 list also includes Philippines, Poland, Nigeria, Romania, Egypt, Bangladesh, and Vietnam. In contrast, the top recipients in terms of the share of remittances in GDP include many smaller economies. However, Bangladesh is not among these. The slowdown in remittance flows that became evident in the last quarter of 2008 has continued into the first half of 2009. Officially recorded remittance flows to the Latin America and the Caribbean region have dropped significantly in the first half of 2009, flows to some countries in South and East Asia are still growing but the rate of increase slowed. Bangladesh reported falling remittance inflows from the US while the flows from the Middle Eastern countries continue to remain strong (World Bank, 2009).

32

Sources of Remittances

The United States is the top destination and largest source of remittances for the developing countries. According to World Bank (2008), 39 per cent of the remittances to the developing countries flow from USA. However, 80 per cent of the remittances go to the Latin American and Caribbean countries. Though remittance flows from Gulf countries to the developing countries is only 8 per cent, it accounted for 63 per cent of the remittance inflows for Bangladesh (World Bank, 2008). A good number of Bangladeshis have been working in the Middle Eastern countries like Saudi Arabia, UAE, Kuwait, Oman etc who send a considerable volume of worker remittances every year. A considerable volume of remittances also flows in from UK and other developed countries. However, only five countries accounted for about 85 per cent of the total remittance flows to the country (MOF, 2008). Figure-3: Sources of Remittance Flows to Bangladesh from Major Countries during 1990-2008 Sources of Remittance during 1990-2008 425000

325000

K.S.A U.A.E

225000

Kuwait Oman Qatar Bahrain 125000

Malaysia S.Pore

25000

1989

1994

1999

2004

-75000

Year

Note: Graphs based on BMET Web Data

33

2009

Channels of Remittance Flows

Using informal channel for sending remittances to the developing countries has been a common practice. Appropriately capturing workers' remittances is a daunting task in view of substantial under-recording of flows through formal channels. It is true that recorded remittance flows have surged in recent years, driven by a combination of factors like better data collection, greater awareness of the development potential of remittances, concerns about money laundering and terrorist financing; lower costs and wider networks in the industry that supports remittance; and growth in the number of migrants and their incomes. Alongside these, government policies to improve banking access and the technology of money transfers have also helped increase the flow of remittances and promote their transfer through formal channels (Global Economic Prospect (GEP), 2006). However, still one cannot deny that officially recorded remittance estimates may significantly underestimate the real magnitude of remittances. The World Bank household survey suggests widespread use of informal remittance channels. In some countries the use of informal channel is below 5 per cent (such as Dominican Republic, Guatemala ) whereas in some countries it is above 80 per cent (such as Uganda). Like in other developing countries, money is sent in cash or in kind and using both formal and informal channels in Bangladesh. The most common formal method had been to use drafts issued by a bank, which are sent by mail and then cashed. This method is usually very slow. In recent time, SWIFT and e-mails are commonly used that are much faster. The most extensive informal method used by Bangladeshi migrants is the hundi system, which oftentimes circumvents existing tax and foreign exchange regulations, and may even facilitate money laundering (Buchenau, 2008). While it is extremely difficult to estimate the flows through informal channels, they appear to be large. Other than popular informal channel of remitting fund through hundi , money is sent through relatives, friends, neighbors or other country mates traveling to the home country. According to staff estimates of the World Bank based on household survey, in Bangladesh 54 per cent uses informal channel in remitting funds from abroad (as quoted in Global Economic Prospect, 2006). Based on some studies, Azad (2006) noted that around 40-50 per cent of the total volumes of remittances are sent through unofficial channel. Siddiqui and Abrar (2001) in their study conducted in two thanas of Chittagong and Tangail found that 46 per cent of the total volumes of remittance to these households have been channeled through official sources, around 40 per cent came through hundi, 4.6 per cent moved through friends and relatives and about 8 per cent of the total were hand-carried by workers themselves when they were on

34

visits home. The main advantages offered by informal hundi system include fast delivery; door-to-door service; lower fees; and better exchange rates than those offered by formal institutions (Murshid et al., 2002). Additionally, hundi transactions do not require that senders present legal identification and this represents an additional advantage for undocumented workers in Arabic and Asian countries (Buchenau, 2008). There are indications that the popularity of formal sector is growing in the country in recent years. 5. Banks in Channeling Remittances in Bangladesh: Changing Scenario Official remittances flow into Bangladesh mainly through banks. The governmentcontrolled commercial banks (previously called nationalized commercial banks or NCBs) of Bangladesh have branches and representations abroad and have been the most-used option for migrants sending remittances through official channels. Some private banks have also been very active in the remittance market in recent years. Most banks use branch networks in the process of channeling funds to the rural areas. In this process, the foreign counter parts are mainly the exchange houses with which the banks have arrangements. Moreover, some banks also have established subsidiaries in a few countries for safe and speedy transfer of remittances. For example, Sonali Bank has established a subsidiary 'Sonali Exchange Company Incorporated' in USA with its branches/booths in eight different cities, Agrani Bank has set up 'Agrani Exchange House Pvt. Ltd.' in Singapore and Janata Bank has established 'Janata Exchange Company' in Italy. Figure-4: Growth Rate of Remittance Transfers by All Banks

45 40 35 30 25 20 15 10 2001

2002

2003

2004

2005 Year

Source: Graph based on Bangladesh Bank data

35

2006

2007

2008

Figure - 5: Growth Rate of Remittance Transfers by Government Controlled Banks

30 25 20 15 10 5 0 -5

2001

2002

2003

2004

2005

2006

2007

2008

Year Source: Graph based on Bangladesh Bank data

Figure - 6: Growth Rates of Remittance Transfers by Local Private Commercial Banks

90 80 70 60 50 40 30 20 10 0 2001

2002

2003

2004

2005

Year


36

2006

2007

2008

Figure - 7: Growth Rates of Remittance Transfer by Foreign Banks

50 45 40 35 30 25 20 15 10 5 0 2001

2002

2003

2004

2005

2006

2007

2008

Year Source: Graph based on Bangladesh Bank data

Figure - 8: Growth Rates of Remittance Transfer by Specialized Banks

600 500 400 300 200 100 0 -100

2001

2002

2003

2004

2005

Year


37

2006

2007

2008

Growth rates of transfer of remittances by different broad categories (government controlled, private commercial, specialized and foreign banks) of banks have been inconsistent over the years. Government controlled banks, private commercial banks, and foreign bank branches have maintained positive growth rates over the years 2001-2008 (Figures 4-8). A number of factors might be responsible for the inconsistencies. Different banks have good businesses in different sending countries and there is growing competition among different banks and MTOs. Moreover, the growth rates of manpower exports and volume of remittances are linked with banks' remittance businesses. The growth rates of manpower exports from Bangladesh and the volume of remittances inflows have been inconsistent over the years mainly because of the stiff competition from new labourexporting countries, economic uncertainties and unemployment in different economic regions, policy changes in different country of destinations etc. Figure - 9: Changing Market Share of Remittance Transfers among Different Bank Groups

60.00% 50.00% 40.00% NCBs

30.00%

PCBs

20.00%

FCBs

10.00% 0.00% 2000

2005

2008

Year Source: Calculated from Bangladesh Bank Data Source

Before the year 2000, over 50 per cent of the total remittances (that were sent through banks) were transferred in by the nationalized commercial banks (government controlled banks). Especially, Sonali bank, Agrani Bank, and Janata Bank were heavily engaged in the remittance businesses. These banks have traditional advantage of their huge branch network in rural Bangladesh. At that time, among the private sector banks, Islami Bank Bangladesh Ltd., Uttara Bank Ltd. and Pubali Bank Ltd. were doing relatively good (as compared to the

38

relatively small private commercial banks) with the advantage of their bigger branch networks. Over the years, the situation changed along with the composition of market share (Figure 9). Alongside using ICT tools, banks have started using the services of each other networks/branches more extensively. Bangladesh Bank has allowed banks to use the services of MFIs in distributing the remitted fund in the remote areas of Bangladesh, and accordingly some banks (e.g., BRAC Bank has engaged BRAC and NCCBL has engaged TMSS) have usefully engaged the branch networks of micro finance institutions. Dynamic strategy networking, marketing, and use of information technology have changed the market share composition. From about 17 per cent market share in 2000, the local private commercial banks have captured over 45 per cent market share by the year 2008. In contrast, market share of four major government controlled commercial banks have decreased to around 23 per cent in 2008 from about 52 per cent in the year 2000 (Figure 9). Currently, over 60 per cent of total bank branches belong to the four major government-controlled commercial banks, though this traditional advantage alone is not working as earlier. It indicates that only greater branch network cannot offer competitive advantage to a bank. Trend of using official channels for sending remittances has improved in recent years. And thus despite some negative trend of export of manpower, growth of remittances earnings through official channel increased remarkably. It can be observed that during 19962000 about 5 per cent annual average growth of manpower exports was accompanied by 10 per cent growth of remittances, whereas during 2001-2005 only about 3 per cent annual average growth of manpower exports was accompanied by about 20 per cent growth in foreign remittances. In 2008, overseas immigration grew at a rate of 5 per cent; on the other hand, remittances increased by 36 per cent during that time (calculated from Bangladesh Bank and BMET data). This may be linked to the transfer of remittances from informal to formal sector. However, only with this relationship it is very difficult to establish the transfer of remittances from informal to formal sector. For example, in 2007, the growth of remittances was considerably low as compared to the growth of manpower exports. However, it is more or less accepted by different studies and literature that more and more remitters have been shifting from informal to formal sector throughout the world. The global 'War against Terrorism' is believed to be one of the crucial contributory factors. In the context of Bangladesh, the improvement may be attributed to the enforcement of Money Laundering Prevention Act, 2009 and a series of measures by Bangladesh Bank and the commercial banks. During recent period, BB took a series of measures to encourage expatriate Bangladeshis to send their hard-earned wages through formal banking channels instead of the illegal system in order to boost the country's foreign exchange reserves.

39

Four government-controlled banks and dozens of private commercial banks have also stepped up efforts to increase remittance flow from the Middle East, the United Kingdom, Malaysia, Singapore, Italy and the United States. Box-10: DiGiREMIT Money Transfer by Mobile Phone In 2007 DiGi, the Telenor mobile operator in Malaysia, and Citibank jointly launched DiGiREMIT, a mobile banking service that enables people to transfer money from Malaysia to Bangladesh, Indonesia and the Philippines, by SMS. The aim of DiGiREMIT is to simplify and secure the transfer of money via mobile phone from anywhere and at anytime to the widest distribution networks in the three recipient countries. This enables DiGi customers, particularly migrant workers, to improve their financial security. Migrant worker remittances are often a large source of national income for recipient countries. According to Citibank research, Malaysia is a major source of migrant income for these countries. DiGiRemit is designed to simplify the transfer of money using mobile phones from anywhere and at anytime to the widest distribution networks in the three recipient countries. More recipient countries will be included later. According to the Citibank,NA Bangladesh source, advertising and marketing are not done appropriately in both Malaysia and Bangladesh, and thus people hardly know about channel. Another problem is that the Citibank does not give cash over the counter. They always give DD/Pay order to the beneficiary. But people like cash. Moreover, Citibank's customer has to come to bank premise in Malaysia or any other bank to use the method. With respect to time and cost, DIGIREMIT has no advantage or disadvantage. Its like any other electronic channel. Source: http://www.telenorgroup.com/no/nyheter-og-media/artikler/2007/secure-money-transfer-via-sms; and the bank sources.

