Socio-economic Impact of Remittance on Households: A Study on Khulna City

Socio-economic Impact of Remittance on Households: A

Study on Khulna City

Md. Ashif Hossain

Economics Discipline

Social Science School

Khulna University

Khulna, Bangladesh

August, 2013



……………………………………

Md. Ashif Hossain

Student Number: BSS 091508

Session: 2011-2012

Supervisor

…………………………………….

Sk. Sharafat Hossen

Assistant Professor


Khulna University

Khulna, Bangladesh

A Thesis Paper submitted to the Economics Discipline of Social

Science School, Khulna University, Bangladesh in partial fulfillment

for the BSS (Hons.) in Economics degree

August, 2013



…………………………………………

(Mohammed Ziaul Haider, Ph.D)

Head


Social Science School

Khulna University

August, 2013

Statement of Originality



The findings of this Thesis are entirely of the candidate’s own research

and any part of it has neither been accepted for any degree nor is it being

concurrently submitted for any other degree.

……………………………….

Md. Ashif Hossain

Student Number: BSS 091508

Session: 2011-2012

August, 2013

i

Acknowledgement

First of all I express my heartfelt gratitude to supreme creator and ruler of the world

Almighty ALLAH who has given me the opportunity to conduct my education in

Economics Discipline, Khulna University and to complete my thesis for the degree of

Bachelor of Social Science (BSS) in Economics.

After that I would like to convey my cordial gratitude and indebtedness to my

honorable teacher and thesis supervisor Sk. Sharafat Hossen, Assistant Professor,

Economics Discipline, Khulna University, Bangladesh, for his valuable suggestions

and overall guidance for preparing every part of the thesis paper.

I would also like to express my heartiest honor and indebtedness to our honorable

Professor Mohammed Ziaul Haider, Ph.D Economics Discipline, Khulna University,

Bangladesh for his valuable comments regarding thesis preparation. I also would like

to convey my indebtedness to all of our honorable teachers of Economics Discipline

for their precious comments made while preparing this thesis.

I also convey my deep gratitude to my parents for taking care of me and giving me

financial support to complete this thesis.

Last but not the least I would like to thank all the respondents for their cooperation

and information to collect the primary data and I am also thankful to SM. Yeasin and

all of my well wishers and friends for their encouragement, support, cooperation and

contribution for my thesis preparation.

Md. Ashif Hossain


Khulna University

Khulna, Bangladesh

August, 2013

ii

Abstract

Foreign remittance to Bangladesh now become one of the vital sources of foreign

exchange earnings and it also plays a significant role by reducing the foreign-

exchange constraint and improving the balance of payments, ensuring imports of

various types of capital goods, and raw materials for industrial development.

Furthermore, it has also increased the supply of savings and investment for capital

formation and development in country’s economic condition and thus it accelerates

economic development of a country. But this study attempted to evaluate the impact

of foreign remittances on socio-economic condition of households in Khulna city.

This paper uses various data of households of Khulna city to analyze the impact of

foreign remittances on the socio-economic condition of households. The results of this

analysis were compared to those households who do not receive remittances to clearly

identify the decision of the households to spend remittances in different sector. Unlike

to other studies, this study reveals that households receiving remittances spend less on

food consumption, consumer durables and other consumer goods than do households

who do not receive any remittances. This study finds that households receiving

remittances spend heavily on various investment activities like land purchase,

building construction, other investment activities and this investment constitutes more

than half of the remittances received during the last 12 months counted from August

2012 to July 2013. This study also finds that households receiving remittances in

Khulna city spend more on education than do households having no remittances

which is a good sign of any economy as investment in education is treated as

investment in human capital. However, this study also finds that foreign remittances

help households to spend more on social ceremonies, households’ services and

electrical goods which indicate improved living standard and socio-economic

condition.

iii

Table of Contents

Topic

Page No.

Acknowledge i

Abstract ii

Table of Contents iii

List of Tables vi

List of Figures vi

Abbreviations vii

Chapter One: Introduction 1-6

1.1 Background of the Study 1-3

1.2 Objective of the Study 4

1.3 Rationale of the Study 4

1.4 Scope of the Study 5

1.5 Limitation of the Study 5-6

1.6 Organization of the Research 6

Chapter Two: Literature Review 7-11

Chapter Three: Methodology 12-20

3.1 Topic Selection 12

3.2 Study Area Selection 12

3.3 Research Type and Method 12

3.4 Nature of the Study 13

3.5 Sources of Data 13

3.5.1 Primary Sources 13

3.5.2 Secondary Sources 13

3.6 Description of the Population 14

3.7 Sampling Technique 14

iv

3.8 Sample Size 14

3.9 Data Collection Method 14-15

3.10 Pre-Testing 15

3.11 Variable Selection 15-16

3.12 Description of the Variable 16-19

3.13 Questionnaire Preparation and Distribution 19

3.14 Data Analysis 19

3.15 Tools of Analysis 20

3.16 Data Presentation 20

Chapter Four: Overview of Foreign Remittances in Bangladesh 21-27

4.1 Foreign Remittance 21

4.2 Inward and Outward Foreign Remittance 21

4.2.1 Inward Foreign Remittance 21

4.2.2 Outward Foreign Remittance 21-22

4.3 Channels of Transferring Foreign Remittances 22

4.3.1 Formal Channels of Transferring Foreign Remittances 22

4.3.2 Informal Channels of Transferring Foreign Remittances 22

4.4 Importance of Foreign Remittances 23

4.5 Nature of Remittances Inflow 24

4.6 Country Wise Foreign Remittances inflow 24-25

4.7 Impact’s of Foreign Remittances on Bangladesh Economy 25

4.7.1 Impact of Foreign Remittances on BOP 25-26

4.7.2 Foreign Remittances and GDP 26

4.8 Foreign Remittances in Khulna City 26-27

4.9 Chapter Summary 27

v

Chapter Five: Impact of Remittance on Households 28-44

5.1 Country Wise Remittances Inflow 28

5.2 Socio-demographic Condition of the Households 29

5.2.1 Number of Remitters in the Households 29

5.2.2 Households Size of the Respondents 30-31

5.2.3 Profession of the Households Head 31-32

5.2.4 Number of Earning Members 33-34

5.2.5 Education Enrollment 34

5.2.6 Causes of Migration 35

5.3 Impact of Foreign Remittances on Consumption Expenditure 35-36

5.4 Impact of Foreign Remittances on Education of Households 37

5.5 Impact of Foreign Remittances on Savings of Households 38

5.6 Impact of Foreign Remittances on Investment of Households 39-40

5.7 Impact of Foreign Remittances on Social Ceremonies 40

5.8 Impact of Foreign Remittances on the Use of Electronics and

Electrical Goods

40-42

5.9 Impact of Foreign Remittances on Assets of Households 42-43

5.10 Share of Foreign Remittances in Different Sectors of Khulna City 43

5.11 Frequency of Receiving Remittances 44

5.12 Chapter Summary 44

Chapter Six: Findings and Conclusion 45-47

6.1 Findings of the Research 45-46

6.2 Concluding Remarks 47

References 48-51

Appendix viii-xi

vi

List of Tables

Number of the Tables and Titles Page No.

