Greater role for Mobile Financial Services

It is good to see policymakers, experts and economists agree on the vital role mobile financial services (MFS) can play to increase the fast declining remittance inflow through formal channels. As things stand now, it is estimated that about half of all inward remittance is channelled through illicit channels and that costs the government billions in lost foreign exchange earnings. Policymakers and experts were on the same page during a recent roundtable arranged by the Economic Reporters Forum that laid stress on taking immediate steps to encourage our expatriate workers to use official channel that would see their precious earnings take the legal route to reach the monies to their dependents back home.

The country presently has several tried-and-tested MFS but getting that news out to our expatriate workers abroad has not been done. Bangladesh has missions in all the major foreign labour markets where economic migrants work and it is necessary to engage embassy and high commission officials to disseminate the possibility of using MFS to send their earnings safely to the country. Looking beyond the modalities involved, the issue of the wide gap between what is offered in terms of exchange rate by the government and hundi (unofficial channel) operators must be addressed. Expatriate workers will not be weaned away from hundi operators if the difference remains Tk5 to Tk6 against 1 US$. One way could be to increase the cash incentive to the point that it makes up the difference and the cash back process must be instantaneous, i.e. built in to the MFS platform.

The bulk of Bangladeshi workers who go abroad are blue collar workers who are not sufficiently educated. Yet they do understand smart phones and are in general well acquainted with digital devices. Smart phones are used to keep in touch with family back home via online voice / video services. This makes the transition to digital payments systems like MFS easier, provided a well thought out campaign is designed and executed to make them aware of such a service that takes only a few clicks on their cell phone devices.

If this can be done, then the country stands to gain an additional US$10 to $12 billion worth of remittance that is currently lost to informal channels. Even if half of the illicit transactions can be brought through formal channels, the remittance basket stands to gain at least $5 billion a year. That is going to be immensely helpful for the economy. Because as things stand now, the war in Europe has sapped the purchasing power of European consumers who have less to spend on our primary export products, namely apparels. With a general downturn in the global economy, there has been a corresponding loss of exports for the country and hence boosting remittances has become all the more important.

With forex reserve declining at the rate of about $1 billion a month, it is now a matter of national priority to launch an exhaustive campaign to reach out to migrant workers. Without taking into account their issues and tribulations, it will be an uphill task to get them to use formal channels to send their hard earned forex. The inputs received must go into the design of the digital platform that will potentially be used by MFS to channelise remittance to the country.