To bring efficiency in remittance channeling, certain local banks have arrangement with MTOs. Citibank has an arrangement with Malaysia-based DiGi Telecommunications under which DiGiRemit is designed to simplify the transfer of money using mobile phones from anywhere and at anytime to the widest distribution networks in the three recipient countries including Bangladesh (Box-10). Very recently Dhaka Bank Ltd and Eastern Bank Ltd with telecom partner Banglalink introduced the country's first mobile-based remittance service in aiming to provide easy remittance service to all mobile subscribers at any part of the country (Box-11). It is expected that this bank-led mobile remittance service would discourage remittance transfer through illegal channels and due to its affiliation with formal banking systems.

40

Box-11: Mobile-Based Remittance Service Launched in Bangladesh The Dhaka Bank Ltd and Eastern Bank Ltd with telecom partner Banglalink introduced the country's first mobile-based remittance service in April 2010, aiming to provide easy remittance service to all mobile subscribers at any part of the country. The service is working through a 'Bank-led' model whereby the banks offer mobile wallet accounts to the mass through Banglalink and ensure the business processes are in line with the financial regulations of the country. Through this service, the Banks use Banglalink's payment management platform and communication network to introduce a highly secured, convenient, reliable, fast and cost effective remittance system. Selected Banglalink distribution outlets are used as Remittance disbursement cash points for the remittances sourced by the banks. Banglalink with about 2222 outlets across the country has been acting as the information carrier and platform manager along with ensuring cash point roll out and connectivity. As per the arrangement, the process for the sender or the person who initiates the transfer is more or less the same, but the delivery method is faster than ever. Mobile remittance creates cross-border mobile money transfer services for efficient international mobile money transfer scenarios for both senders and beneficiaries. An open remittance hub connects sending and receiving money channels on a single platform, rather than through bilateral agreements. The process is pretty simple. This service allows expatriates to deposit money with partnering banks and specifies the subscriber in Bangladesh who is to receive the money. The service sends a text message to the recipients, notifying them that the money has been transferred. The recipients can cash from any Banglalink remittance point by showing their mobile phone (with an SMS) and a form of personal identification. The recipients get the money from Banglalink's registered cash points or remittance points free of cost. It is expected that this bank-led mobile remittance service would discourage remittance transfer through illegal channels and due to its affiliation with formal banking systems; and the remittance transfer in this way would be secured. Recently, Robi Axiata Limited, one of the leading mobile phone operators of the country, and Eastern Bank Ltd (EBL) signed another agreement to facilitate mobile remittance service across the country. Any mobile operator's customer, who needs not to be customer of any bank, can receive this service from selected Robi Service Partner outlets. Customers have to submit a photocopy of original identity document like national identity, passport or driving licence and transaction identity at the service centres to get the service. Source: www.thefinancialexpress-bd.com,April 16, 2010 www.dhakamirror.com, December 22, 2010

41

Box-12: Project to Increase Efficiency of Remittance Payment in Bangladesh The Remittance & Payments Partnership The Remittance and Payments Partnership (RPP) is a high profile DFID-Bangladesh project designed to produce measurable impacts on the price, speed and growth of remittances in Bangladesh with an overall goal to “promote pro-poor economic growth in order to increase the incomes and employment for the poor”. The RPP Program is a 7.5 million GBP grant funding a three-year (2006-09) multi-level project. Bangladesh Bank is the Government of Bangladesh's implementing agency providing overall project direction through the establishment of a RPP Project Oversight Board. RPP's goal is to encourage the flow of remittances through formal channels to poor and rural Bangladeshi households and private micro enterprise development, and to enhance the impact of remittances on growth and poverty reduction. With a higher level of involvement of banks and other financial institutions in the remittances market, remittance recipients can benefit from access to other financial services such as savings facilities, thus being able to use remittances more 'productively,' and increasing rates of financial inclusion. The three outputs are interdependent in supporting the overall goal of increasing formal sector remittance flows. Output 1's overall objective is the introduction of a modern payments system through the implementation of the National Payment System Strategy, supported by a range of private and public stakeholders and led by the National Payment System Council. Increasing regulation of capital flows, following newly introduced anti-terrorism and money laundering, are reducing the viability of informal remittance systems for international migrant workers and inducing a shift to formal systems that need to be strengthened, and computerised. Output 1 will also support the development of an Automated Clearing House (ACH) for Bangladesh. Implementing an ACH for Bangladesh Bank is an integral part of modernizing the country's payments environment and the first deliverable of this project. Output 2 will improve the range of remittance products through the operation of a challenge fund that will provide grants for innovation and infrastructure investment. Output 3 of the project will provide better information to migrants on their rights and better understand migrants' needs. Source: http://www.rmmru.net/rpp/index-3.html

BB has also been engaged in different projects with donor agencies to improve the efficiency of remittance transfers into the country (Box-12). Under the auspices of the RPP (Remittance Payments Partnership), DFID in association with Bangladesh Bank has established the Remittance & Payment Challenge Fund (RPCF) to provide grant to selected private and non-governmental organizations subject to submission of fully fledged project plan and subsequent approval of the same. Foreign Remittance Payment Project (FRPP) of NCCBL (Box-13) is one such initiative under which the bank established partnership agreements with Thengamara Mohila Sabuj Sangha (TMSS). Approximate cost of the

42

project is Taka 9 crore required to be invested in equipment, training, incentives and marketing to achieve these objectives. NCC Bank Ltd has contributed Tk. 5 crore and Department for International Development (DFID) has contributed 4 crore taka. The project will enable the installation of electronic point of sale (POS) technology in all NCC Bank Ltd. branches and 250 remote branches of TMSS and the issuance of free debit cards to remittance beneficiaries. BRAC Bank Limited had submitted a project proposal, named 'EL DORADO' and was awarded the grant not exceeding GBP445,036 for the development and implementing the solution for channelizing migrants' remittance proceeds to the ultimate beneficiaries in Bangladesh within the shortest possible time (Box-14). The total project cost was Tk. 12 crore. Under the agreement, BRAC Bank shall procure all necessary software and licenses and necessary components including machineries and equipments for setting up the said system. In persuance to this, BRAC Bank entered into an agreement on December 20, 2008 with Interblocks Limited of Sri Lanka, to procure the software for ElDORADORemittance & Payment System. Box-13: Foreign Remittance Payment Project (FRPP) of National Credit and Commerce Bank Limited National Credit and Commerce bank Ltd, established in 1985, attaches great priority on homebound foreign remittances from Bangladeshi expatriates and has entered into agency arrangements with a number of foreign banks and exchange companies where expatriates go to send money home. To attract the expatriates to send their remittance through NCC Bank Ltd, the bank has launched a wide range of useful products, including a special saving scheme, pension scheme, income generating investment schemes and rehabilitation schemes for the repatriates. Recently, NCC Bank Ltd. has entered into a partnership agreement with Thengamara Mohila Sabuj Sangha (TMSS), which is established in 1980. TMSS is a National non government organization which is working for poor people, especially the women folk of both urban and rural areas by giving health, education and microfinance services. Now TMSS has 550 branches almost all over the country. Between the partnership of NCC Bank Ltd. and TMSS will operate the foreign remittance payment project (FRPP). It will help NCC Bank Ltd. to fulfill its objectives of smooth remittance processing and providing a convenient delivery channel for remittance The project will enable the installation of electronic point of sale (POS) technology in all NCC Bank Ltd. and TMSS branches and the issuance of free debit cards to remittance beneficiaries. Customers will be benefited by the prepaid card that will allow card transactions up to the amount of remittance. Customers can conveniently draw out their remittance in cash on the spot, or as and when they require at TMSS and NCC Bank Ltd. branches, automated teller machines (ATMs), or they use the card to buy gods and services from merchant that have POS machines. Customers will be charged 500 taka for permanent card. Within two hours beneficiaries can draw their money. There are 15 exchange houses in the world, NCCBL has agreement with those exchange houses. Any kind of implementation cost will be bear by NCCBL. Operational cost of the 250 outlets of TMSS (Continued)

43

Box-13: (Continued)

And is shared by NCCBL and TMSS. Revenue will be shared by both. Operational procedure of the project is shown in the flow diagram below -

After receiving remittance from foreign country the bank distribute the payment to the respective branches of the bank and TMSS outlets. At the same time bank sends SMS notification to TMSS branches, TMSS head office, NCCBL branches, remitter and beneficiaries through GPRS or EDGE connectivity. NCCBL maintains database, network backbone and card services with the collaboration of ITCL. NCCBL keeps the information of beneficiary according to KYC (Know Your Customer) which is recommended by Bangladesh Bank. The salient/ prominent features of the project are as follows: One, bank has entered into an agreement with TMSS having 550 branches all over the country. At first phase bank will use 250 outlets in phases located in the remote areas and where NCCBL do not have any branches. (Continued)

44

Box-13: (Continued)

Two, bank will introduce on line cash disbursement facility of the remittance i,e. remittance service through Electronic fund Transfer using Bank POS terminals in 300 centers of Bank and TMSS. Three, customers will be provided with a card free of cost loaded with remittance sent. He/she can withdraw money as per his requirements from any of the 300 POS terminals. Source: Based on NCCBL Information Sources

Box-14: Foreign Remittance Payment Project (FRPP) of BRAC Bank Ltd. The project is divided into two parts one is 'M-Remit', for the beneficiary who are the client of BRAC Bank Ltd. & BRAC and another one is 'ELDORADO- Remittance & Payment System', a common electronic platform for member banks to deliver inward remittances from the originating institutions to ultimate beneficiaries in Bangladesh. BRAC Bank Ltd. started the first part of the project using M-Remit software with 74 branches, 60 SME service centers, 3 agri branches and 1800 BRAC offices known as BDP (BRAC Development Point) out of 3600 BRAC offices. The connectivity established among the bank braches, SME service centers and BDPs using EDGE or GPRS Modems. The BDPs where IT infrastructure does not exist, BRAC Bank make the setup. Maintenance of IT infrastructure is done jointly, BRAC Bank maintains the IT setup that established by them and BRAC maintain the IT setup of BDPs that established by BRAC. They did agreement with 30 exchange houses in all over the world. For every transaction in BDPs BRAC Bank provides TK. 100 to BRAC regardless of the Transaction amount. For distributing remittance they made eight working mode in M-Remit. The modes are 1. Direct Credit; 2. Pay Cash; 3. Pay Order; DD; TT; MT; TTPO (Advise and Pay) ELDORADO is a secured web based and on-line Remittance Payment System that went live on July 25, 2009. The system platform will be a direct electronic substitute of present day manual instruments such as DD (Demand Draft), TT (Telegraphic Transfer), MT (Mail Transfer) and Pay Order used under existing inter-bank agency agreements. This remittance engine will be fully compliant with all relevant central bank regulations and will automatically provide the necessary MIS directly to Bangladesh Bank for supervision and monitoring. In ELDORADO transactions will be settled on a bi-lateral net settlement basis. Fees for Local/Foreign Remittance are Tk. 50. Presently Eldorado has 12 member banks having around 500 branches all over the country. The current members are: Al Arafah Islami Bank Ltd.; Bank Asia Ltd.; BRAC Bank Ltd.; Dhaka Bank Ltd.; EXIM Bank Ltd.; Social Islami Bank Ltd.; Mutual Trust Bank Ltd.; First Security Islami Bank Ltd.; Eastern Bank Ltd; South East Bank Ltd; Rupali Bank Ltd; United Commercial Bank Ltd. (Continued)