Table No. 01:Variable Name and Unit of Measurement 16

Table No. 02:Description of the Variables 17-19

Table No. 03:Yearly Data of remittance inflows for the last 10 years 24

Table No. 04: Foreign Remittances and BOP (in billion USD) 26

Table No. 05: Foreign Remittances and GDP (in billion USD) 26

Table No. 06: Country wise remittances inflow in 2013 28

Table No. 07: Interval Time of Receiving Remittances 44

List of Figures

Number of the Figures and Titles Page No.

Figure No. 01: Inflow of Foreign Remittance from Major Countries in

2012-2013

25

Figure No. 02: Number of Remitters in Households 29

Figure No. 03: Households Size of the Remittances Receiver 30

Figure No. 04: Households Size of the Remittances Non Receiver 31

Figure No. 05: Professions of Head of Households Receiving

Remittances

32

Figure No. 06: Professions of Head of Households Receiving No

Remittances

32

Figure No. 07: Earning Members in Remittances Receiving

Households

33

Figure No. 08: Earning Members in Households Receiving No

Remittances

34

Figure No. 09: Educational Enrollment of Households 34

Figure No. 10: Causes of Migration 35

Figure No. 11: Remittances Used in Different Sectors of Households 43

vii

Abbreviations

BB Bangladesh Bank

BoP Balance of Payment

Edu Education

FDI Foreign Direct Investment

FY Fiscal Year

GDP Gross Domestic Product

IOM International Organization for Migration

KSA Kingdom of Saudi Arabia

RMG Ready Made Garment

UAE United Arab Emirate

UK United Kingdom

USA United States of America

US United States

USD United States Dollar

1

Chapter One: Introduction

1.1 Background of the Study

Bangladesh has been ranked as the 7th

highest remittance receiving country in the

world and it is considered as second among six Asian countries after India though

inward workers’ remittances faced lower growth in Fiscal Year 2011 because of

global economic slowdown (Bangladesh Bank, 2011). It is often argued that

remittances are an important source of income for households, which can help

households increase investments and cope with socioeconomic shocks (Cuong, 2009).

Foreign remittances, sent by migrant workers, play a very significant role in earning

foreign capital and developing the household condition especially the standard of

living for the less developed and developing countries. The foreign remittances have

become a critical issue in the globalizing world as it directly contributes to economic

growth and poverty reduction in these countries. Remittances sent back to developing

countries rose from $31.1 billion in 1990 to $76.8 billion in 2000 to no less than

$167.0 billion in 2005 (Kapur and McHale, 2006).

Bangladesh has experienced a significant growth of migrant deployments and inflows

of remittances in recent years. Migration from Bangladesh increased rapidly since

2007, which put Bangladesh on a firm footing in remittance earning. Before 2007,

around two hundred to four hundred thousand workers migrated abroad from

Bangladesh. The figure grew to around nine hundred thousand in just the year 2008.

In 2011, approximately 569,000 workers went abroad and remittance inward stood at

USD 12 billion (World Bank, 2011). Before 2007, the remittance inflows were around

USD 1 to 3 million. Bangladesh has emerged as one of the largest remittance earners

despite global economic and domestic political crisis. The economy of Bangladesh is

always vulnerable to frequent political instability. The GDP growth rate has been

falling since FY 2011 and it came down to 6.03 percent in FY 2013 which is the

lowest in last four years due to low investment and deadly political unrest and it is

foreign remittance which helped the economy to remain GDP growth above 6 percent

(The Daily Star, 17 May, 2013).

2

At the household level, remittances directly affect the lives of the migrants’ families

as remittances increase the consumption and help in investment in education, health

and other productive activities (BB, 2011). Another research on this topic shows that

as a labor abundant country, Bangladesh has sent over an estimated 6.7 million

migrant workers to more than 140 countries across the globe over a period of more

than three decades since the mid-1970s while most remittance transfers have been

used by migrant-sending households for consumption, there is evidence to show that

these transfers have helped to reduce poverty in Bangladesh (Mamun and Nath,

2010).

However, most of the empirical studies on foreign remittances reveal that foreign

remittances are making a substantial difference on the households and broadly they

also ensure broader community well-being through increasing level of consumption of

households, generating income sources of families, and thus they help to reduce

poverty in households and increase investments in education, health and sanitation at

the household level. At the same time, investments in business enterprises and other

occupations which generally include agriculture, large scale housing, craft industries,

local human resource development and these activities contribute both the community

level or household level development and national level development as well.

In addition, various studies also demonstrate that foreign remittances have macro

level impact on the overall economy. Not only these remittances help households

development but also they generate savings which is also termed as investment and in

the long run this could lead higher the growth of the economy. Moreover, foreign

remittances could also lessen foreign exchange constraints and they also help in

imports of various goods. Yet, this research mainly focuses on the impacts of the

remittances on micro level which is the households of migrants.

Muhammad et al. (2010) Remittances have impacted social status of the families of

migrants by improving the life style, giving the opportunity to send children to

standard educational institutions and helping them to explore new income generating

activities. But his research was conducted on Pakistan and there are some studies

available on the economic and social impacts of migration and remittances at the

micro and macro level on all over the world and in Bangladesh, but these studies are

3

very general and they do not focus on of impacts of migration and remittances on the

household level especially in city areas. There is a lack of empirical evidence of the

contribution of recent growth of migration and remittances on migrant sending

households in Bangladesh let alone in Khulna city area. Thus, it provides the

opportunity to investigate this area and to search the relationship between remittance

and households’ socio-economic condition in Khulna city area.

More importantly, a number of research works have been prepared in other parts of

Bangladesh especially in rural areas on the impact of foreign remittance on

households yet this present type of study has hardly been conducted in Khulna city.

Indeed, it is mentionable that a good number of people in Khulna city live in abroad at

present and they regularly send remittances to their families.

