Agrani Exchange, which occupies the upper floor, is one of the formal remittance channels for Bangladeshi workers in Singapore
For a few years now, the Dhaka government has been trying to encourage Bangladeshi nationals working abroad to use formal remittance channels when sending money home, instead of using the Hundi system (also known as the Hawala system). The incentive takes the form of a top-up into the worker’s bank account.
From what we have read, between 2012 and 2017, Bangladeshi remittances as a percent of GDP dropped from 10.5 percent to 5.4 percent (link), and this was what motivated the Bangladeshi government and central bank to design an incentive scheme. Perhaps there was a trend whereby workers abroad were choosing to use informal Hundi channels to send money home, thus reducing the foreign exchange available to the authorities.
The Hundi system is one based on a network of individuals in both the source and destination countries, and operates based on trust. The migrant worker hands over an amount to his preferred Hundiwala, who then contacts his counterpart in the migrant worker’s home town or village. That other partner then delivers an equivalent sum of money to the migrant worker’s family. The process seldom takes more than a day.
A TWC2 research study from 2019 provides a more detailed look at the Hundi system and why many workers prefer it to formal channels. See Remittance highways and byways. Briefly, migrant workers expressed preference for the Hundi system because of these factors:
- Hundiwalas give better exchange rates and/or charge lower commissions.
- Bank transfers take longer than hundi transfers.
- In Singapore, banks are located downtown whilst their dorms are far away; banks may not be open on worker’s rest day, thus inconvenient for the migrant worker.
- Bank branches may not be present in their home towns or villages, and their families will have to make a long trip to collect the remitted money, whereas the hundiwala’s partner is much closer and may even deliver the cash to the family home.
To encourage use of formal banking systems, the Dhaka government initiated an incentive scheme in July 2019, giving a 2 percent top-up to every amount transferred through banks and licensed channels (see middle paragraphs in this link). The incentive was increased to 2.5 percent on 1 January 2022 (see link) and further increased to 5 percent from October 2023. As explained in a risingbd.com news story dated 22 October 2023,
Expatriates will get five percent incentive from today if they send remittances to the country through legal channels.
Earlier only 2.5 percent incentive was given by the government. From now on, the banks will provide 2.5 percent side by the government.
It is unclear how the government or the banks will fund their share of such a generous top-up, though people will likely imagine that playing around with exchange rates may be a possibility. It has also been suggested that not all banks are on board with the latest move; only some of them will be adding the additional 2.5 percent top-up while others may give less. Things may become clearer with time.
What workers think
Comments following a poll on a Bengali-language Facebook page about his new move were interesting. The poll asked participants whether they used hundiwalas or banks to send money home. About 70 percent of respondents said they used banks. Below are some comments that we saw (courtesy Google Translate). They suggest considerable scepticism about the poll results as well as distrust of the Bangladeshi government.
1. Depends on the situation. Use both. But it is better to send to bank.
2. I send through banks because there is no hundi in my area, I send to banks thinking about security of money.
3. Depend on exchange rate.
4. Brother, how will I send money to Bangladesh Bank. Where Austen Union [Western Union] is 85 taka [to one Singapore dollar] and our country’s leading bank is 80 taka 50 taka, send in both.
Some comments indicate participants’ wariness about responding to a poll like this. They have a fear of being watched by the Bangladeshi government. In the first of the comments below, the commentator expresses his opinion that many who voted “bank” in the poll might not be truthful.
5. Everyone will support the bank, actually 80% Hundi.
6. What is the benefit of knowing? Why should I tell you?
7. Everyone be careful, detectives are on the page of Guni!! Everyone say in the bank.
Other comments hint of the fierce political debates going on in their country, and the deep mistrust of the current (Awami League) government. We’d stress again that the accusations in these comments are not TWC2’s opinions, but that of the commentators on that Facebook page.
8. Hundi or bank, money is going to the country, the difference is the government can eat in a bank, can’t eat in a hundi.
9. As long as the Awami tyrant government is there, I will not pay any money to the bank.
10. They will steal all the money in the country and build houses in the country.
11. It is illegal to send our money to hundi, but sending it to the illegal government I think it is illegal to me.
Will illegal recruiters rub their hands with glee?
TWC2 understands that the 5 percent top-up does not apply to all incoming funds into Bangladesh. It is meant to apply only to remittances sent by Bangladeshi nationals working abroad to their families.
At first sight, this may seem clear enough, but there is a twist.
Many Bangladeshi workers looking for their second, third or fourth job in Singapore rely on other Bangladeshis in Singapore to match them with new jobs. Invariably, the latter are not licensed employment agents, but freelancers monetising their good connections with prospective employers. We use the North Indian word dalal to refer to them.
From TWC2’s anecdotal insights, these dalals are often of two broad types.
The first type would be those who are themselves here on Work Permits, doing construction or other kinds of work. They would be trusted employees of their bosses, and it is this trusted position which they leverage to recommend new workers to the company when the boss confides in them that extra manpower is required. Naturally, they (trusted employees) expect payment from jobseekers in return. Perhaps a part of the payment is shared with the boss too.
The anecdotes we hear would be the ones where a worker, after starting work in his new job, tells us he was surprised to see that the dalal who recommended him to the new job (and took money for the favour) was also working in the same company, as a supervisor or foreman.
As an experienced and trusted employee, this type of dalal may earn about $1,500 a month from his Work Permit job, but each recruitment transaction he brokers can earn him $2,000 – a nice windfall.
The second type would be those who are also in Singapore on Work Permits or some other kind of work pass. But they have an understanding with their official employer that they wouldn’t actually need to show up for work. Perhaps the company doesn’t have work at all. These “release workers” find their own paid work or use their time to act as dalals. They acquire a lot of contacts with employers and perform the service of finding workers for them. They wouldn’t have any employment agency licence (they wouldn’t qualify) and thus what they do would not be legal.
The difference between this type of dalal and the first type is that for this type, job-brokering work is his main activity, whereas for the first type, it is incidental to his usual job as a construction supervisor or something similar.
Consider what happens when either type of dalal receives his “recruiter’s fee”. He may want to send the money home to Bangladesh where he may be building a grand mansion for his family. But from the remittance agency’s perspective, the money obtained by a bank client from his dalal services is indistinguishable from the money earned from a Work Permit job. The dalal is unlikely to tell the bank or remittance agency that part of the money was the fruit of his illegal recruitment activity since that would be self-incriminating.
Consequently, the entire sum being remitted is likely to be cast as earnings from work. As a result, the entire remittance may then enjoy the 5 percent top-up. If so, the Bangladeshi government and its banks will be giving an extra reward to an illegal agent’s activity.
How’s that for unintended consequences?