45

Box-14: (Continued)

Process Flow of M-Remit: Payment Service Execution Team Execution Team

Day Shift

Night Shift

Transaction Download from Gmail or Email, website sent by Exchange House

If Test Key does not match

Contact Exchange House

Exchange House Provides correct Test Key via e-mail

Test Key Matching

C

Transaction Payment Mode Selection

C

Segregation of the transactions

C

Desperado Entry Input

TT/PO/BDP Report Generation ELDORADO: C

Transaction Checking, Rectification and Authorization Record of Documents

C

Onward delivery to the next department/ Manager

(Continued)

46

Box-14: (Continued)

Salient features of the ELDORADO-Remittance & Payment System are as follows: Online transactions on real time basis; Fund transfer (inter bank & inter Branch); Direct electronic payment substitutes- Demand Draft (DD),Telegraphic Transfer (TT), Mail Transfer (MT), Pay Order; Fully compliant with all relevant Central Bank regulations; Two Types of TransactionsPayment of Foreign Remittance in TAKA, Transfer of inland Remittance in TAKA; Two broad modes of Remittance in TAKA- Payment of Foreign Remittance i.e. Exchange houses to Bank A/C Pay (within member banks), Exchange houses to Pay Cash for non-account holders (within member banks), Exchange houses to 'Advice & Pay' ( Non-member bank); Transfer of Inland Remittance i.e. Customer A/C to CustomerA/C transfer (within member banks), Customer A/C to Pay Cash for non account holders (within member banks), Customer A/C to 'Advice & Pay' (nonmember banks), Cash deposit by non-account holder to customer A/C (within member banks), Cash deposit for Cash Payment (both are non-account holder within member banks). Process of remitting fund through ELDORADO

Client will deposit money to exchange house or any of the branches of member banks.

Beneficiary gets notification by SMS/ E-Mail from Eldorado system.

Beneficiary draws the money from his account or receives cash from the branches.

Potential benefits to the Migrants include: One, no additional cost of transaction is involved in remitting money to Bangladesh using through Banks, network; two, Real time Settlement will be available in ELDORADO; three, Implementation of ELDORADO will ensure 'Straight Through Processing' (STP) thereby increasing the faster processing of transactions; four, Cash transaction will be possible through ELDORADO for the non-bank clients; five, Query for the remittance payment will be much more less due to tracking system; Six, ELDORADO system will be a secured gateway for transferring the remittance to ultimate beneficiary in Bangladesh; Seven, No individual correspondent agreement is required with each bank; Eight, The additional cost of transaction, e.g. slab wise commission, telephone cost, postage cost etc. will be reduced on per transaction; Nine, Real time E- Settlement and auto reconciliation process will be available in ELDORADO; Ten ELDORADO eliminate/reduce the need for use of physical financial instruments. Source: Based on Information from BRAC Bank sources

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6. Do the Uses of ICT Made any Differences to Banks and Clients? -Survey Observations For survey and analysis, the banks were categorized into different tiers based on their state of automation, as defined by the Bangladesh Bank guidelines. Of the commercial banks considered for the study, 25 banks belong to the category of Tier-1, 13 banks to Tier-2 and 8 banks to Tier-3 (see appendix table-1, 2, 3 for bank wise details ICT status). From different types of banks of Bangladesh, 9 (nine) banks were selected as survey samples purposively based on the consideration that the sample banks should represent all categories of banks in terms of ownership, state of computerization, and involvement in international banking transactions. Figure-10: Remittance Business Performance of Tier-1 Banks GrowthRate of Tier 1 Banks

Remittance Business Growth of Private CommercialBank

60 50

140

40

120 100

30

80

20

60 40

10

20 0

0 2001 2002 2003 2004 2005 2006 2007 2008

-20

2001

2002

2003

Year

2004

2005

2006

2007

2008

Year

Remittance Business Growth of Specilaised Bank

Remittance Business Growth of Foreign Commercial Bank Branch 140

70

120 100

60

80

40

60 40

30

20 0

10

50

20

0

-20 2001 2002 2003 2004 2005 2006 2007 2008

2001

Year

2002

2003

2004

2005

Year

Source: Based on Bangladesh Bank data

48

2006

2007

2008

Figure-11: Remittance Business Performance of Tier-2 Banks Growth Rate of Tier 2Banks

Remittance Business Growth ofPrivate CommercialBanks

140 120 100

120

80

100

60

80

40

60

20

40

0

20

-20

0

-40 2001

2002

2003

2004

2005

2006

2007

-20

2008

2001 2002 2003 2004 2005 2006 2007 2008

Year

Year

Remittance Business Growth of Foreign Commercial Bank Branches 25000 20000 15000 10000 5000 0 -5000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Source: Based on Bangladesh Bank Data

Figure 12: Remittance Business Performance of Tier-3 Banks Growth Rate of Tier 3 Banks

Remittance Business Growth of Public Sector Banks

30 25

30

20

20

15 10

10 5

0 2001 2002 2003 2004

0 2001 2002

2003

2004

2005 2006

2005 2006

2007 2008

-10

2007 2008

Year

Y ear

(Continued)

49

Figure-12: (Continued)

Remittance Business Growth of Specialised Banks

Remittance Business Growth of Private Commercial Bank 600

70 60 50 40 30 20 10 0

500 400 300 200 100 0

2001 2002 2003 2004 2005 2006 2007 2008

-100

Year

2001 2002 2003 2004 2005 2006 2007 2008

Year

Source: Based on Bangladesh Bank Data

The figures-10, 11, 12 show inconsistent but positive growth of remittance businesses by different broad categories (Tier 1, 2 and 3) of banks over 2001-2008. However, Tier-1, and Tier-2 banks have maintained much better growth rates during the period. Calculations based on Bangladesh Bank data indicate that Tier-1 banks have annual average growth rate of 35.15 per cent, Tier-2 have growth rate of 41.14 per cent and Tier-3 banks have growth of 14.35 per cent over 2001-2008. Even these percentages may give misleading picture. It must be remembered that worker remittances (to the rural Bangladesh) are basically channeled through local government-controlled and private commercial banks. Moreover, ICT related major changes have taken places mainly with local banks. The multinational banks operating in the country have always been sophisticated in terms of using ICT. If the foreign banks are excluded, the annual average growth rates of banks of Tier-1, Tier-2, and Tier-3 banks stand at 45.92 per cent, 43.62 per cent, and 14.35 per cent respectively. The remittance market found remarkable change in the market share over 2000 and 2008 by the survey banks group. As Figure 13 shows, in 2000 the market share of Tier-3 banks (with 4 by the then NCBs) were 61 per cent that came down to 27 per cent in 2008. Where as market share by the both Tier-1and Tier-2 banks increased remarkably over the period. Especially, Tier-1 banks captured almost 50 per cent market share by 2008 (Figure 13).

50

Figure - 13: Changing Market Share of Remittance Businesses among Different Survey Bank Groups (Tier-1, Tier-2, and Tier-3) 70.00% 60.00% 50.00% 40.00%

Tier -1

30.00%

Tier-2

20.00%

Tier-3

10.00% 0.00% 2000

2005

2008

Ye a r Source: Calculated from Bangladesh Bank data.

If the same analysis of changing market share is conducted excluding foreign bank branches then the success of Tier-1 and Tier-2 banks in the remittance market of Bangladesh becomes more visible. Table 9 shows the change in market share of different broad survey groups excluding foreign banks. In this case 19 private commercial banks belong to Tier-1; 9 private commercial banks belong to Tier-2; and 4 government controlled banks, 2 specialized banks, and 2 private commercial banks belong to Tier-3. Both Tier-1 and Tier-2 banks have gained remarkable improvements in terms of gaining market share and growth rates (annual average) in between 2005 and 2008. Though the market share of these banks (Tier-1 and Tier-2) remained very small in terms of branch networks (13 % and 14 % respectively), their use of ICT and strategies of networking did the magic (Table-9 and Figure 14). Table-9: Changing Market Share of Remittance Transfers among Different Survey Bank Groups (excluding FCBs) 2000 2005 2008 (% of Remittances) (% of Remittances) (% of Remittances)

Growth Rate (2005-2008)

Market Share (Branches)

Tier-1 (19)

9%

11%

27%

95.06%

13%

Tier-2 (9)

13%

16%

33%

77.90%

14%

Tier-3 (8)

78%

63%

40%

13.32%

74%

Source: Calculated from Bangladesh Bank data.

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Figure - 14: Changing Market Share of Remittance Transfers among Different Survey Bank Groups (excluding FCBs) 80% 70% 60% 50% 40%

Tier-1 (19)

30%

Tier-2 (9)

20%

Tier-3 (8)

10% 0% 2000

2005

2008

Year

Source: Calculated from Bangladesh Bank data.

Growing reliance on ICT based channels by banks is evident from the survey information. Before the year 2005, DD was the most popular form of remittance transfer mode. The survey data (Figure 15) show that banks used DD in about 82 per cent cases in channeling remittances in the year 2002 that came down to 33.5 per cent in 2007. Over the years, banks increasingly started relying on SWIFT or E-mail technology. In 2002, SWIFT was used for 12 per cent cases and E-mail for only 6 per cent cases. The figures increased to 40 per cent and 26 per cent respectively in the year 2007. Figure -15: Use of Different Channels by Banks in Channeling Remittances (Cases of transactions in Per cent) 90 80 70 60

DD

50

S W IFT

40

E -M ail

30

Others

20 10 0 2001

2002

2003

2004

2005

Ye a r

Source: Survey Information

52

2006

2007

2008

Differences in the use of channels by different categories (Tier-1, Tier-2, and Tier-3) of banks are remarkable. Tier-1 banks used DD for a very insignificant number of remittance transfer cases (5.8 per cent) during 2005-2007. However, Tier-2 and Tier-3 banks used DD for considerable number of cases during the period. Especially, Tier-3 banks used DD for more than half of the cases of total remittance transfer by these banks. Tier-1 banks relied on ICT based channels (SWIFT or E mail) for about 95 per cent cases during the period 2005-07 (Figure-16). Figure -16: Use of Channels during 2005-2007 (Tier wise) 100.00% 80.00% 60.00% DD

40.00%

ICT Based Channels 20.00% 0.00% Tier 1

Tier 2

Tier 3

Tiers

Source: Survey Information

Total cost of remitting money comprises direct costs paid to service providers in the sending and receiving countries (fees and exchange rate differentials); costs incurred by the sender to carry out the transaction; and transactions costs of the recipient in the home country. Survey data on cost of remittance flows were not available or not at all reliable. However, published sources offer valuable indications in this connection. A few years back, informal sector had considerable cost advantage over formal sector. Siddiqui and Abrar (2003) observe that the average costs for sending and receiving money through official and hundi methods (to the rural household of a few selected villages) were Tk. 287.50 and Tk. 127.53 respectively. However, the situation has changed over time. Now the difference is not remarkable. Buchenau (2008) notes, the total direct cost of sending remittances to Bangladesh through formal channels appears similar to that in countries with developed remittance markets. The study adds, banks and MTOs in Saudi Arabia, Kuwait, the USA and the UK normally charge fees in the range of USD 5 to USD 30 per remittance and offer exchange rates close to interbank rates. The total direct cost can be estimated to be about 5 to 6 per cent for amounts below USD 200 and less than 3 per cent for amounts over USD 500. Buchenau (2008) observes that the main cost factor constraining the use of formal remittance channels seems

53

to be the high transaction costs resulting from a sparse network of branches and agencies both in the host countries and Bangladesh. Table -10: Average Cost (Direct) of Sending Remittances for the First Quarter 2010 [for USD 200]

[For USD 500]

Sending Countries Average Cost in % Average Cost in USD Average in % Average Cost in USD Saudi Arabia

3.90

7.81

2.41

12.04

United Kingdom

5.68

11.35

3.32

16.60

Malaysia

5.45

10.91

3.57

17.87

Singapore

2.24

4.48

1.24

6.19

Note: Cost includes the transaction fee and exchange rate margin. Source: Calculated from World Bank data.