The countries of Middle East are the main destination of migrants of Bangladesh and

among them 38.80% migrants live in KSA and 22.94% live in UK. But majority of

the migrants are less skilled and semi skilled (Islam, 2011). So, considering the

convenience and comparison of the various groups of migrants, they are grouped into

four categories. They are divided into professionals, skilled, semi-skilled and less-

skilled workers who send remittances to their households.

The above discussion suggests that remittances have significant impacts on both

micro and macro level development in Bangladesh. As is observed from the available

research works in Bangladesh and other countries, remittances obviously affect

households of migrants and various researches are being conducted on this topic but

there is hardly any research which is conducted on Khulna city previously.

So, this research addresses the existing gap on the impact of foreign remittances in the

socio-economic condition of households of migrant’s in Khulna city. This research

investigates how remittances impact on households, on which sectors households

usually want to use the bulk of the remittances and their level of development which

is identified comparing two types of households namely, households with remittances

and households without remittances.

4

1.2 Objective of the Study

The principle or broad objective of undertaking this research was

i. To identify the impact of remittances on socio-economic condition of

households of migrants

This objective was fulfilled through evaluating the impact of remittances on major

variables which were considered influential to interpret socio-economic condition of

households and the result was compared to those households which did not receive

any remittance.

1.3 Rationale of the Study

Foreign remittances are blessing for a developing country like Bangladesh where a

vast majority of people are unemployed, poor and unskilled. Bangladesh has a rapid

growing man power and this growing man power is turning to assets when they

migrate to other developed countries to work and send remittances to their home.

Remittances contribute to the GDP of the country directly as the amount of

remittances received is increasing substantially year after year. They have both macro

and micro level impacts on the economy of the country. As far as the macro level

impact is concerned it is observed that remittances affect country’s overall savings,

investments, consumption, poverty alleviation, foreign exchange, etc. and they affect

the country’s macro economic situation. On the other hand, foreign remittances affect

the migrant’s family’s income, consumption, health care, education, investment in

businesses, assets generation. However, various literatures on the impacts of foreign

remittances on households suggest that remittances reduce poverty from the migrant’s

families by increasing their earning, improving their standards of living. Hence, it can

be said that remittances have positive socio-economic impact. Yet, there are some

literatures which showcase those remittances have negative impacts on households. In

this present research, the author tried to investigate the obvious socio-economic

impacts of foreign remittances on households of the migrants in Khulna city area.

5

1.4 Scope of the Study

The scope of this study covered primarily those issues which interpret socio-economic

impacts of remittances on households of the migrants. So, this study basically

concentrated on those variables which mostly interpret the household’s level

development. Furthermore, the study also focused on those issues which were

considered influential for ensuring social wellbeing of the households. Moreover, the

study showcases the present situation of Bangladesh in regards to remittances inflow

and explores the trends of migration to other countries. However, it also attempted to

investigate the households’ preference in the case of usage of remittances during last

12 months from August 2012 to July 2013. Overall, through taking account all those

issues mentioned above this study tried to identify the socio-economic impacts of

remittances on migrant’s households.

1.5 Limitations of the Study

This study has some limitations which are discussed below:

i. Lack of previous sufficient research works regarding socio-economic impacts

of foreign remittances on this part of Bangladesh makes this type of research

work difficult

.

ii. This research was conducted with only 68 samples among them 34 samples

were related to remittances receiving households and the rest 34 were those

households without remittances and perhaps which might not reflect the actual

scenario of the total population of the study area.

iii. Time was also a constraint of this thesis. Lack of time made the scope this

thesis limited.

iv. This research was based on the comments of the respondents and it is very

likely that respondents may not have provided the actual and more accurate

information, so the findings of the study may also not be unbiased.

6

v. As this type of research covers a number of issues which are not directly

related to this present research work. Yet, those issues such as trends of

migration, macro economic impacts of migration, etc. are important when we

tell something about remittances and their impacts. But to keep focus on the

objectives of this research, those issues were not taken into account more

broadly.

1.6 Organization of the Research

Organization of the research is the brief of total research. This research has six

chapters. In chapter one, introduction and background of the research were

mentioned, chapter two described the idea regarding the reviews of various literatures

on this topic, chapter three presented to the methodology of the research, chapter four

introduced the idea of overview of foreign remittances in Bangladesh and present

status of remittances flow and their roles in the economy of Bangladesh, etc. Chapter

five demonstrated impact of remittance on households’ part which presented the

primary data especially in tabular form and graphical form and other formats if

necessary and finally chapter six showed the findings and conclusion of the research.

After that a list of references were mentioned and in appendix section questionnaire of

this research was attached.

7

Chapter Two: Literature Review

This literature review focuses mainly on the studies written about remittances in

Bangladesh and global perspective for better development of the present research.

Foreign remittance has impact on the socioeconomic condition and living standards of

the households of the migrants who live in abroad and send remittances to home

country.

Remittance is a kind of transfer fund which is earned in the foreign country and sent

to the home country of migrant’s (Mahmud, 2003). Remittance is the ultimate result

of international migration of labour and almost all countries are somehow involved in

the process of migration (Siddique and Abrar, 2003). South Asian countries are

regarded as an important source of labour migration for those countries that face

labour shortage. Siddique et al. (2012) mentioned that Bangladesh, India, Pakistan

and Srilanka are those countries within South Asia that supply migrant workers all

over the world and remittances sent by those workers play important role to promote

economic development in these countries.

Pradhan et al. (2012) said that Bangladesh, as a large man power exporting country in

the world, earns a substantial amount of workers’ remittances and in the past twelve

year, workers’ remittances Inflow has increased nearly fivefold between 1997 - 98

and 2009 – 10. The growing importance of foreign remittances in an economy like

Bangladesh is widely recognized as with RMG sector and non- farm activities in the

agricultural sector, remittance has been identified as one of key factors that has been

responsible for reducing the overall incidence of poverty in Bangladesh (Osmani,

2005). Remittances help both micro and macro economic development process in the

home country that means they also provide significant source of foreign currency,

national income, finance import and contribute to the balance of payment to improve

side by side family level development (Azad, 2003).

8

A large number of people in developing countries migrate mostly as economic

migrants and they decide to leave their home country for availing employment

opportunities and better living elsewhere. Buchenau (2008) told in a research work

that since the mid 1970s, labor migration has become an important element of

survival for many households in Bangladesh. As a result, after migration they bring

positive change in their life through sending remittances to families and relatives who

have remained in their country of origin (Louka et al., 2006). Ratha (2005) mentioned

that in developing countries migrants’ remittances have made possible a dramatic

improvement in the living conditions of millions of households in migrant sending

countries.

