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Utilizing Remittance as a source of Micro Financing A study on UK NRB remitters’ investor market By JameRasheed
Research Objective To determine if remitters in UK can play a part in supporting micro financing projects in Bangladesh
Research Questions Analyse the investment pattern of Bangladeshi remitters living in UK. Assess the interest in investing in micro financing projects in Bangladesh by UK remitters. Create a typology of strategies which can encourage UK NRB investors in participating in investing in Bangladesh.
General Sources of Finance for Micro Finance Projects Donor and government grants and soft loans Savings demand deposits, passbook savings, time deposits, etc
Evolution Process of Microfinance Financing Microcredit uses the graduation principle Size of repeat loans increases according to repayment record Sustaining the program through new funds Debt capital Short term borrowing From commercial and central banks Long term borrowing From well developed capital markets
Similarities and Differences between Remittance and Micro Finance Approaches & Outcomes Both provide financial freedom Micro Finance has a structured process of investment Remittance is unstructured and individualistic Both aim for alleviation of poverty Micro finance addresses betterment of society Remittance addresses individuals Both derive their sources from an ideology of charity and philanthropy Both have the same end game Microfinance is a source of credit Remittance is a source of savings
Remittance and Employment Remittance flow has been constantly rising. In fact, 2008 saw the highest recorded flow of remittances, despite the recession –related level off of employment abroad
WB Estimate of Average Remittance Transaction Size
WB Estimate of Average Transaction Size About two-thirds of 20 villages from 10 district suggested that the remittance is received by Bank Draft However, 16 percent of that sample remit money initially into a third party account from where it is distributed to the beneficiary 24 percent send money through hundi process then through formal channels.
Research Sampling Process The sample was selected through the snow ball sampling method The sample size was 20 respondents who had established restaurants in UK from the Sylhety community The questionaire was based on the US AIDS remittance data mining system
Average ticket size per corridor in BDT (3 month) BRAC Bank Ltd
Why Fixed assets? Land value always appreciates It is generally stable and lucrative Can be turned into a fixed source of income Bangladesh's high population rate ensures rising demand for land thus increasing the price.
Religion as a criterion for investment A research conducted by DFID in 2005 identifies that Zakat was the prime means of investment from UK . However, this is usually done as there are no known other favourable investment tool available to a remitter.
Interest in investing in micro- financing projects in Bangladesh
Investing in government and private sector for MFI projects
Trust factor between government and private sector MFI
Expectation on the rate of return on MFI projects
BB initiative to remitters investment Tax haven for remitter investment Bonds FC and NFCD account WEDB Bond (provides return) USD Premium Bond (provides return) NITA account (investors account on share market, bonds etc)
Conclusion UK remitters have the highest potential to invest in micro financing projects provided there is a return. The currency conversion rate makes it feasible to have the high investment potential in generating investment funds. Though religion is a factor in the investment decision there is an interest in getting a return on investment even if its relatively less. There is a high probability of remitter investment in the private sector as opposed to the government sector.
Recommendation Create a separate fund in the foreign currency reserve for development purposes. New development bond or WEDB that can be sold to remitters and generate separate fund for development with return on ROI Direct deposited fund directly for the MFI’s with minimal governmental involvement.
Potential lacking of the survey An adequate number of respondent to create a potential link between religious views and investment in Bangladesh. Types of preferred investment by remitters and their expected return. Specific investment climate by remitters to initiate investment in Bangladesh.