World Bank (2010) information reveals that the average costs in different remittance corridors vary significantly. Table-10 shows that the average cost of sending remittance from Singapore (USD 200) is only 2.24 per cent (the cheapest in the World) but the costs of sending remittances from UK and Malaysia are well above 5 per cent. However, as the amount increases, the relative cost decreases (consistent for all remittance corridors). Table-11: Comparing Costs (Direct) through Different Channels in Different Corridors (First Quarter 2010) % Total Cost [USD 200] Bank Average MTO Average Post office Avg.

6.02 3.77 7.13

Bank Average MTO Average

4.06 3.79

Bank Average Bank-MTO Avg. MTO Average

2.01

Avg. Cost in USD [USD 200]

% Total Cost [USD 500]

Malaysia to Bangladesh 12.04 7.54 14.26 Saudi Arabia to Bangladesh 8.12 7.58 Singapore to Bangladesh 4.02

Avg. Cost in USD [USD 500]

3.62 2.76 5.84

18.05 13.80 29.20

2.43 2.39

12.15 11.95

0.98

4.90

2.01

4.02

0.98

4.90

2.47

4.94

1.50

7.50 (Continued)

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Table-11: (Continued)

Bank Average

5.75

MTO Average

5.67

UK to Bangladesh 11.50 11.34

3.42

17.10

3.30

16.50

Table-12: Change in the Direct Cost of Transferring Remittances to Bangladesh over 2008-2010 (from Saudi Arabia, Singapore and UK) MTOs

Banks

Year Avg. Cost USD

Avg. Cost %

Avg. Cost USD

Avg. Cost %

2008

12.78

6.39

15.54

3.94

2009

9.06

4.53

8.48

4.24

2010

7.95

3.97

7.88

7.77

Source: Calculated from World Bank Remittance Prices (Http://remittanceprices.worldbank.org)

World Bank data (Table 11 and 12) shows competitive remittance price/rates for banks and MTOs in sending remittances to Bangladesh from different countries like Saudi Arabia, Singapore, Malaysia, and UK. Some banks have arrangements with MTOs and also offer more or less similar price (Table-11). There are evidences that the remittance costs/prices decreased over time. Table-12 shows that cost of remittance transfer by both banks and MTOs decreased considerably in between 2008 and 2010. (It is to be mentioned here that Table-11 and Table-12 are based on a small number of samples gathered by the World Bank). Literature (section-3) clearly reveal that time requirements (speed) of sending remittances have gone down over time, and formal sector now has started competing with informal sector. Greater use of ICT based techniques is the main responsible factor. But a few years back, the situation was different in almost all remittance corridors. A number of studies (Puri, S., and T. Ritzema 1999; Siddiqui and Abrar, 2003; El-Qorchi, 2002; Azad, 2006) observe that it takes over 10 days to send remittance to the rural households from the foreign countries using formal channel which is a much higher time as compared to the informal channels. In the context of Bangladesh, the study by Siddiqui and Abrar, (2003) observe that when the average time requirement through hundi is about 3 days, it takes generally 10-15 days to reach foreign remittances through banks. Azad (2006) notes that, in the existing method of sending remittances through banks, it takes about 13 days to reach remittance to a rural household whereas it takes at most 3 days for rural households to receive remittances through informal channels. However, the situation has changed and speed of remittances

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through formal sector market players (MTOs and banks) improved remarkably. The survey information (Table-13) and recent World Bank information (Table 14 and 15) give an encouraging picture. The survey information reveal greater reliance of all types of banks (Tier-1, Tier-2 and Tier-3) on the ICT based systems like e-mail, SWIFT etc (Figure-15). The ICT based arrangement of remittance service takes much lower time to transfer remittances from the country of origination to the country of destination (Table-13). The change in the use of alternative ICT based instruments made it possible by banks to deliver quick service to the migrants/recipients in recent period. Table-13: Time Requirement by Different Sampled Banks Channels

Maximum Time

Minimum Time

Maximum Average Time

Minimum Average Time

Average Time

DD

10 days

2 Days

6.4 Days

2.3 Days

3.4 Days

Email and SWIFT

2 Days

Same day

1.2 Days

0.6 Days

0.8 Days

Others (TT, Fax)

7 Days

Same day

2.2 Days

1.2 Days

1.6 Days

Source: Survey information.

The World Bank data (Table 14 and 25) show that both MTOs and banks have improved their quality of remittance services in terms of quick transactions over 2008-2010. In particular, a number of banks are now in a position to deliver remittances instantly or same day as a number of MTOs do. Both MTOs and banks have attained improvements, and, the extent of change of banks is remarkable. (It is to be mentioned here that Table-14 and Table-15 are based on not a very large number of samples gathered by the World Bank). Table-14: Change in the Time Requirement in Sending Remittances to Bangladesh over 2008-2010 (% of cases from Saudi Arabia, Singapore and UK) Same Day

MTOs Next day

2 days plus

2008

30%

35%

2009

35%

2010

55%

Year

Same Day

Banks Next day

2 days plus

35%

-

33%

67%

18%

47%

-

33%

67%

25%

20%

33%

50%

22%

Source: Calculated from World Bank Remittance Prices (Http://remittanceprices.worldbank.org)

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Table-15: Time Requirement in Different Corridors by Banks and MTOs [February, 2010]

Saudi Arabia to Bangladesh


United Kingdom to Bangladesh

Malaysia to Bangladesh

Maximum Time

Minimum Time

Most Frequent Time

MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

Less than an Hour

2 Days

MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

2 Day

2 Days

Bank-MTO

6 Days

Less than an hour

1 Days

MTO

6 Days

Less than an Hour

Less than an Hour

Bank

1 Day

1 Day

1 Day

MTO

Maximum Time

Minimum Time

Most Frequent Time/Average Time

Bank

Less than an Hour

Less than an Hour

Less than an Hour

Post office

6 Day

3 Days

4 Days

Source: Compiled from World Bank data.

7. Summary Observations and Conclusion The observations of the study are summarized below: One, There are a number of players through which remittances are commonly transferred in the formal sector: commercial banks, MTOs, non-bank financial institutions, and post offices. Globally, commercial banks and to a lesser extent international MTOs are considered by far the most relevant RSP types. Other than in Latin America and the Caribbean, in all other global regions commercial banks are ranked ahead of international MTOs in their role as RSPs. MTOs play a relatively larger role in remittance receiving countries where there are inadequate developments of the banking industry particularly with regard to the deployment of technology based infrastructure and access points. The technology based fast services of MTOs are getting popularity in a number of low-income countries in recent years. The market share of post office in remittance services is very limited. However, remittances through post offices are popular in a few countries because of their wide networks, for example, in China. Postal departments in some countries are also making arrangements with international MTOs. Electronic Postal Order has got popularity inAfrica in recent times.

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Two, Informal money transfer system exists and operates parallel to conventional regulated banking and financial channels. The largest informal system operating today evolved from two original types, namely the Hawala (hundi in Pakistan), which developed in South Asia (Bangladesh, India, and Pakistan) and the feichien, which started in China. The element of trust is a defining characteristic of the most informal remittance systems. Informal dispute resolution processes among service providers have also made it an efficient payments system that attracted little interest or attention by regulators in developed countries until recently. Especially, the anonymity that is possible with transactions of this kind has raised concern in the law enforcement community, in general. The stricter regulatory and supervisory framework was inevitable when journalists and others have made connections between the financing of terrorism and informal remittance systems. Three, In a number of developing economies, the locally operated credit unions and MFIs are increasingly getting involved in the process of remittance transfer with the formal RSPs. These organizations and business entities commonly work with MTOs and banks as part of their agency arrangements and have basically been playing roles in distributing remittances among recipients. Four, Different payment instruments are in use for remittance services by RSPs: cash, current account transfers, payment cards linked to a current account, prepaid cards, and mobile payments. Globally, cash and current account transfers are regarded as the most relevant payment instruments use for remittances; payment cards and other instruments are still at a very distant second place. Five, Technology penetration effort by financial firms and other institutions are evident in almost all global economies. Some financial firms have been engaged in modernizing their prevailing technology platforms to process international wire transfers and online data management. However, the investment, administration, maintenance and training costs of such a task are sometimes not financially viable to many small institutions. As a whole, South Asia has remained far behind other regions of the world in terms of technology penetration. Six, Existing technologies can offer a good number of advantages to the remittance and financial/money transfer industries in their functionality, value added innovative abilities, business and development impact, and cost effectiveness. Although most of the developing countries use agent based cash-to-cash transfers, the increasing flexibility offered by technology provides the choice of adopting attractive transfer mechanisms for account-toaccount transfers. Technologies like data payment transmission systems through ACH,