Louka et al. (2006) found out that developing countries in particular may have a lot to

gain in terms of growth, investment, human capital accumulation and poverty

reduction if migration is properly managed and it has both direct and indirect positive

impact on development thus, it could lead to substantial gains to both home and host

countries. Bruyn and Kuddus (2005) found in a study conducted a year before of the

above mentioned study that remittances have been causing silent economic revolution

in Bangladesh receiving 12 percent of the official remittances following into South

Asia. Remittance inflows to Bangladesh are increasing at an average annual rate of 19

percent in the last thirty years (Paul and Das, 2011, p. 42).

The volume of remittances to developing countries has increased steadily over the last

decades (Babatunde and Martinetti, 2010). Remittances mainly come from three

distinct types of migrants like American, British well educated, high or middle

income earners and from migrant labourers residing in Middle Eastern and South East

Asia (Bruyn and Kuddus, 2005). These remittances have become the most powerful

means to improve the socio economic condition of the families living in the country

of migrated people (Hasan, 2006). It is found from most studies about remittance

usage that remittances are spent on current consumption, health and education thus,

leading to improved standards of living for emigrant households ( Azeez and Begum,

2009, pp. 301).

9

It is found from many studies that remittances are mainly used for consumption

purpose of the migrants’ families. Puri and Ritzema (2001) strongly support that only

a small percentage of remittances are used for savings which is also termed as

investment and which also has strong multiplier effect. In contrast, Hassan et al.

(2012) comments that remittance can be thought of augmenting total disposable

incomes of the households. A part of which is consumed and rest is saved. In the

portion of consumption expenditures some are actually investments as represented by

expenditure incurred to buy durable household goods, finance education and health,

purchase land or to provide capital for micro business start ups etc.

It is found that most of the remittance goes to non-productive purposes and a very

insignificant portion is utilized for productive purposes (Hasan, 2006). Some

opponents hold the view that remittances encourage recipient families to work less

and likely to be used for consumption smoothing, debt repayment and financing

future migration but not investment (Karagoz, 2009). Besides the unproductive nature

of usage, a sizable portion of the remittances is invested in land, both residual and

arable leading rise in land price in both urban and rural areas (Azad, 2003).

Paul and Das (2011) found remittances seem to have positive but marginal impact on

economic growth of Asia and pacific countries through the improvement of domestic

investment and human capital having significant direct impact on poverty reduction

through increasing income, smoothing consumption and easing capital constraint of

the poor. Often the middle income countries are receiver of the bulk of the foreign

remittance and it is found that 60 percent of the global remittances were sent to

developing countries in the year 2000 (Hasan, 2006).

Hasan (2006) also showed that the cumulative receipts of remittance from

Bangladeshi migrants during 1976-2003 stood USD 22 billion and in 2003 through

official channels Bangladesh received 3 billion US dollars and it is estimated that

another 3 billion came from informal channels. This remittance plays an important

role in the development of households at micro level and the development of the

country at macro level (Azeez and Begum, 2009). It increases investment, reduces

poverty, improves school enrollment and reduces infant mortality (Adida and Girod,

2011). It has impacted social status of the emigrants’ families and changed the

10

behavior of relatives and friends towards the recipient’s families (Muhammad et al.,

2010).

Through remittance the recipients’ families generated different forms of economic

activities like micro level business, investment in real estate and purchase of

agricultural land etc. (Muhammad et al., 2010). It also accounts for 60 to 70 percent

of recipients’ poor household’s income (Bruyn and Kuddus, 2005). It has a great

social benefit to the elderly parents and widowed mothers and wives of the migrants

(Wu, 2006). Adida and Girod (2011) found that remittances fund household access to

basic utilities which improve the family’s well being.

Foreign remittances have impact on three levels such as micro level (household level),

community level and macro level which means national level (Azhar, 2008). These

remittances often provide a significant source of foreign currency, increase national

income, finance import and contribute to the balance of payment position to improve

(Azad, 2003). The remittances of migrants can be major source of external finance

which could help to ease current account deficit maintaining sound balance of

payment and foreign currency reserve in Bangladesh (Pradhan et al., 2012).

Remittances can act as a tool of economic development by affecting both micro and

macro level unit of the economy. Adida and Girod (2011) found that remittances fuel

economic development because recipients stimulate local market by spending their

income on consumption and because non-migrants invest small amount of their

remittances in local productive activities.

To analyze the role of household level development, it is found that remittances have

changed the life style, housing patterns, consumption expenditure and extravagancies

on different occasions of families left behind. They are also used to repay debt, repair

and construct houses and to invest in real estate and business and buy vehicles. Thus,

it creates both household level development and national level development

(Muhammad et al., 2010).

11

Remittances have a potential positive impact as a development tool for the recipient

countries. The development effects of remittances can be decomposed into its impact

on savings, investments, growth, consumption, poverty and income distribution

(Karagoz, 2009). However, there are only a few studies on impact of migration and

remittances on household welfare such as education, healthcare, consumption and

saving. In addition, impacts of migration and remittances on household welfare are

not always found positive in empirical studies (Cuong, 2009).

The above literature focuses on the impact of foreign remittances on household level

development and national level development but the current study is mainly

concerned with the impact of remittances on the socio-economic status of the people

which focuses on the household level of the migrants basically. There are a number of

literatures regarding the role of remittances on national level and household level

socio-economic development. But this present study’s goal is to observe the impact of

remittances on household level or family level development in city areas and try to

come in a specific conclusion regarding the impact of remittances on the household

level development.

12

Chapter Three: Methodology

The present chapter focuses on the methodology of this research or technique adopted

to conduct research on the topic of the socio economic impact of foreign remittance

on households. Methodology is the science of studying how research is done

objectively and scientifically. It deals with the theory of the study, the description, the

explanation and justification of the methods, not the application of the methods.

3.1 Topic Selection

Foreign remittance has got momentum in the recent one decade. It is considered the

second largest earning sector after RMG. In Khulna city a number of people are now

living in a number of foreign countries and they usually send remittance monthly,

quarterly, half-yearly and yearly basis which helps the households of migrants to lead

a decent live which leads to the development of the households. So, to examine the

effect of remittances on the socio-economic condition of the migrant’s families this

present research has been selected.

