Breaking the Currency Barrier: Easing Remittances for Bangladeshi Migrants

 

Bangladeshi migrant workers play an indispensable role in the Maldives’ economy, particularly in tourism, construction, and service industries. Their contribution is not only vital to the Maldives but also to Bangladesh, where remittances from these workers provide crucial support to families and add to the country’s foreign exchange reserves. However, despite their significant role, Bangladeshi workers face persistent challenges in remitting their hard-earned income back home. The main difficulties arise from currency conversion, limited access to formal banking channels, high remittance costs, and regulatory barriers. Addressing these challenges is essential for the well-being of migrant families and for strengthening Bangladesh’s economic resilience.

The Maldives is one of the world’s most tourism-dependent economies. Its hotels, resorts, restaurants, and infrastructure projects rely heavily on migrant labor. Among the migrant groups, Bangladeshis constitute a large share, estimated at nearly one hundred thousand to one hundred and twenty thousand workers, making them one of the largest foreign communities in the Maldives. Most of these workers are employed in construction, domestic work, and low-skilled service jobs. For many Bangladeshi households, the wages earned in the Maldives represent the primary source of income, sustaining livelihoods and enabling investment in education, housing, and healthcare. The importance of ensuring smooth and cost-effective remittance channels cannot therefore be overstated.

The foremost obstacle for Bangladeshi workers in the Maldives lies in the problem of currency mismatch. Workers are usually paid in Maldivian Rufiyaa (MVR), the local currency. While this is natural for domestic transactions, it creates complications when it comes to remitting funds to Bangladesh. The MVR is not a convertible currency and cannot be directly transferred abroad. Outward remittances from the Maldives are processed only in US dollars, meaning that workers must first exchange their MVR wages into USD before initiating a transfer through banks or money transfer operators. This requirement adds an additional layer of difficulty.

The demand for USD in the Maldives is persistently high, fueled by the tourism industry, imports, and international transactions. As a result, the supply of dollars is often limited, and migrant workers face difficulties in finding sufficient amounts for conversion. The shortage of USD has given rise to informal money-changing networks. Workers frequently resort to these channels, but the exchange rates offered are often unfavorable and exploitative. Many lose a substantial portion of their income during conversion, and worse, informal systems carry risks of fraud, theft, and non-delivery of funds.

The net result is that workers face what can be described as a double penalty. First, they lose money in the unfavorable exchange rate when converting MVR to USD. Second, they must pay transfer fees when sending the remitted amount through banks or exchange houses. For low-income workers earning modest wages, these costs reduce the real value of remittances significantly. Even when workers manage to secure USD, they face further hurdles in the formal banking system. Many workers lack the documents required to open and operate bank accounts in the Maldives, forcing them to rely on intermediaries. Exchange houses affiliated with Bangladeshi bank sometimes face liquidity or settlement issues. Recent cases in Singapore highlighted how three Bangladeshi exchange houses encountered severe difficulties in transmitting funds back to Bangladesh. They receive currency notes from workers but cannot deposit the same with their bank accounts maintained abroad. These disruptions risk pushing transactions further into shadow markets. In addition, banks and licensed exchange houses charge fees that, while small in percentage terms, are substantial relative to a worker’s monthly wage. Global regulatory pressures related to anti-money laundering and counter financing of terrorism also delay transfers, adding to worker frustration.

The inefficiencies in remittance transfers harm both workers and Bangladesh’s economy. Families in Bangladesh receive less than what workers actually earn, leaving them financially vulnerable despite the sacrifices made abroad. Dependence on unauthorized money changers undermines the formal financial system and increases vulnerability to fraud. When funds bypass official channels, Bangladesh loses out on valuable foreign exchange reserves, weakening its balance of payments. Over time, workers become disillusioned with formal banking systems, reinforcing a cycle of informality that benefits neither the sending country nor the receiving one.

To overcome these barriers, Bangladesh could consider a policy innovation: allowing outbound travelers and migrant workers to use Taka-linked international debit or prepaid cards for remittance purposes. Such a mechanism would transform the way remittances are managed, particularly for workers in the Maldives, by minimizing the need for USD conversion and offering a safe, traceable, and affordable alternative.

The system would function in several steps. First, Bangladeshi banks would issue prepaid or debit cards denominated in Taka to outbound passengers under their travel entitlements. The equivalent foreign currency value of the card load would then be retained in a foreign currency margin account with the issuing bank in Bangladesh, ensuring the funds are secure and accounted for. Upon arrival in the Maldives, passengers could withdraw or convert local currency from designated partner exchange houses or correspondent banks abroad using their Taka card. Once funds were disbursed abroad, the card-issuing bank in Bangladesh would record the transaction as an inward remittance, and the money would be transferred to the worker’s family or beneficiaries in Bangladesh.

To maintain transparency, the reporting framework would be split into two legs. The first leg, involving card issuance and margin account placement, would be reported as a travel expense. The second leg, covering foreign disbursement and remittance recognition, would be reported as an inward wage remittance. This ensures compliance with foreign exchange regulations and provides an auditable trail of transactions.

The benefits of this approach are numerous. It would reduce dependence on USD in the Maldives since funds would be backed by margin accounts in Bangladesh. It would eliminate reliance on informal channels, protecting workers from fraud and exploitation. Costs would be reduced by removing the double penalty of exchange losses and high transfer fees. Families would receive a greater share of the money that workers intend to send. For Bangladesh, the system would ensure that inflows are recorded formally, supporting the country’s foreign exchange reserves. Full alignment with know-your-customer, anti-money laundering, and counter-terrorism financing standards would strengthen transparency and reduce misuse of funds. Most importantly, the system could be scaled to other countries where Bangladeshi migrants face similar challenges.

For such a policy to succeed, several elements would need to be carefully managed. Bangladeshi banks would need to establish strong correspondent arrangements with correspondent banks and exchange houses abroad. Central bank would need to issue detailed guidelines on how margin accounts should be maintained, reported, and audited. Transaction charges would need to be capped at affordable levels to ensure accessibility for low-income workers. A pilot program involving a limited number of banks and workers could test operational feasibility before a full-scale rollout.

The remittance challenges faced by Bangladeshi workers in the Maldives are multifaceted, rooted in currency mismatches, USD shortages, high costs, and weak institutional support. These obstacles reduce workers’ incomes, push transactions into informal channels, and deprive Bangladesh of valuable foreign exchange. A forward-looking solution lies in the introduction of a Taka card–based remittance framework. By allowing workers to remit money home in local currency with settlement arrangement abroad through prepaid or debit cards backed by margin accounts in Bangladesh, the process of remittance can be streamlined, costs reduced, and transparency enhanced.

As Bangladeshi workers continue to sustain both the Maldivian economy and their families at home, it is the responsibility of policymakers to ensure they are not penalized by inefficiencies in the financial system. Implementing innovative solutions such as Taka cards could transform remittance flows, safeguarding worker earnings and strengthening Bangladesh’s economic resilience. In the long run, the measure would help restore confidence in formal channels, improve living standards for workers’ families, and ensure that the sacrifices made abroad translate into meaningful gains for the nation. The central bank should come forward for piloting the program.


Mehdi Rahman works in the development
sector. He also writes on foreign trade
and monetary issues.