58

prepaid debit or credit cards, cell phones, and online transfers provide firms with alternatives to shift and transform their business into fully electronic based transfer systems. In some countries, ACHs have been connected with other cross border payment systems to accommodate the needs of the remittance market (e.g., United States Mexico automated clearinghouse), which provide a public network platform for account-to-account remittances among bankers. However, at the moment many senders and receivers have limited access to such channels. If the customers do not have access to an account and can only use cash, they may have no means of making and receiving payments to and from an RSP offering a purely internet or mobile phone service (i.e. with no physical access points). Unfortunately, a large number of migrants and recipients do not have bank accounts. Until these factors change, there are limits on the usefulness of these ICT based remittance channels in low income economies. Seven, It is widely argued that mobile money transfer has great potential as a remittance transfer tool. Mobile Money enables financial services and money transfers - often initiated by urban and international migrants - to reach poor people in rural areas. Mobile remittance services is expected to form a commercially viable and sustainable opportunity to reach the unbanked with low cost, no-frills financial services. Different countries and regions have started experimenting mobile phone based remittance system and other ICT based arrangements for fast and cost effective remittance tarnsfers. However, the primary obstacle to offer mobile remittance services is regulatory rather than technological. Since remittances qualify as a banking transaction, mobile operators would have to comply with banking and financial regulations in both the sending and receiving countries. International laws relating to money laundering, terrorism financing, and fraud are also other issues to address. Recently two commercial banks of Bangladesh partnered with a telecom company to introduce the country's first mobile-based remittance service which is working through a 'Bank-led' model whereby the banks offer mobile wallet accounts to the mass through the mobile company and ensure the business processes are in line with the financial regulations of the country. Eight, Development of domestic payment infrastructure is the pre-condition for development of efficient remittance transfer system. The recipient countries require a consistently well-functioning communications and information technology infrastructure; however, financial institutions find it overly costly to establish and maintain liquidity in remote ATMs. Considering the wide scale use, mobile phone banking appeared to be a very good financially viable option. South African Bank of Athens, based in South Africa is an example of M-banking bank-led models; and G-Cash, owned by Globe Telecom and based

59

in the Philippines, is an example of non-bank led model. However, this issue poses the possibility of an increased risk to M-banking customers and to the financial sector in general if less responsible actors enter the field. Post office and mobile vans are also good options. Peru has started creating new banking agents in post offices; and Colombia and India have started using mobile vans to access potential customers. These vans function as mobile banking branches. Nine, Costs or fees for remittance services can be complicated for senders and receivers to understand. Pricing is sometimes based on a percentage and sometimes a flat fee is charged. In both cases, a minimum floor fee has been discouraging to small remitters. Generally, the fee structure tends to be regressive as the small transfers face proportionately higher fees. The transaction fee and the charge of a foreign exchange spread are the two most common components of the price of a remittance. Receiving institutions may occasionally charge an additional fee for home delivery or receipt in a remote area. The new money transfer service offered by certain banks also does not provide a fixed foreign exchange rate at the time of the transaction's origination, but rather only at settlement, worsening the lack of transparency to the customer. Ten, traditionally, there is a tradeoff between cost and quality. Higher cost has been one of the reasons for choosing informal channels by many remitters. Quality indicates speed, reliability, security and convenience. Now, technology may enable better quality services at lower cost. Reduction in cost resulted in high market share in some instances, for example, Western Union achieved remarkable market share in the ItalySenegal corridor following notable reduction in translation cost. Bilateral initiatives through linking ACH by sending and recipient countries have helped reducing costs of channeling remittances in some instances. For example, bilateral initiatives between the U.S. and Mexican authorities have encouraged shift of remittance from informal to formal systems and resulted in considerable reduction in transaction costs. Eleven, The global average cost of sending remittance has dropped consistently since 2008. There are wide scale differences in the prices of different country remittance corridors. Singapore-Bangladesh is the cheapest remittance corridor in the world for the remitting small amount like USD 200 or USD 500 (found by a World Bank study). Though, a large volume of remittance typically implies lower average cost, as the amount changes the cost does not change proportionately in all corridors. Cost also varies among different channels: banks, MTO, post offices etc. In most corridors, it is relatively more expensive to send remittance through commercial banks. Twelve, Most worker remittances are sent in response to emergency needs of beneficiary households or to cover food expenditure. Thus, one of the principal factors in the choice of

60

transfer operator is the speed of the transfer to respond to the emergency. Banks and MTOs have been working hard to improve the quality of the remittance services, and role of new technologies have been playing major roles in this connection. Informal sector has its traditional advantage of being quicker than the formal sector operators. There are evidences that services using new technologies by RSPs (banks and MTOs) have reduced the time gap or speed differences between formal and informal operators. The available information clearly indicates the improvement in the speed of remittance transfers by MTOs and banks in between 2008 and 2010. Thirteen, Overseas remittances have been one of the most remarkable aspects of Bangladeshi labour exports. Worker remittances have consistently increased over the years. The remittances flows assumed a speedier pace mainly since the early 1990s. Like in other developing countries, money is sent in cash or in kind and using both formal and informal channels in Bangladesh. While it is extremely difficult to estimate the flows through informal channels, they appear to be large. There are indications that the popularity of formal sector is growing in the country in recent years. Despite the slowdown of overseas jobs in response to the 2008-9 global crises, inflow of remittances has maintained an upward trend in the country. Fourteen, The United States has been the top destination of the migrants and largest source of remittances for the developing countries; however, 80 per cent of the US remittances go to the LatinAmerican and Caribbean countries. Though remittance flows from Middle Eastern countries to the developing countries is only 8 per cent, it accounted for 63 per cent of the remittance inflows to Bangladesh. A good number of Bangladeshis have been working in the Middle Eastern countries like Saudi Arabia, UAE, Kuwait, Oman etc who send a considerable volume of worker remittances every year. A considerable volume of remittances also flows in from USA, UK and other developed EU countries. Fifteen, Most official remittances are transferred into Bangladesh through banks. The government-controlled commercial banks (previously called nationalized commercial banks) of Bangladesh have branches and representations abroad and have been the most used option for migrant workers sending remittances through official channels. Some private banks are also very active in the remittance market in recent years. Most banks use branch networks in the process of channeling funds to the rural areas. In this process, the foreign counter parts are mainly the exchange houses with which the banks have arrangements. Moreover, some banks also established subsidiaries in a few countries for safe and speedy transfer of remittances.

61

Sixteen, Growth rates of transfer of remittances by different broad categories (government controlled, private commercial, specialized and foreign banks) of banks have been inconsistent over the years. All broad groups have maintained positive growth rates over 2001-2008. A number of factors might be responsible for the inconsistencies. Different banks have good businesses in different sending countries and there is growing competition among different banks and MTOs. Moreover, the growth rates of manpower exports and volume of remittances are linked with banks' remittance businesses. The growth rates of manpower exports from Bangladesh and the volume of remittances inflows have been inconsistent over the years mainly because of the stiff competition from new labourexporting countries, economic uncertainties and unemployment in different economic regions, and policy changes in different country of destinations etc. Seventeen, Banks with large number of branches have traditional advantage of their branch network in rural Bangladesh. However, over the years, the situation changed and the composition of market share has changed. Alongside using ICT tools, banks have started using the services of each other networks/branches. Bangladesh Bank has also allowed banks to use the services of MFIs in distributing the remitted fund in remote areas of Bangladesh, and accordingly some banks (such as, BRAC Bank has engaged BRAC and NCCBL has engaged TMSS) have usefully engaged the branch networks of MFIs. Dynamic strategy, networking, marketing, and use of information technology have changed the market shares of a good number of banks. From about 17 per cent market share in 2000, the local private commercial banks have captured over 45 per cent market share by the year 2008. In contrast, market share of four major government controlled commercial banks have decreased to around 23 per cent in 2008 from about 52 per cent in the year 2000. Currently, over 60 per cent of total bank branches belong to the four major government-controlled commercial banks. However this traditional advantage alone is not working as earlier. It indicates that more extensive branch network alone cannot offer competitive advantage to a bank in the remittance market. Eighteen, Trend of using official channels for sending remittances has improved in recent years. And thus despite some negative trend of export of manpower, growth of remittances earnings through official channel increased remarkably. The global 'War against Terrorism' is believed to be one of the crucial contributory factors. In the context of Bangladesh, the improvement may be attributed to the enforcement of Money Laundering Prevention Act, 2009 and a series of measures by Bangladesh Bank and the commercial banks. During recent period, BB took a series of measures to encourage expatriate Bangladeshis to send their hard-earned wages through formal banking channels instead of the illegal system in

62

order to boost the country's foreign exchange reserves. Four government-controlled banks and dozens of private commercial banks have also stepped up efforts to increase remittance flow from the Middle East, the United Kingdom, Malaysia, Singapore, Italy and the United States. To bring efficiency in remittance channeling, certain local banks have made arrangement with MTOs. Nineteen, BB has been engaged in different projects with donor agencies to improve the efficiency of remittance transfers into the country. Under the auspices of the RPP (Remittance Payments Partnership), DFID in association with Bangladesh Bank has established the Remittance & Payment Challenge Fund (RPCF) to provide grant to selected private and non-governmental organizations subject to submission of project plan and subsequent approval of the same. Foreign Remittance Payment Project (FRPP) of NCCBL is one such initiative under which the bank established partnership agreements with TMSS. The project would enable the installation of electronic point of sale (POS) technology in all NCC Bank Ltd. branches and 250 remote branches of TMSS and the issuance of free debit cards to remittance beneficiaries. BRAC Bank Limited had submitted a project proposal, named 'EL DORADO' and was awarded the grant for the development and implementing the solution for transferring migrants' remittance proceeds to the ultimate beneficiaries in Bangladesh within the shortest possible time. Twenty, The study observes inconsistent and positive growth of remittance business among different broad categories of banks (Tier-1, Tier-2, and Tier-3). Calculations based on Bangladesh Bank data indicate that Tier-1 banks have annual average growth rate of 35.15 per cent, Tier-2 have growth rate of 41.14 per cent and Tier-3 banks have growth of 14.35 per cent over 2001-2008. These percentages may give misleading picture. It must be remembered that worker remittances (to the rural Bangladesh) are basically channeled through local government controlled and private commercial banks. Moreover, ICT related major changes have taken places mainly with local banks. The multinational banks operating in the country have always been sophisticated in terms of using ICT. If the foreign banks are excluded, the annual average growth rates of banks of Tier-1, Tier-2, and Tier-3 banks stand at 45.92 per cent, 43.62 per cent, and 14.35 per cent respectively. Twenty-one, The remittance market experienced remarkable change in the market share over 2000 -2008. In 2000, the market share of Tier-3 banks (with 4 by the then NCBs) were 61 per cent that came down to 27 per cent in 2008. Whereas market share by the both Tier-1 and Tier-2 banks increased remarkably over the period. Especially, Tier-1 banks captured almost 50 per cent market share by 2008. If the same analysis is conducted excluding foreign bank branches then the success of Tier-1 and Tier-2 banks in the