3.2 Study Area Selection

There are a number of research works available regarding on the socio-economic

impact of remittances on various parts of the world and Bangladesh as well but there

is hardly any research work on Khulna city where a number of people are still living

in abroad. This research was conducted on Khulna city especially regarding the

impact of foreign remittances on the socio-economic condition of households.

Actually this area has been selected because of considering the convenience of the

author and no previous work has been done in this area.

3.3 Research Type and Method

Research has several types such as empirical, constructive and exploratory. This

research is especially an empirical one because this research attempted to draw

conclusion based on existing data. This research has done through qualitative

approach and based upon the responses of the head of the households whose one or

more members live in abroad.

13

3.4 Nature of the Study

For fulfilling the objectives of the research and comparison, the researcher collected

data on same variables but two different households namely, households receiving

remittances and households not receiving remittances and also collected data from

those families that receive remittances during last 12 months counted from August

2012 to July 2013. Hence, this helped the respondents to recall much information

more easily and accurately and also helped the researchers to compare exactly.

3.5 Sources of Data

To complete the research necessary data were collected from both primary and

secondary sources.

3.5.1 Primary Sources

Primary data are referred to as first-hand information collected through various

methods such as observation, survey, interview and the like. Depth-interviews of

remittance receiving families and non receiving families to collect primary data were

conducted through questionnaire. The questionnaire included the relative questions

about the study and the respondents were asked to give the best answer as well as to

give descriptive answers for some questions where more details are necessary for

better understanding and clarification about the any issue.

3.5.2 Secondary Sources

In order to satisfy the objective of the study and to build a supportive background of

this research, it was essential to collect different secondary information regarding

various aspects of foreign remittances in Bangladesh and theoretical assistance for

analysis of data. In this matter, Internet was the prime secondary source for data

collection. Especially, various journal articles, thesis papers, organizational reports,

conference papers and working papers regarding the related topic were also reviewed

as well as websites of Bangladesh Bank, Bureau of Manpower Employment and

Training, Bangladesh Bureau of Statistics and World Bank and other sources were

also reviewed. Also various reports have been collected from internet which reflects

the research objectives.

14

3.6 Description of the Population

The population of the research work was the number of households in Khulna city

whose at least one member is now living in abroad and sending remittances regularly

as well as those households who do not receive remittances. For more accuracy of the

research data were collected from almost all areas of the city.

3.7 Sampling Technique

Result of a research study highly depends on the selection of a proper and suitable

sampling technique. Considering this, Convenience sampling method and Snowball

sampling method were used for collecting data. Since the research was conducted on

Khulna city and a lot of people receive foreign remittances regularly here, it became

helpful to collect information following Snowball and Convenience sampling method.

3.8 Sample Size

As was observed in this study area, the total population was the total number of

households which presently receive foreign remittances and those do not receive

foreign remittances in Khulna city. The total number of samples was 68 families of

migrants and non migrants which were collected from different areas of this city for

clear representation of the population under study. Among 68 samples 34 samples

were households receiving remittances and the rest 34 were households receiving no

remittances.

3.9 Data Collection Method

In this study, survey based method was used to collect necessary data. Primary data

were collected from the answers of survey questionnaire. The medium of primary data

collection was structured questionnaire and in-depth interviews. The questionnaire

included questions depending on the following heads:

i. All households members age, sex, educational status, occupational

status

ii. Family system. i.e. Joint, Small.

15

iii. Investment nature of various sectors: in Agricultural and Industrial

sector, small business, land purchase, building construction, formal

investment in Banks, share and business and others.

iv. Nature of remittances inflow of the households

v. Households income, expenditures and revenues in a time series basis

for those two types of households

vi. Sectors of remittance use during last 12 months

vii. Land assets, other assets and their values, nature of purchase of the two

types of households

viii. Personal details of migrant are like age, income, educational status,

employment status, amount of remittance sent, etc. are avoided to

remain the research on only households’ socio-economic condition

The relevant theoretical aspects of the research were collected from different

secondary sources, like journals, books, newspaper, research papers and different

websites.

3.10 Pre-Testing

Pre-testing is important before going to final collection of data. Pre-testing helps to

modify questionnaire and pattern of interview. On the basis of pre-test necessary

modifications can be done. Considering the importance of pre-testing, pre-testing has

been conducted in this research by taking 10 samples and after that final data were

collected by modifying the questionnaire on the basis of pre-testing.

3.11 Variable Selection

For the sake of fulfilling the desired objective, the following variables which are

thought to be more influential in describing the socio-economic condition of the

migrants’ families have been considered. It is mentionable that while collecting data,

different units of measurement were used but in case of data analysis variables are

expressed in a unique measurement which is yearly basis. So, the following variables

were measured by the suggested way of measurement in the table demonstrated

below.

16

Table No. 01: Variable Name and Unit of Measurement

Name of the Variables Unit of Measurement

Inflow of Remittances Current BDT (Yearly)

Income Current BDT (Yearly)

Savings Current BDT (Yearly)

Investment Current BDT (Yearly)

Purchase of Land Current BDT (Yearly)

Construction/Repair of Houses Current BDT (Yearly)

Expenditure on Consumption Current BDT (Yearly)

Nature of House Coding

Education Years of Schooling

Housing Value Current BDT (Yearly)

Household Services Current BDT (Yearly)

Transport and Communication Current BDT (Yearly)

Social Ceremonies Current BDT (Yearly)

Electronics and Electrical Goods Current BDT (Yearly)

Furniture and Ornaments Current BDT (Yearly)

Assets valuation Current BDT

Sectors of Remittances Use Last 12 months (August 2012 to July

2013)

Source: Author’s Compilation.

3.12 Description of the Variables

This research has some selected variables mentioned in the previous section, now the

description of those variables is given below, which were thought more influential in

interpreting the socio-economic condition of households of migrants affected by

foreign remittances. These variables were compared to households receiving no

remittances to find out the impact on foreign remittances on these variables of

households.

17

Table No. 02: Description of the Variables

Name of the

Variables

Description

Inflow of Remittances Inflow of remittances means the money and others

valuable assets which are sent to the migrants’

households.

Income The income of households is greatly affected by the

inflow of remittances and the income generally increases

because of receiving additional income from remittances.

So, in this research the author tried to explain how much

the income of the households is affected by remittances.

Savings People usually save the additional amount of income and

it is seemed that remittances add savings which have

multiplier effect. So, it is important to know the real

impact of remittances on savings.

Investment in Business Investment in business acts as an income generation

activity which has a link with socio-economic

development of households of migrants. Hence,

remittances make possible the households to invest in

business.

