World Bank finds huge boom of remittance
Mahfuja Mukul:The World Bank has identified Bangladesh as one of only three big economies that had increases in remittance inflows in 2020, along with Pakistan and Mexico, and remittances have long made up a substantial share of people’s income in the country, preliminary results from a recent study supported by the Asian Development Bank Institute (ADBI) finds surprising resilience for remittance inflows into the rural economy during the first wave of the coronavirus disease (COVID-19) pandemic in Bangladesh.
In collaboration with Socioconsult, a well-known survey company in Dhaka, we conducted a study throughout 2020 to develop a more panoramic view of what is happening in rural areas that might offer insights into how to achieve a quick recovery for Bangladesh’s economy, a goal shared by the Asian Development Bank (ADB), other multilateral development partners, and the Government of Bangladesh.
Our study is based on a three-round survey (June 2020, September 2020, and January 2021) of the most widely used Mahabub Hossain Panel Data (MHPD)1 samples of more than 2,200 households. The households are nationally representative rural samples that were obtained through multistage random sampling and used to capture the short-to-medium-term impacts of the first wave of the COVID-19 pandemic. Repeating the surveys for the same samples every 3-4 months throughout 2020 allows us to observe the changes in the rural economy, offering evidence of the quick recovery of consumption and the economic conditions of rural households and their associated factors. The first-round survey targeted all 2,846 respondents of the survey in 2014 and used detailed contacts provided by the households at the time. In the following rounds, the survey only targeted those who had given complete answers in the previous round.
Our first-round data, conducted in June 2020, document several adverse impacts from the containment measures, such as delayed harvests during the dominant rice (Boro) season in 2020, difficulty in selling farm produce, labor and material input disruptions and cost increases, and reductions in remittance receipts and non-farm business sales (Malek, Troung, and Sonobe 2021). We also find that rural households had to reduce their food consumption and receive food support from the government and cash support from the private sector during the first 3 months of the pandemic. However, when we combine the data from all three rounds, our results reveal a more positive picture for rural areas, suggesting quick recovery among farm and non-farm businesses, remittance income, food consumption, and overall economic conditions, especially in the third round (Malek, Troung, and Sonobe 2021).
Such a quick recovery in the rural economy is not surprising because Bangladesh is still agrarian and heavily dependent on the agricultural sector, with employment and livelihood shares of approximately 50% and 70%, respectively. Media reports suggest that many displaced workers from urban sectors and students who stopped their studies due to the COVID-19 lockdown measures needed to stay in their rural houses and contributed to both rural farm and non-farm production. The country’s central bank monthly remittance data show that inward remittances hit bottom in March-May 2020 but quickly recovered in June and peaked in July with the flows reaching a record value of around $2.6 billion. Consistent with the macro remittance data, we find a considerable share of sample households receiving remittances from their absentee members working overseas or within Bangladesh. The share of overseas remittance recipients quickly recovered from around 6% during March-May 2020 to over 11% in September-December 2020. The same trend is observed for domestic remittances as well, with the domestic economy undergoing a quick recovery in 2020. Around 30% of households reported receiving money or food support from the government, NGOs, or friends or neighbors, etc., mostly received in the first-round period after the lockdown measures were imposed across the country.
Together with the descriptive evidence, our regression analysis suggests a significant positive relationship between the remittance inflow variables and food consumption expenses, consumption experiences, and changes in economic conditions. Deeper analysis also indicates a possibly more optimistic picture of food consumption equity in contrast with the widening food gap warned by scholars and international organizations, and such evidence appears to be more profound among remittance recipient households compared to their non-recipient counterparts. We find possible evidence of rapid conversion between different quantile groups for real food distribution. In March-May 2020, the real food consumption spending of the top consumers was more than 4 times higher than the bottom consumers, but the bottom group quickly caught up, and the gap dropped to under 2 times in September-December 2020.2
Although our study does not claim a causal relationship between remittance inflows and rural recovery, it may help to reinforce the claim made by the Asian Development Bank (2021) on the crucial role of remittances for domestic demand and consumption amid the pandemic, which fueled the collapse of other foreign currency sources, foreign direct investment, and exports, in many low- and middle-income developing economies.
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