63

remittance market of Bangladesh becomes even more visible. It has been observed that both Tier-1 and Tier-2 banks have gained remarkable improvements in terms of gaining market share and growth rates (annual average) in between 2005 and 2008. Market shares of Tier-1 and Tier-2 banks changed from 9 per cent and 13 per cent to 27 per cent and 33 per cent respectively. The annual average growth rates of Tier-1 and Tier-2 banks were 95 per cent and 78 per cent respectively. Though the market share of these banks (Tier-1 and Tier-2) remained very small in terms of branch networks (13 % and 14 % respectively), their use of ICT and strategies of networking did the magic. Twenty-two, Growing reliance on ICT based channels by banks are evident from the survey information. Before the year 2005, DD was the most popular form of remittance transfer mode. The survey data show that banks used DD in about 82 per cent cases in channeling remittances in the year 2002 that came down to 33.5 per cent in 2007. Over the years banks increasingly started relying on SWIFT or E-mail technology. In 2002, SWIFT was used for 12 per cent cases and E-mail for only 6 per cent cases. The figures increased to 40 per cent and 26 per cent respectively in the year 2007. It is to be noted here that the ICT based tool, SWIFT got popularity as a remittance tool among banks mainly in low-income countries in recent years. Twenty-three, Differences in the use of channels by different categories (Tier-1, Tier-2, and Tier-3) of banks in Bangladesh are remarkable. Tier-1 banks used DD for a very insignificant number of remittance transfer cases (5.8 per cent) during 2005-2007. However, Tier-2 and Tier-3 banks used DD for considerable number of cases during the period. Especially, Tier-3 banks used DD for more than half of the cases of total remittance transfers by these banks. Tier-1 banks relied on ICT based channels (SWIFT or E mail) for about 95 per cent cases during the period 2005-07. Twenty-four, Total cost of remitting money comprises direct costs paid to service providers in the sending and receiving countries; costs incurred by the sender to carry out the transaction; and transactions costs of the recipient in the home country. Survey data on cost of remittance flows were not available or not at all reliable. However, published sources offer valuable indications in this connection. The average costs in different remittance corridors vary significantly, as found by the World Bank. In quarter I of 2010, the average cost of sending remittance from Singapore (USD 200) was only 2.24 per cent (the cheapest in the World) but the costs of sending remittances from UK and Malaysia were well above 5 per cent. However, as the amount increases, the relative cost decreases (consistent for all remittance corridors). The World Bank data also reveals competitive remittance price/rates for banks and MTOs in sending remittances to Bangladesh from different destinations like

64

Saudi Arabia, Singapore, Malaysia, and UK. Some banks have arrangements with MTOs and also offer more or less similar price. There are evidences that the remittance costs/prices decreased over time. Twenty-five, Literature clearly reveal that time requirements (speed) of sending remittances have gone down over time, and formal sector now has started competing with informal sector. The speed of remittances through formal sector market players (MTOs and banks) improved remarkable during recent years. The survey information and recent World Bank data give an encouraging picture in this connection. The survey information reveal greater reliance of all types of banks (Tier-1, Tier-2 and Tier-3) on the ICT based systems like e mail, SWIFT etc. The ICT based arrangement of remittance transfer takes much lower time to transfer remittances from the country of origination to the country of destination. The change in the use of alternative ICT based instruments made it possible by banks to deliver quick service to the migrants/recipients in recent period. The World Bank data shows that both MTOs and banks have improved their quality of remittance services in terms of quick transactions over 2008-2010. Especially, a number of banks are now in a position to deliver remittances instantly or same day as a number of MTOs do. Both MTOs and banks have attained improvements, though, the extent of change of banks is remarkable. Financial institutions in many countries remain insufficiently aware of the potential of integrating new customers into the formal banking system. Offering financial access to the low-income people is essential to attract all classes of people to transact through the formal channel. Recipients and senders of remittances must be aware of the benefits of channeling remittances through legal channel and must be comfortable in dealing with bank officials. Although small payments continue to face high prices, one of the major developments in remittance markets in recent years is the sharp decline in remittances price with increased competition. If lower cost transactions can be combined with improved financial access, then more and more clients will shift from informal to formal channel and remittances may be an effective tool for encouraging increased financial intermediation. To attain that, financial market of the country needs an integrated and ICT based technical infrastructure. It has been proved that organizations that have large branch networks, such as major banks or national postal services have greater scope to play a bigger role in providing remittance services; however, only expansion of branch network will not serve. Service providers require business models that profitably support the expansion of the agency or electronic banking networks with increased interoperability into rural or semi urban areas. Some private sector banks of Bangladesh have started working towards that end. In the global changing environment, local banks cannot keep away from innovative technologies such as

65

mobile banking and card-based remittance services. In this connection, the introduction of mobile based remittance services is a remarkable initiative. For retail remittance payment services in rural Bangladesh, post offices or reputed retailers may also be considered alongside MFIs by banks in line with some other remittance recipient countries. Innovative technology based initiatives coupled with central bank's policy and regulatory supports may revolutionize the remittance service market of Bangladesh in near future.

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66

Azad, Abul Kalam (2006), “Migrants' Remittances in Bangladesh- Dynamics and Development Impacts”- a paper presented in the seminar on ' Inward Remittances: Dynamics and Development Impacts' organized by Business Bangladesh in March 2006, at Dhaka. Bakht, Farid and Raisul Awal Mahmood (1989), Overseas Remittances and Informal Financing in Bangladesh, Research Report No-101, BIDS, Dhaka. Bangladesh Bank (2006), Economic Trends, Statistics Department (February), Dhaka. Bangladesh Bank (2006), Economic Trend, Statistics Department, Bangladesh Bank, Dhaka. Bangladesh Bank (2005), Guideline on Information and Communication Technology for Scheduled Banks and Financial Institutions, Bangladesh Bank, Dhaka. BIS and World Bank (2007), General Principles for International Remittance Services, Report of the Committee on Payment and Settlement Systems, Basel, Switzerland. Buencamino, Leonidas, and Sergei Gorbunov (2002), “Informal Money Transfer Systems: Opportunities and Challenges for Development Finance.” DESADiscussion Paper 26. Buchenau, Juan (2008), Migration, Remittances and Poverty Alleviation in Bangladesh, AResearch Report for United Nations Development Program, Dhaka Bangladesh. Bueno, Manuel (2008), An Overview Of The Mobile Phone Banking Industry, IE Publishing Department. María de Molina 13, 28006 Madrid, Spain. Cirasino, Massimo (2007), “Enhancing Competition and Reducing Costs in the Remittance Industry: The General Principles for International Remittance Services”, A paper presented in the International Forum on Remittance, Washington D C. Committee on Payment and Settlement Systems and the World Bank (2006), General Principles for International Remittance Services. Consultative report prepared for the Bank f o r I n t e r n a t i o n a l S e t t l e m e n t s a n d t h e Wo r l d B a n k . Av a i l a b l e a t : www.bis.org/publ/cpss73.pdf C P Abeywickrema (undated), Remittances, Microfinance and Technology, Hatton National Bank, Sri Lanka. De Luna Martinez, Jose (2005), “Workers ' Remittances to Developing Countries: A Survey with Central Banks on Selected Public Policy Issues.” Policy Research Working Paper 3638, World Bank.

67

El-Qorchi, M (2002), Hawala: How does this Informal Funds Transfer System Work and How Should it be Regulated?,http://www.imf.org El Qorchi, Mohammed (2002), The Hawala System”, Finance and Development, Vol. 39, No. 4, December. Focal (2005), Canada - Caribbean Diasporas and Development Conference Series Report, May 30-31, Canadian Foundation for theAmericas, Toronto, Canada. Garsia, José Antonio (2009), 'Measuring Payment System Development', a paper presented in the World Bank Global Payment System Conference in Cape Town, SouthAfrica,April. Hastings, Anne H. (2006), “Entry of MFIs into the Remittance Market: Opportunities and Challenges”, Apaper presented in the The Global Microcredit Summit, Nova Scotia, Canada November 13. INSTRAW and IOM (2000), Temporary Labour Migration of Women: Case Studies of Bangladesh and Sri Lanka. Santa Domingo: INSTRAW and IOM. International Organization for Migration (2005), Dynamics of Remittance Utilization in Bangladesh, Migration Research Series, No-18, IOM, Geneva. International Organization for Migration (2005), World Migration 2005: Costs and Benefits of International Migration, No. 882 - 22 June, Geneva. International Organization for Migration (2005), World Migration Report, 2005, IOM, Geneva. IOM and UNDP (2002), Proceedings of National Consultation Workshop on Labour Migration Process in Bangladesh. Dhaka: IOM and UNDP. Islam, Muinul (2000), “ Overseas Migration and the 'Hundi' System: The Case of Bangladesh Migrants in Singapore” a paper presented in the XIII Biennial Conference organized by Bangladesh EconomicAssociation. Jennifer Isern, Enjiang Cheng & Xu Zhong (2007), Supply Of Financial Services In China: A Study of Domestic Money Transfers, Asia Pacific Journal of Finance and Banking Research Vol. 1. No. 1. 2007. Kalan,George,and Dilek Aykut (2005),“Assessment of Remittance Fee Pricing.” Background paper prepared for a World Bank Report. Washington, DC.

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Koncept Analytics (2009), Global Money Transfer (Remittance) Market: An Analysis, Report,http://www.reportbuyer.com/banking_finance/misc_banking_finance/global_mon ey_transfer_remittance_market_analysis.html). Lucas, Robert E.B. (2004), “International Migration to the High Income Countries: Some Consequences for the Sending Countries.” Unpublished paper. Boston University. Economics Department. Migrant Remittances, (2007), Worldwide Trend in International Remittances, A feature, April, Issue, Vol-4, No-2, UK. Ministry of Finance (2005), Bangladesh Economic Review, Finance Division, Ministry of Finance, Govt. of Bangladesh. MobileIn.com (2009), 'Mobile Money Transfer 2009-14' , a Management Report, Available at: http://www.mobilein.com/MobileMoneyTransfer2009-2014.pdf Mobi le News Bulletin (2007), Vol.4, No.5, November: Available at: h t t p : / / w w w. t h e di al og ue . o rg/ P u bl i c a t i on F i l e s / M i g r a nt % 2 0R e m i t t a n ce s - NOV%202007.pdf). Murshid et al. (2002), “AStudy of remittance Inflows & Utilization”, UNDP & IOM, Dhaka. www.un-bd.org/pub/unpubs/IOM-- A%20Study%20on%20Remittance%20Inflows%20 and%20Utilization.pdf Orozco, M. (2003), “Remittances, the Rural Sector, and Policy Options in Latin America, Migration Policy Institute: Migration Information Source, Washington, June. Orozco, M. (2003), “The future trends and patterns of remittances to Latin America”, Paper presented at the Inter-American Development Bank Conference on 'Remittances as a Development Tool' on 28 October 2003 in Mexico. Orozco, Manuel and Eve Hamilton (2005), Remittances and MFI intermediation: Issues and Lessons, An earlier version of this paper was presented for discussion at the 2005 Financial Sector Development Conference, New Partnerships for Innovation in Microfinance, June 23, Frankfurt. Porteous, David (2006), The Enabling Environment For Mobile Banking In Africa, REPORT Commissioned by Department for International Development (DFID),USA. Puri, S., and T. Ritzema (1999), Migrant Worker Remittances, Micro-Finance and the Informal Economy: Prospects and Issues, ILO Social Forum Unit, Working Paper No. 21, http://www.ilo.org/

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Raihan, A. (1998), “Information Technology and Electronic Banking”, Bank Parikrama, Vol.XXIII, Sep-Dec., BIBM, Dhaka. Raihan, Ananya (2006), “Inward Remittances and Policy measures”- a paper presented in the seminar on ' Inward Remittances: Dynamics and Development Impacts' organized by Business Bangladesh, March, Dhaka. Ramamurthy, B. (2003), International Labour Migrants: Unsung Heroes of Globalisation, Study No. 8, SIDA, Stockholm. Ratha, Dilip (2003), Workers' Remittances: An Important and Stable Source of External Development Finance, Global Development Finance, Sakiul Millat Morshed (2000), 'Pre-departure, Reintegration and Policy Advocacy in the Migration Process' Paper presented in the Regional Summit on Pre departure, Post arrival and Reintegratiion Programmes, held in Kuala Lumpur in September Salazar Parrenas, R. (2002), “The care crisis in the Philippines: Children and transnational families in the new global economy”, In Barbera Ehrenreich and Arlie Russell Hochschild (eds.): Global Women: Nannies, Maids and Sex Workers in the New Economy, Granta Books, London. Samuel Munzele Maimbo (2004), The Regulation and Supervision of Informal Remittance Systems: Emerging Oversight Strategies, A paper presented in the Seminar on Current Developments in Monetary and Financial Law, November. Siddiqui, Tasneem and Chowdhury R. Abrar (2003), Migrant Worker Remittances and Micro-Finance in Bangladesh, Working paper No. 38, September, ILO. Siddiqui, Tasneem (2003), “Migration as a Livelihood Strategy of the Poor: The Bangladesh Case” a presented at the Regional Conference on 'Migration, Development and Pro-Poor Policy Choices in Asia' jointly organized by the Refugee and Migratory Movements Research Unit, Bangladesh, and the Department for International Development, UK, during 2224 June 2003 in Dhaka, Bangladesh. Siddiqui, Tasneem (2004), “Efficiency of Migrant Workers ' Remittances” a paper prepared for theAsian Development Bank. Siddiqui, T. (2001), Transcending Boundaries: Labour Migration of Women from Bangladesh, University Press Ltd, Dhaka.