Purchase of Land Remittances create the opportunity to increase the income

of the households and it seems that households spend a

huge sum of money to purchase land which also has a

direct link to households’ development.

Construction/Repair of

Houses

Frequent construction and repair of house indicates a

decent status and living standard. So, it is needed to know

whether the households increase or decrease this cost with

the inflow of remittances.

Expenditure on

Consumption

Various literatures suggest that bulk of the remittances is

spent on consumption purposes. Therefore, in this case it

is needed to know the true impact of remittances on

consumption.

18

Name of the

Variables

Description

Nature of House Here nature of house means own house, rented or other

houses that remittances receiver use. Which is measured

by 1= Own, 2= Rented and 3= other.

Education Through remittances receiving families can increase their

income so, naturally they can able to provide family

members with better and sophisticate education which

some families cannot afford without remittances and it is

well known that socio-economic condition of families is

immensely affected by education. Level of education is

counted by years of schooling such as, 0= No education,

10= S.S.C and 16= Graduate

Housing Value Housing value is the present market value of the house

that remittances receiving and non receiving households

live which have close link to the socio-economic

condition of households.

Households Services Here households’ services mean payment made for

getting utility facilities like water, gas, electricity,

telephone, and other taxes which may be affected by

remittances or not.

Transport and

Communication

Today transport and communication are two important

sectors where households spend more. Fares of buses,

taxies, rickshaws and cost of gasoline, postage, internet,

and mobile phones etc. are included in this head of costs

that are very much affected by remittances.

Social Ceremonies Various social ceremonies like Eid, Puja, wedding and

other religious and family ceremonies are observed in our

country and these ceremonies are also financed by foreign

remittances.

Electronics and

Electrical Goods

The use of Electronics goods like Computer, Laptop,

Mobile phone, Tab, expensive watches and Electrical

goods are TV, refrigerators, AC, Oven, etc are important.

19

Name of the

Variables

Description

Furniture and

Ornaments

Possession of furniture and ornaments has also been given

weight in this research which can interpret the living

standard of households.

Assets Valuation Here attempts have been made to evaluate the value in

BDT of total assets that both two types of households

possess to make comparison and identify the impact of

remittances.

Sectors of Remittances

Usage

To identify how bulk of remittances distribute to different

sectors in last 12 months, I have identified households

expenditure, savings, investment, land purchase, building

construction, formal investment in Banks, share, and

business and others as sectors of remittances use.

Source: Author’s Compilation.

3.13 Questionnaire Preparation and Distribution

As far as the questionnaire is concerned, it was basically specific and free from any

kind of biasness. Both close-ended and open-ended questions were incorporated that

were asked to collect necessary information from respondents. Some of the questions

in the questionnaire were narrative. The survey was mainly conducted in the main city

among the households which received foreign remittances during last 12 months and

those do not receive any remittances.

3.14 Data Analysis

The Data analysis refers to editing, coding, classification and tabulation of collected

data so that they are easy to analyze. After collection of data from the field survey, the

data from questionnaire were grouped, categorized and interpreted according to the

objective.

20

3.15 Tools of Analysis

After giving entry of various variables and data, STATA for windows software was

used to conduct two sample t test of both types of households receiving remittances

and households receiving no remittances. MS Excel was also used to analyze the data.

3.16 Data Presentation

After assembling and grouping of data, they were presented both in graphical and

tabular format. For analyzing these data descriptive statistical techniques were applied

to achieve the objective of the research undertaken.

21

Chapter Four: Overview of Foreign Remittances in Bangladesh

4.1 Foreign Remittance

Remittance means transfer of money. In the simplest form, foreign remittance can be

described as the purchase and sale of freely convertible foreign currencies as

admissible under Exchange Control Regulation of the country. It can also be defined

as the portion of the migrant workers’ earnings sent back from the country of

employment to the home country. Remittances are typically transfers of money from

one country to another. They are targeted to meet specific needs of the recipients.

When migrants send home part of their earnings in form of either cash or goods to

support their families, these transfers are known as migrants’ remittances.

Remittances have been growing rapidly and now represent the largest source of

foreign income for many developing countries.

4.2 Inward and Outward Foreign Remittance

4.2.1 Inward Foreign Remittance

All remittances that come from foreign countries to the local countries are regarded as

inward foreign remittances. That means the foreign exchanges that we receive are

called inward foreign remittances.

The major sources of inward foreign remittances are

i. Export proceeds

ii. Money sent by country’s workers working in abroad

iii. Foreign loans and grants

iv. Commissions/fees etc. earned by local businesspeople in the form of foreign

currency

4.2.2 Outward Foreign Remittance

All remittances from a local country to a foreign country are called outward foreign

remittances. That means in outward foreign remittances foreign currencies go out of

the home country.

The major sources of outward foreign remittances are

i. Payments of import liabilities

ii. Payments of consular fees, loans, commissions etc.

22

iii. Educational and medical expenses

iv. All other payments sent abroad in foreign currency

4.3 Channels of Transferring Foreign Remittances

Migrants use a wide array of methods to remit money, ranging from hand deliveries

by migrants themselves or by the third parties to electronic transfers. However, these

mechanisms can be divided into two broad channels. They are

i. Formal Channels

ii. Informal Channels

4.3.1 Formal Channels of Transferring Foreign Remittances

Formal remittances refer to those remittances which enter a country through official

banking channels. Migrants use various formal mechanisms to send money to their

home country. Migrants send money to their home countries through the following

major official channels

i. Banks and Credit Unions

ii. Money Transfer Companies

iii. Post Offices

4.3.2 Informal Channels of Transferring Foreign Remittances

Informal remittances refer to those remittances which enter a country through private,

unrecorded channels. The level of informal remittances is virtually unknown. The

International Organization for Migration (IOM) estimates that these informal

mechanisms could account even for 50% of the remittance transfers (IOM, 2004).The

major factor causing migrants to remit through the informal channels is high cost of

transferring funds through the banks and transfer agencies.

