International remittance is one of the most important global issues of the twenty-first century because of its crucial role in the economic development of developing countries. Every year, a large number of people migrate from one country to another over the world searching for better livelihoods. Bangladesh is one of the notable countries among them.
According to a report of the World Bank published in 2016, Bangladesh is the seventh largest emigrant country while it is the tenth largest remittance recipient country in the world. In 2016, the volume of migration from Bangladesh was 757731 million while it was 555881, 425684 and 409253 in 2015, 2014 and 2013, respectively (BMET).
On the other hand, in 2016 the country received $13.62 billion remittances while it was $15.28, $14.95 and $13.84 billion in 2015, 2014 and 2013, respectively (BMET). Although every year the volume of remittance inflows is increasing significantly worldwide, the rate of remittance inflows into Bangladesh is lower than other neighbouring countries like India and China.
In 2014, Bangladesh received $15.8 billion remittances while India and China received $72.2 and $63.9 billion (World Bank, 2016). In this situation, a question raises apparently that why does Bangladesh receive a low amount of remittance than China and India? Or, what drives international remittance inflows into Bangladesh? The conclusive answer of these questions is till now undetermined despite a number of studies already being conducted on this issue.
From the review of earlier studies, it is observed, in order to identify the determinants of remittance more distinctly, scholars classified the determinants into two categories, namely, microeconomic determinants and macroeconomic determinants. These determinants play a vital role in motivating migrants to remit their earnings to the families in the home country.
Scholars identified three distinct sets of motivations to remit by the migrants. They are- altruistic motive, self-interest motive, and enlightened self-interest motive. Altruistic motive deals with the transfer of earnings home by migrants with a view to helping the left behind families. According to this motive, remittance is positively related to migrants' income and household size, and negatively related to migrants' household income.
On the other hand, self-interest motivation implies that migrants transfer earnings to their families if and only if they have the probabilities of returning home. This motivation assures that remittance is positively related to migrants' asset and income in the home country and the probability of inheriting and negatively related to risk aversion.
Finally, enlightened self-interest motivation is the sum of all sorts of contractual arrangements such as co-insurance, exchange motive and loan repayment between migrants and their families.
Co-insurance motive highlights that migrants remit earnings when both migrants and their families attempt to diversify risk. On the other hand, when migrants remit to buy assets or future inheritances from other family members, it is termed as exchange motive. Finally, loan repayment motive induces migrants to remit for the investment in education and others skill development purposes of the potential migrant.
Reviewing previous studies, it is also observed that there are a number of papers in the world regarding this issue. However, most of them are based on macroeconomic determinants. In a broad sense, they found exchange rate, interest rate, inflation rate, wages in the host country, GDP growth rate and so on as the determinants of remittance.
On the other hand, there are some studies in the world on the microeconomic determinants of remittance. They revealed that age, sex, education, household size, marital status, skill, training, years at abroad, earnings and so on are the determinants of remittance. Scholars found that microeconomic determinants are the significant factors that affect remittance inflow in the long run while macroeconomic factors affect remittance channel used. On the other hand, another study stated that migrants take decisions to remit on the basis of microeconomic factors.
Mannan and Farhana (2014a, 2014b, 2015); Mannan and Fredericks (2015) and Kundu (2016) studied on the microeconomic determinants of remittance in Bangladesh. Apart from Kundu (2016), the rest researchers focused on some particular context. As for example, Mannan and Farhana (2014a, 2014b, and 2015) focused on marital status, gender, and educational attainment, respectively.
On the other hand, Mannan and Fredericks (2015) highlighted only on religion. Kundu (2016) studied the microeconomic determinants of remittance, the study considered remittance as the dependent variable and measured with categorical variable and found some significant factors motivating international remittance inflows in Bangladesh.
The most outstanding findings have been revealed from a study of Kumar et al. (2018). They have found that household size, earnings of migrants, migrants' skill, training, and experience are the significant factors that affect migrants remittance sending. This result reveals that Bangladeshi migrants remit their earning not motivated by a particular motivation rather than by mixed motivations.
Besides the determinants of remittance, the study also reviews the uses of remittance in Bangladesh. Kumar et al. (2018) found that remittance recipient households utilize remittance for many purposes like consumption of food and non-food items, housing, education, health and investment purposes. Among these purposes, more 50 percent of receipt remittance is utilized in consumption of food purpose. Very remittance is utilized for productive purposes like investment in any business or farms.
It is also found that Barai (2012); Iqbal and Ahmed (2002) and Bruyn and Kuddus (2005) studied the uses of remittance in Bangladesh. They found that migrant households use remittance mostly on consumption of food items. Besides, they spend remittance very few on productive sectors like business, commercial farming, and transportation. Barai (2012) found that remittance is used on consumption of food and clothes by 20.45 percent. On the other hand, Iqbal and Ahmed (2002) found that 34.9 percent remittance is used on the consumption of food.
From the above-presented information, it can be concluded that Bangladesh migrants remit to their families in the home countries motivated by mixed views and utilizes remittance mostly in consumption purpose. This remittance reduces poverty and enhances the welfare of the remittance recipient households, directly and indirectly, contributes to the development of community and the national economy. Therefore, government and non-government organizations should take care of the significant factors that affect more in the inflow of remittance into Bangladesh.
The writer is Lecturer and Researcher of Economics, Varendra University, Rajshahi