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Siddiqui, Tasneem (2005), International labour migration from Bangladesh: A decent work perspective, Working Paper No 66, Policy Integration Department, International Labour Office, Geneva. Siddiqui, T., S. Malik, and C.R. Abrar (1999), International Labour Migration and the Role of the Trade Unions, ILO, Dhaka. Singh, Bhupal (2005), “Services Exports under Mode 4 of GATS: Exploratory Evidence from India” United Nations Department of Economic and Social Affairs (Statistics Division), February. UN. Sorensen, Ninna Nyberg (2004), “The Development Dimension of Migrant Remittances” IOM Migration Policy Research Working Papers Series No.1, June, Danish Institute for Development Studies, Denmark. Suki, Lenora (2007), Competition and Remittances in Latin America: Lower Prices and More Efficient Markets, Working paper 2/2007, Inter American Development Bank and OECD. Sultana, Rasheda (2010), “Mobile Banking: Overview of Regulatory Framework in Emerging Markets”, Grameenphone Ltd., Dhaka. Uddin, Kawsar (2009), Mobile Phone for sending remittances, A New Paper Article, The Independent, Dhaka, Friday 9April, Dhaka, Bangladesh. UK Department for International Development and University of Dhaka (2003), 'Good Practices from two countries: Philippines and Sri Lanka' Key note paper presented in the Regional Conference on MIGRATION & DEVELOPMENT PRO-POOR POLICY CHOICESIN ASIA Jointly organized by Department for International Development, UK, and the Refugee and Migratory Movements Research Unit, University of Dhaka, Dhaka, Bangladesh 22-24 June. United Nations (2002), International Migration Report 2002, UN, NewYork. US Department of the Treasury - Terrorism and Financial Intelligence - Hawala &Alternative Remittance Systems, http:// www.ustreas.gov/offices/enforcement/keyissues/hawala World Bank (2005), The US-Mexico Remittance Corridor-Lessons on Shifting from Informal to Formal Transfer System, Working paper No. 47, Washington DC.

71

World Bank (2006), Global Economic Prospect, IBRD, Washington D C. World Bank (2006), Global Economic Prospects- Economic Implications of Remittances and Migrants, IBRD, Washington DC, USA. World Bank (2008), “Payment System Worldwide- A Snapshot, Outcome of the Global Payment System Survey”, Washington D C. World Bank (2008), Development and Migration Brief 8, Development Prospect Group, The World Bank (http://siteresources.worldbank.org/) World Bank (2009), Development and Migration Brief 10, Development Prospect Group, The World Bank (http://siteresources.worldbank.org/) World Bank and IFC (2010), “An Analysis of Trends in the Average Total Cost of the Migrants Remittance Services, Version-1”, April, Payment System Development Group, APolicy Note by World Bank and IFC,Available at: remittanceprices.worldbank.org World Bank Web, “Remittance Prices Worldwide”, A World Bank Group Web Site: Available at: http://remittanceprices.worldbank.org/RemittanceCosts/?from=167&to=17 Wrench, J. and Qureshi, T. (1995), Higher Horizon: A Qualitative Study of Young Men of Bangladeshi Origin. London: The HM Stationery Office. A_© gš¿Yvjq (2005), e¨vsK I Avw_©K cÖwZôv‡bi Kvh©vejx-2004-2005, A_© gš¿Yvjq, evsjv‡`k miKvi, XvKv, evsjv‡`k|

72

Appendix Appendix Table-1: Tier-1 Banks Sl. No.

Name of the Banks

1

Export Import Bank of Bangladesh Limited

2

Citybank, N.A.

3

AB Bank Limited

4

BASIC Bank Limited

5

IFIC Bank Limited

6

Eastern Bank Limited

7

Standard Chartered Bank

8

Mutual Trust Bank Limited

9

ONE Bank Limited

10

Al-Arafah Islami Bank Limited

11

Jamuna Bank Limited

12

The Hongkong and Shanghai Banking Corporation Limited

13

The Premier Bank Limited

14

National Credit and Commerce Bank Limited

15

BRAC Bank Limited

16

Dutch-Bangla Bank Limited

17

Southeast Bank Limited

18

The City Bank Limited

19

Dhaka Bank Limited

20

Bank Asia Limited

21

ICB Islamic Bank Limited

22

Prime Bank Limited

23

State Bank of India

24

Commercial Bank of Ceylon PLC

73

Appendix Table-2: Tier-2 Banks Sl. No.

Name of the Banks

1

Pubali Bank Limited

2

Mercantile Bank Limited

3

Habib Bank Limited

4

First Security Islami Bank Limited

5

United Commercial Bank Limited

6

National Bank Limited

7

Bangladesh Development Bank Limited

8

Social Investment Bank Limited

9

Shahjalal Islami Bank Limited

10

Standard Bank Limited

11

Bank Alfalah Ltd.

12

Woori Bank

13

Islami Bank Bangladesh Ltd.

Appendix Table-3: Tier-3 Banks Sl. No.

Name of the Banks

1

Rajshahi Krishi Unnayan Bank

2

Janata Bank Limited

3

Agrani Bank Limited

4

Rupali Bank Limited

5

Bangladesh Commerce Bank Limited

6

Sonali Bank Limited

7

Uttara Bank Limited

8

Bangladesh Krishi Bank

74

Appendix Table-4: Remittance Transfers by Banks of Tier-1 [in million Taka] Bank Name

2000 2001

2002

2003

2004

2005

2006

2007

2008

Private Banks Arab Bangladesh Bank Ltd.

1579 1622

6097

5806

5070

7614

8950

10722 11275

Prime Bank Limited

3128 2540

2021

4058

3077

3688

15050 15905 22669

Exim Bank Limited

110

403

278

235

114

223

344

710

1428

Trust Bank Limited

10

22

18

151

198

535

765

3505

5789

Eastern Bank Limited

275

425

113

354

477

1917

7653

11968 17033

Dutch-Bangla Bank Limited

231

384

833

749

516

838

1556

4884

5172

IFIC Bank Limited

3078 2899

3193

3367

4302

5745

6583

6778

12277

2918

6385

One Bank Limited

62

75

176

603

1521

2667

2653

Dhaka Bank Limited

593

752

953

1116

1364

3962

17523 11688 11834

Bank Asia Limited

304

57

130

677

2674

5445

7752

11584 11648

Al-Arafah Islami Bank Limited

631

486

179

302

292

455

901

1843

2672

-

-

1

96

174

645

2262

2506

3165

The Premier Bank Limited

18

19

55

365

1408

1427

940

1620

2786

NCC Bank Limited

197

318

1455

1162

1945

2492

3857

7441

12098

-

4

351

1481

2761

5157

8130

19869 35968

Mutual Trust Bank Limited

31

38

73

90

166

564

2672

5454

Southeast Bank Limited

376

452

493

573

1074

3510

13480 11040 15222

The City Bank Limited

883

953

1000

1493

2467

3793

8473

4932

9828

ICB Islamic Bank Ltd.

-

-

-

-

-

-

-

1034

713

Jamuna Bank Limited

BRAC Bank Limited

7242

Foreign Bank Branches City Bank N.A.

2909 12480 15195 11573 18974 12462

Standard Chartered Bank

18406 25752 38436 57968 78967 86544 1E+05 1E+05 157684

State Bank of India

1928 1738

The Hongkong and Shanghai Banking Corporation Ltd.

11838 17290 24759 24802 16321 33571 44068 70106 82022

Commercial Bank of Ceylon PLC

1962

2702

1713

3578

7386

6001

17151 52397

8225

5007

-

4066

5821

4954

6061

9484

13195 13013

-

-

-

614

869

924

1002

Specialized Bank Basic Bank Ltd Total

-

445

46587 68709 101837 125544 151143 193762 285123 393924 505772

Source: e¨vsK I Avw_©K cÖwZôv‡bi Kvh©vejx, 2000-2008

75


2000

2001 2002 2003 2004 2005

2006

2007

2008

Pubali Bank Limited

2565

5100 19380 31753 11754 14820 15938 24090 28190

Standard Bank Limited Mercantile Bank Limited

2 369

12 308

80 496

195 474

136 671

204 679

565 2989

477 3510

829 4723

First Security Islami Bank Limited

241

61

61

83

33

62

48

330

806

United Commercial Bank Limited

564

628

735

541

550

1515

1721

1957

4466

National Bank Limited Islami Bank Bangladesh Limited

4662 7644

4979 6458 7637 9035 13618 21354 27560 39878 9879 14670 16668 23669 36948 53819 67113 140404

Private Banks

Social Investment Bank Limited

33

32

107

120

225

333

775

655

1042

Shahjalal Islami Bank Limited

0.2

0.1

352

981

1171

690

3535

4295

9498

Foreign Banks Habib Bank Limited

16

22

25

28

68

160

341

85

276

4305 4605 5102 5342

8186

9167

5502

Woori Bank

-

Bank Alfalah Limited

-

-

-

1

3376

143

4809

6963

27

33

3

2

1

2

3

4

Specialised Banks Bangladesh Shilpa Bank

4

16100.2 21048 46702 63088 52417 77748 109416 144051 242581

Total



2000

2001

2002

2003

2004

2005

2006

2007

2008

Sonali Bank Limited

48425 50089

66098

65535

76680

94324 113483 109481 116187

Janata Bank Limited

10973 12885

19960

21384

24331

26573

29267

36788

45924

Agrani Bank Limited

32189 33709

31720

27429

36840

34568

39296

42514

52686

Rupali Bank Limited

2040

1630

8005

10203

11340

13641

18050

18895

21643

Uttara Bank Limited Bangladesh Commerce Bank Limited Specialised Banks

4287

6316

8553

14020

19710

27276

28728

29575

36073

-

-

20

50

1752

1843

925

1888

1548

Bangladesh Krishi Bank

149

863

669

1224

1572

2454

3280

5295

6878

-

-

-

-

23

65

74

73

0

Nationalised Banks

Private Banks

Rajshahi Krishi Unnayan Bank Total

98063 105492 135025 139845 172248 200744 233103 244509 280939


76

Appendix Table-7: Cost of Remittance Transfer from Malaysia to Bangladesh in First Quarter 2010 Firm Type