The major informal channels are

i. Hundi

ii. Friends and/or relatives

iii. Ordinary mail

iv. Travel agencies

v. Moneychangers

vi. Counter services

23

4.4 Importance of Foreign Remittances

The role of foreign remittances in economy of developing nations and remittance

receiving households is great. For some countries foreign exchanges play a vital role

in their development. The major importance or impacts that foreign exchanges have

are given below:

i. Foreign remittances are an important and growing source of foreign funds for

several countries. These flows are more than double the official aid received

by developing countries.

ii. For many developing countries, remittances constitute a large source of

foreign income relative to other sources. Remittances have become as large as

Foreign Direct Investment.

iii. Unlike Foreign Direct Investment, which tend to be highly volatile,

remittances are much more stable and even countercyclical in the face of

external economic shocks.

iv. Remittances have been associated with increased household investments in

education, health and entrepreneurship-all of which have a high social return

in most circumstances.

v. Since remittances are largely personal transactions from migrants to their

friends and families, they tend to be well targeted to the needs of their

recipients.

vi. The ability of the foreign remittances to reduce poverty and to promote human

development is well-documented and often reported as beneficial to overall

development.

vii. Not only have economic remittances increased in importance as a source of

positive cash flow, but they have also grown in importance relative to the size

of the economy. As a share of GDP, remittances rose from 0.95 percent in

1995 to 1.75 percent in 2010.

viii. By boosting foreign exchange receipts, remittances have maintained adequate

foreign reserves which have turned out as highest in 2013 and remittances

have helped to build up international reserves and have contributed to

reducing current account deficits in many developing countries

24

4.5 Nature of Remittances Inflow

Foreign remittances have reached peak in this year amounting to 14460.52 million US

dollar which is 1617.29 million US dollar higher than that of the previous year. If we

consider the last 10 years statistics of foreign remittances, it will be very clear to us

that the amount increases dramatically. Thus, it gives the people more income

opportunity reducing household’s poverty and developing livelihood of the

households receiving remittances.

Table No. 03: Yearly Data of remittance inflows for the last 10 years

Year

Remittance inflow

In million US dollar In million Taka

2003-2004 3371.97 198698.00

2004-2005 3848.29 236469.70

2005-2006 4802.41 322756..80

2006-2007 5998.47 412985.29

2007-2008 7914.78 542951.40

2008-2009 9689.26 666758.50

2009-2010 10987.40 760209.59

2010-2011 11650.32 829928.90

2011-2012 12843.23 101904.29

2012-2013 14460.52 1156841.6

Source: Author’s Computation from Bangladesh Bank, 2012.

The extracted data of remittances inflow suggest that within the last ten years the

amount of inflow of remittances increased by 11088.55 million USD or 428.84

percent which is contributed by 8 million Bangladeshi working in abroad.

4.6 Country Wise Foreign Remittances Inflow

Foreign remittances come from a number of countries. If we categorize those

countries, we can come to the conclusion that bulk of the remittances originate from

American, European and Middle Eastern countries. The figure in the next page shows

the inflow of remittances that Bangladesh received from major countries in FY 2012-

2013.

25

Figure No. 01: Inflow of Foreign Remittance from Major Countries (USD in million)

in 2012-2013

Source: Bangladesh Bank, 2012.

In FY 2012-2013, bulk of the remittances came from KSA followed by UAE, USA,

Kuwait, UK, Malaysia and other countries respectively which strongly suggests that

Middle Eastern countries are the main source of foreign remittances in Bangladesh.

4.7 Impact’s of Foreign Remittances on Bangladesh Economy

Remittance has a considerable contribution to ease foreign exchange constraint,

stabilizing the exchange rate and allowing Bangladesh to import much needed raw

materials, intermediate goods and capital equipment. Comfortable reserves of foreign

exchange have also contributed to overall macro stability and have reduced aid

dependency. Remittance increases with the expanding migration process and

accelerating movement of people for overseas employment market.

4.7.1 Impact of Foreign Remittance on BoP

The economic performance of a country is reflected in its balance of payment (BoP)

situation. The most important macro-economic impact of financial flow arising from

international labour migration is on the balance of payments and through that on the

economy as a whole. A major benefit of labour export is the balance of payments

support provided by remittance. From the following table we can see how foreign

remittances have helped to keep the proper balance of balance of payment

1186.93

3829.45

2829.4

1859.76

991.59 997.43

2766.57

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Kuwait KSA UAE USA UK Malaysia Others

26

Table No. 04: Foreign Remittances and BoP (in billion USD)

Year Remittance Export Import Trade Balance

2009-10 10.97 16.2 23.74 07.53

2008-09 09.69 15.57 22.51 06.94

2007-08 07.92 14.11 21.63 07.52

2006-07 05.98 12.18 17.16 04.98

2005-06 04.80 10.53 14.75 04.22


4.7.2 Foreign Remittances and GDP

Foreign remittances play a vital role in the GDP of Bangladesh. From the following

Table: No. 05: Foreign Remittances and GDP (in billion USD)

Year Remittance GDP As % of GDP

2009-10 10.97 98.75 11.11

2008-09 09.69 89.36 10.84

2007-08 07.92 79.55 09.96

2006-07 05.98 68.55 08.72

2005-06 04.80 61.98 07.74


table we can see the huge influence that the foreign remittance has over the GDP of

Bangladesh. It is a fact that the growth of GDP of Bangladesh now heavily depends

on the flow of remittances. If the amount of foreign remittances somehow decreases

the growth of GDP is sure to be hampered.

4.8 Foreign Remittances in Khulna City

Khulna is the 3rd largest city in Bangladesh after Dhaka and Chittagong. This city is

located in the southern area of Bangladesh and situated on the banks of the Rupsha

and Bhairab River It is also referred to as an industrial city and is the head quarter of

Khulna district and principle city of the division. The population of this city is 7,

51,237 according to the 5th

population census of Bangladesh among them 3, 90,591

are male and 3, 60,646 are female respectively.

http://en.wikipedia.org/wiki/Bangladesh

http://en.wikipedia.org/wiki/Rupsha_River

http://en.wikipedia.org/wiki/Bhairab_River

27

It has been very difficult to find flow of foreign remittance in Khulna city for the lack

of necessary information. Since there is hardly any data regarding how many people

from this city live in the abroad and how much money they send to their households,

accurate information cannot be collected. So, there is plenty of information gaps. We

cannot know for sure that how many people have gone to abroad during a specific

period of years and which categories they belong to.

In essence, there is not much information regarding the foreign remittance and its

related issues involving the Khulna city. This research opted to break this restrict to

some extent and provided some real insight regarding socio-economic impacts foreign

remittances in Khulna city.

