Published: 11:43 PM, 28 July 2026
The Case for Letting Money Flow Out to Speed Up Repatriation of Earnings
Bangladesh’s journey toward integrating freelancer income into the formal financial system began as early as 2011, when the central bank introduced a policy allowing the repatriation of earnings through online payment gateway service providers. At the time, the move was forward-looking and unconventional. The digital economy was expanding globally, and a new class of freelancers in Bangladesh had started earning foreign exchange through non-traditional channels. Recognizing this shift, the central bank acted proactively - without any explicit demand from commercial banks.
Over time, the policy has evolved through multiple refinements and has now reached a stage of maturity. Yet, its adoption remains limited. Only a handful of banks - countable on one’s fingers - have introduced and actively supported such products. Most others have remained indifferent. This reflects a deeper structural issue: innovation in the financial sector is often policy-driven, but its implementation depends on the incentives and preferences of banks.
Nevertheless, the central bank deserves due credit. In an environment where institutions are typically risk-averse, it introduced a mechanism that enabled at least part of the freelance economy to enter formal channels. Without this initiative, a significant portion of digital earnings would likely have remained entirely outside the banking system.
In contrast, wage remittances have long been well integrated into the formal framework. Banks have established extensive drawing arrangements with exchange houses and money transfer operators abroad. These partnerships allow them to capture large volumes of foreign exchange efficiently. Most banks actively participate in this segment, treating it as a core source of foreign currency.
However, the behavior of banks reveals a clear preference: they favor bulk transactions over retail ones. Large inflows from exchange houses are easy to manage, operationally efficient, and commercially attractive. In contrast, freelancer earnings typically arrive in small, fragmented amounts, requiring more effort in processing, compliance, and customer handling. As a result, banks show little interest in such retail inflows - even when the beneficiaries are their own customers.
This preference is visible in day-to-day market practices. Banks actively seek bulk foreign exchange in the early part of the day, often competing to secure large deals. Yet they remain largely passive when it comes to attracting numerous small inflows that, in aggregate, could be substantial. This raises an important question: will this pattern change? The likely answer is no - unless structural conditions force a shift.
At the heart of the issue lies the imbalance between inward and outward remittances. Bangladesh’s foreign exchange regime has traditionally emphasized inflow maximization while maintaining tight control over outflows. While this approach may have been necessary in earlier periods, it has now created distortions. Restrictions on outward remittances encourage the development of informal channels that simultaneously handle both inflows and outflows, reducing the effectiveness of formal mechanisms.
First, non-resident Taka account holders should be allowed to remit funds back to their country of residence with minimal restrictions. This reform would eliminate one of the key incentives for using informal channels. When non-residents have confidence that their funds can move freely in both directions, they are more likely to engage with the formal banking system.
Second, individuals should be given greater flexibility to make outward remittances for legitimate purposes such as education, medical treatment, investment, and asset diversification. A structured framework with defined annual limits can ensure control while providing necessary freedom. Such arrangements are common in many emerging economies and have proven effective in reducing reliance on informal channels.
Third, businesses should be allowed more freedom in making outward payments related to services, technology acquisition, and overseas expansion. In a globalized economy, restricting such transactions can hinder competitiveness. A more liberal approach would encourage firms to operate transparently through formal channels rather than resorting to informal settlements.
Fourth, regulatory focus should shift from restriction to monitoring. Instead of imposing rigid controls on every transaction, a risk-based approach supported by digital reporting systems can ensure compliance while reducing friction. This would make formal channels more user-friendly without compromising oversight.
Fifth, and perhaps most importantly, outward liberalization should be seen as a tool to influence bank behavior. As outward remittances become easier, banks will face increased pressure on their foreign exchange liquidity. This pressure can act as a powerful incentive for them to actively pursue inflows - not only from traditional bulk sources, but also from retail segments such as freelancers.
This shift would also help integrate the growing freelance economy into the formal system. Bangladesh has emerged as a significant player in global digital services, with thousands of freelancers earning foreign exchange. Yet, a considerable portion of these earnings remains outside the banking system. By aligning incentives through outward liberalization, banks can be encouraged to capture this untapped segment.
Ultimately, the question is not whether banks prefer bulk transactions - they clearly do - but whether the system can be designed in a way that makes retail inflows equally attractive. The answer lies in removing structural distortions and creating a balanced, two-way flow of foreign exchange.
The central bank has already demonstrated foresight by introducing policies for freelancer income repatriation. The next step is to deepen these reforms by addressing the constraints that limit their effectiveness. Relaxation of outward remittances is not a risk to be avoided; rather, it is a necessary evolution toward a more efficient and transparent foreign exchange market.
By enabling funds to move freely in both directions, Bangladesh can reduce the size of the shadow market, strengthen formal channels, and ensure that its growing engagement with the global economy is fully reflected in its financial system.
Mehdi Rahman works in the
development sector. He also
writes on foreign trade and
monetary policies.