Avg. Cost [USD 200]


Avg. Cost [USD 500]

Bank Average

6.02

12.04

3.62

18.05

MTO Average

3.77

7.54

2.76

13.80

Post office Average

7.13

14.26

5.84

29.20

Appendix Table-8: Cost of Remittance Transfer from Saudi Arabia to Bangladesh Firm Type


Avg. Cost [USD 200]


Avg. Cost [USD 500]

From Saudi Arabia to Bangladesh, 2010 (First Quarter) Bank Average

4.06

8.12

2.43

12.15

MTO Average

3.79

7.58

2.39

11.95

From Saudi Arabia to Bangladesh, 2009 Bank Average

5.11

10.22

3.38

16.90

MTO Average

3.78

7.56

2.25

11.25

From Saudi Arabia to Bangladesh, 2008 Bank Average

2.48

4.96

0.96

4.80

MTO Average

3.21

6.42

1.47

7.35

Appendix Table-9: Cost of Remittance Transfer from Singapore to Bangladesh Firm Type

Bank Average Bank/MTO Average MTO Average Bank Average Bank/MTO Average MTO Average Bank Average Bank/MTO Average MTO Average


Avg. Cost [USD 200]


From Singapore to Bangladesh, 2010 (First Quarter) 2.01 4.02 0.98 2.01 4.02 0.98 2.47 4.94 1.50 From Singapore to Bangladesh, 2009 1.73 3.46 1.97 3.94 2.74 5.48 From Singapore to Bangladesh, 2008 1.99 3.98 2.36 4.72 3.17 6.34

77

Avg. Cost [USD 500] 4.90 4.90 7.50

0.91 0.94 1.62

4.55 4.70 8.10

1.12 1.26 2.19

5.60 6.30 10.95

Appendix Table-10: Remittance Transfer cost from United Kingdom to Bangladesh Firm Type


Avg. Cost [USD 200]


Avg. Cost [USD 500]

From United Kingdom to Bangladesh,2010 (First Quarter) Bank Average

5.75

11.50

3.42

17.10

MTO Average

5.67

11.34

3.30

16.50

From United Kingdom to Bangladesh,2009 Bank Average

6.75

13.50

4.36

21.80

MTO Average

8.11

16.22

5.12

25.60

From United Kingdom to Bangladesh, 2008 Bank Average

5.87

11.74

3.58

17.90

MTO Average

7.22

14.44

4.18

20.90

Appendix Table-11: Time Requirement in Different Corridors Through Different Channels [From Saudi Arabia to Bangladesh] Maximum Time

Minimum Time

Most Frequent Time

From Saudi Arabia to Bangladesh- February,2010 MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

Less than an Hour

2 Days

From Saudi Arabia to Bangladesh- September, 2009 MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

Less than an Hour

2 Days

From Saudi Arabia to Bangladesh- March,2009 MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

1 Day

2 Days

From Saudi Arabia to Bangladesh- June,2008 Maximum Time

Minimum Time

Most Frequent Time

MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

1 day

2 Days

78

Appendix Table-12: Time Requirement in Different Corridors Through Different Channels [From Singapore to Bangladesh] Maximum Time

Minimum Time

Most Frequent Time

From Singapore to Bangladesh- February, 2010 MTO

2 Days

Less than an Hour

Less than an Hour

Bank

2 Days

2 Day

2 Days

Bank/MTO

Less than an hour

6 Days

1 days

From Saudi Arabia to Bangladesh- August, 2009 MTO

1 Day

Less than an Hour

Less than an Hour

Bank

2 Days

1 Day

1 Day

Bank/MTO

5 Days

1 Day

1 Day

From Saudi Arabia to Bangladesh- February, 2009 MTO

6 Days

Less than an Hour

Less than an Hour

Bank

2 Days

2 Days

2 Days

Bank/MTO

5 Days

2 Days

2 Days

From Saudi Arabia to Bangladesh- April, 2008 MTO

5 Days

Less than an Hour

3 Days

Bank

7 Days

1 day

5 Days

Prime Exchange requires 1 day to Prime bank branches in Bangladesh; 3-7 days to all other banks (2008) Balaka Exchange requires 1day to National Bank in Bangladesh; 2-5 days to all other banks(2008)

Appendix Table-13: Time Requirement in Different Corridors Through Different Channels [From UK to Bangladesh]

MTO Bank

Maximum Time Minimum Time Most Frequent Time From United Kingdom to Bangladesh- February, 2010 6 Days Less than an Hour Less than an Hour 1 Day

1 day

1 Day

From United Kingdom to Bangladesh - August, 2009 MTO

6 Days

Less than an Hour

1 Day

Bank

6 Day

1 Day

1 Day

From United Kingdom to Bangladesh - Feb, 2009 MTO

6 Days

Less than an Hour

3 Days

Bank

6 Days

1 Day

2 Days

From United Kingdom to Bangladesh - May,2008 MTO

10 Days

Less than an Hour

Less than an Hour

Bank

7 Days

1 day

1 Day

Branch of Sonali Bank gets next day, non Sonali Bank requires 6 days

79

Appendix Table-14: Time Requirement in Different Corridors Through Different Channels [From Malaysia to Bangladesh February,2010] Maximum Time

Minimum Time

Most Frequent Time/Average Time

MTO

Less than an Hour

Less than an Hour

Less than an Hour

Bank

6 Day

3 days

4 Days

Post office

Less than an Hour

Less than an Hour

Less than an Hour

80

81

82

83

84

Appendix-16: Questionnaire-1 Implication of the use of Information and communication Technology in Channeling Workers Remittances to Bangladesh Current ICT Status of Banks 1. Name of the Bank: 2. Name of the Respondent:

Designation:

3. Total Branches: 4. No. of Branches computerized: 5. Banking Operation:

Centralize

Distributed

6. Detail Statistics: Name of the Software

Origin L/I/F

Manufacturing Company

No. of Branches Using

Database Engine

7. Available Services: Name of the Service

Available

Name of the Service

Any Branch Banking

Internet Banking

ATM

Electronic Fund Transfer

Credit Card/ Debit Card

Kiosk

Tele Banking

POS

Mobile Banking

Warehouse/Mining

DRS

Online MIS

ECRM

Others

85

Available

Appendix-17: Questionnaire-2 Implication of the use of Information and communication Technology in Channeling Workers Remittances to Bangladesh A: About Bank/Respondent [s] A1

Name of the Bank and Branch:

A2

Address and Contact Number: Name of the Respondent: Designation: Address and Telephone No: Fax and Mail: Automation Status of Bank: LAN, Any Branch Banking, Online Banking, E-Mail, ISD Phone, Banking Software etc.

A3 A4

B: Volume of Total Remittances and Distribution [INFLOWS] WR

NRB INV

FDI

OTHERS

TOTAL

2002 2003 2004 2005 2006

C: Channels used in Transferring Funds [workers remittances] from Foreign Agent to Local Bank [Branch/Head Office]. [2002-2006] C1: Number of Transactions and Amount by Different Channels Channels 2002 2003 2004 DD SWIFT E-Mail TT Money transfer company (Western Union, Express Money, Money Gram etc) Others Comment [if any]:

86

2005

2006

C2: Operational Procedure of Different Channels

DD

SWIFT E-Mail

TT

Money transfer company (Western Union, Express Money, Money Gram etc)

Others Comment [if any]:

C3: Time Requirement [as of 2006] Channels Maximum DD SWIFT E-Mail TT Money transfer company (Western Union, Express Money, Money Gram etc) Others Comment [if any]:

87

Minimum

Average

C4: Advantages and Disadvantages of each Channels [from Banks point of view] DD

SWIFT

E-Mail TT Money transfer company (Western Union, Express Money, Money Gram etc)


C5: Advantages and Disadvantages of each Channels [from Customers’ point of view] DD

SWIFT

E-Mail TT Money transfer company (Western Union, Express Money, Money Gram etc) Others Comment [if any]:

88

C6: Is there any change in the trend of the use of Channels [for WR] over the last five years? What are the probable reasons? C7: Is there any significant differences in the global region or country/countries and use of a particular Channels for sending WR? What are those? C8: Is there any significant differences in the purpose of the remittances and use of channels [WR, FDI, NRB Investment etc.]? What are the probable reasons? C9: What are the foreign agents with whom Your Banks have arrangements? What are the terms? Which channel is better from the point of view of banks’ revenue and why C10: Do you face any difficulty in dealing with foreign counter parts? What are those?

D: Channels used in Transferring Funds [workers remittances] from Local Bank [Branch/Head Office] to the Ultimate User. [2002-2006] D1: Number of Transactions and Amount by Different Channels Channels 2002 2003 2004

DD/Pay Order E-Mail TT Others Comment [if any]:

D2: Operational Procedure of Different Channels

DD/Pay Order E-Mail TT


89

2005

2006

D3: Time Requirement [as of 2006] Channels

Maximum

Minimum

Average

DD/Pay Order E-Mail TT Others Comment [if any]:

D4: Advantages and Disadvantages of each Channels [from Banks point of view] DD/Pay Order E-Mail TT Others Comment [if any]:

D5: Advantages and Disadvantages of each Channels [from Customers’ point of view] DD/Pay Order

E-Mail

TT Others Comment [if any]:

90

D6: Is there any change in the trend of the use of Channels over the last five years? What are the probable reasons?

D7: Is there any significant differences in the use of channels by banks and sending region? Please Explain D8: Is there any significant differences in the regions/districts of Bangladesh and time-cost requirements in sending remittances? Please Explain D9: Do you have any arrangement with bank/other NGOs for channeling funds to send remittances to the end users? What are the terms and Revenue Sharing Arrangement? D10: Do you face any difficulty in dealing with local banks? What are those?

D11: Do you face any difficulty from your clients or end users in the process of channeling remittances? What are those?

E: Costs requirements for each Channel used in Transferring Funds [workers remittances]. [2002-2006] E1: Cost Requirement [as of 2006] Foreign Agent to Local Bank [Branch/Head Office] DD/Pay Order SWIFT E-Mail TT Money transfer company (Western Union, Express Money, Money Gram etc) Others Comment [if any]:

91

Local Bank [Branch/Head Office] to the Ultimate User

F: Miscellaneous Open-ended Questions F1: Is there any policy of the Central Bank in regard to time, cost and operational aspects of WR? What are those? F2: Is there any policy of your bank in regard to time, cost and operational aspects of WR? What are those? F3: Does your Automation Status affect remittance businesses? How? F4: What rate you offer for the remittance inflows [WR]? Who determines the rate? Does the rates vary in different banks? Does the rate vary from client to client?

F5: Do you have missing case or cases of fraud in handling remittances? Please note. F6: What are the reasons that people prefer informal channels in sending worker remittances? What could be the probable solution? Can ICT help in improving the situation?

92

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