On Tuesday, the central bank authorized the country's mobile banking service providers to send remittances to Bangladesh, making it simpler for migrant workers to securely transfer money to their intended recipients.
The Foreign Exchange Policy Department (FEPD) of the Bangladesh Bank issued a circular in this regard allowing licensed MFS providers to send wage remittances in collaboration with internationally recognized online payment gateway service providers, banks, digital wallets, card schemes, and aggregators abroad.
The circular states that in order to obtain approval, only licensed MFS providers must submit an application to the central bank by December 31.
Industry insiders said that the mover will not just bring in financial inclusion but might even potentially curb hundi dependence by migrant workers, as well as help restore the country's forex reserve.
“Apart from helping migrant workers to send money directly and easily to their family members, the move will also stop the drainage of wage remittance through unofficial channels,” a central bank official said.
The central bank is taking necessary steps to implement the framework, the central banker said.
“Currently, remitters rely on formal channels as foreign exchanges, banks, and money transfer companies to send their money back home, for which they have to travel and the transactions are not instantaneous, which pushes them towards the hundi system, which is illegal,” Shamsuddin Haider Dalim, the head of corporate communications at bKash told Dhaka Tribune.
“Migrant workers such as those in the middle east are not well versed in financial management, which also pushes them to use hundi,” the top brass added.
However, once the central bank's move is implemented, migrants will be able to send money back home using their mobile wallets, bringing wider flexibility to the money transfer system, while bringing remittance through formal channels and likely to help restore the country's forex reserve, industry insiders speculated.
Migrant workers will have to open mobile financial accounts in taka through proper Electronic Know Your Customer (e-KYC) with validated proof of departure from Bangladesh.
Designated Bangladeshi banks will provide settlement account services to the MFS providers. They will transfer the funds deposited in their Nostro accounts to the settlement accounts of the MFS providers in Taka, as per the circular.
After receiving the amount in taka, wage earners can use the MFS account from abroad to do all transactions in Taka.
The financial regulatory body has decided to allow MFS providers such as bKash, Rocket and Upay to directly bring remittances sent by Bangladeshi wage earners abroad.
However, of the 13 MFS providers in the country, only Nagad will not be able to apply for the permit as it does not have a license and is currently running its operation with interim permission.
There are about 5,000 illegal agents of Mobile Financial Services (MFS) across Bangladesh who have laundered about Tk75,000 crore in the last year.
The agents laundered money through hundi and as a result, Bangladesh has been deprived of remittances equivalent to about Tk25,000 crore - which is about $7.8 billion dollars, for the past four months, confirmed The Criminal Investigation Department (CID) of the police.