4.9 Chapter Summary

Foreign remittances may be cash or any good which come from outside of the home

country. These remittances may be inward and outward and can be transferred

through both formal and informal channels. Foreign remittances have both macro and

micro level impact on the country. Increasing amount of remittance helps the

migrant’s families to develop their economic condition and helps the country’s macro

economic situation by making improvement of BoP, GDP, increasing foreign reserve

etc. People of a number of districts are migrating especially to middle-east countries

and send remittance almost regularly. It doesn’t mean that people are not going

Europe and America. People are also going there and send remittance. At household

level foreign remittances have great influence on consumption, income, education,

savings and investment, etc. which have been discussed in the subsequent parts of this

research.

28

Chapter Five: Impact of Remittance on Households

This chapter focuses the analysis part made on a qualitative study to fulfill the

objectives of this study how remittances are used by remittance receiving households,

and how it differs from the households receiving no remittances and also how

remittances contribute to the well-being of households and which sectors the

households use bulk of the remittances in this city. In this way this study attempts to

draw conclusion regarding impact of remittances on the socio-economic condition of

households. The study is based on the interviews of only 68 households of Khulna

city among them 34 each of remittances receiver households and the rest 34 are non

receivers. It does not represent a general picture of the whole country rather it

represents the study area, Khulna city. In this part of this research all those variables

which are considered influential to interpret the socio-economic condition of the

migrants’ households are presented.

5.1 Country Wise Remittances Inflow

The research suggests that 26.47 percent of the total remitters in Khulna city came

from USA followed by Dubai (11.26%) and UK (11.76%) in 2013. Besides these

countries others countries like Kuwait, Canada, Australia, Italy and others are also

contributing significant amount of foreign remittances in Khulna city.

Table No. 06: Country Wise Remittances Inflow in 2013.

Country of Migration Number of remitters As % of Total

USA 9 26.47

UK 4 11.76

UAE 1 2.94

Finland 1 2.94

Kuwait 3 8.82

S. korea 1 2.94

Canada 2 5.88

Dubai 4 11.76

Australia 2 5.88

Italy 2 5.88

Others 7 14.73

Source: Field Survey, 2013.

29

5.2 Socio-demographic Condition of the Households

The main attempt here is to introduce the socio-demographic features that were found

during data collection on both of the two types of households. In this study it is found

that the socio-demographic features of these two groups are closely similar which are

illustrated below.

5.2.1 Number of Remitters in the Households

When asked about how many members of the family send remittances from abroad,

most of the respondents answered that they receive remittances from single person.

Out of the 34 respondents, 22 respondents answered that they receive remittances

from only one person while 9 respondents answered they receive remittance from two

persons of the family and the rest are from above two. So, 67 percent households

receive remittance from single person followed by 27 percent who receive remittances

from 2 persons and the rest receive remittances from above 2 persons. This situation

is presented by the pie chart given below.

Figure No. 02: Number of Remitters in Households


67%

27%

6%

Number of Remitters

1 person 2 person Above 2

30

5.2.2 Households Size of the Respondents

The study reveals that the household’s size of the two households is almost identical.

In figure 03, among 34 observations it is visible that there is 1 household which has 2

members, 6 households which have 3 members, 5 households which have 4 and 5

members respectively and there are 13 households which have more than 5 members

receiving foreign remittances and this picture is clearly illustrated through the

following table.

Figure No. 03: Households Size of the Remittances Receiver


In figure 04 given in the following page, among 34 households which do not receive

any remittances, there is 1 household with 2 members and 6 households with 3

members followed by 5 households each with 4 and 5 members respectively.

However, there are 17 households which have more than five members. So, the two

groups are very closely identical in terms of household’s size. This situation is

demonstrated through the following figure presented in the next page.

1

6

5

5

13

2 memner

3 member

4 member

5 member

more than 5

31

Figure No. 04: Households Size of the Remittances Non Receiver


From the light of the discussion, we can easily conclude that in case of family size,

there is not much variation between households receiving remittances and no

remittances.

5.2.3 Profession of the Households Head

The research reveals that 29 percent of the remittances came to those households

whose heads are involved in service sector, 26 percent to those heads involved in

business in various kinds. However retired or households heads with no job received

24 percent of the remittances that came as inflow in Khulna city during the last 12

months. The following pie chart shows this situation clearly.

1

6

5

5

17

2 member

3 member

4 member

5 member

more than 5

32

Figure No. 05: Professions of Head of Households Receiving Remittances


In the following pie chart, we can easily observe that among 34 observations, 32

percent of households’ heads are retired, 23 percent is involved in business, 21

percent involved in service sector and rest of them are involved in both private sector

and government job.

Figure No. 06: Professions of Head of Households Receiving No Remittances


12%

9%

26%29%

24%

Government Job Private Job Business Service Retired/No job

12%

12%

23%

21%

32%

Government Job Private Job Business Service Retired/No job

33

5.2.4 Number of Earning Members

The study reveals that 59 percent of the households that received foreign remittances

in Khulna city in the last 12 months are dependent on one earning member, 14 percent

households are dependent on two earning members and the rest are dependent on

more than two earning members among them 14 percent of households have no

earning members which is illustrated below.

Figure No. 07: Earning Members in Remittances Receiving Households


The following pie chart shows that among 34 observations 50 percent households are

dependent on one earning member, 38 percent are dependent on two, 9 percent

dependent on three and the rest have no earning member. This situation is shown in

the following page.

59%

12%

9%

3%

3%14%

1 person 2 person 3 person 4 person Above 4 person None

34

Figure No. 08: Earning Members in Households Receiving No Remittances


5.2.5 Education Enrollment

From the study it is found that educational enrollment of remittances receiver

households are more than that of households with no remittances and which is

illustrated below with the help of the following bar chart.

Figure No.09: Educational Enrollment of Households


50%

38%

9%

3%

1 person 2 person 3 person None

0 10 20 30 40

S.S.C and H.S.C

Tertiary

Number of Enrollment

Households with

remittances

Households with no

remitthances

35

5.2.6 Causes of Migration

When asked about the reasons for migration, most respondents said that remitters

went abroad due to insufficient income they earned, which account to 35%. It is

followed by education and unemployment respectively. Most of the people have gone

to abroad to increase the income so that the households can live in a better way.

Figure No. 10: Causes of Migration


5.3 Impact of Foreign Remittances on Consumption Expenditure

Here consumption expenditure means those expenditures that households spend on

food consumption, other consumer goods, consumer durables and housing value that

both types of households spend. The consumption expenditure situation of the two

types of households is illustrated below through two-sample t test with equal

variances.

35%

21%

23%

18%

3%

Insufficient Income Unemployment Education

Permanent Migration Others

36

Unpaired t test of Consumption Expenditure

Two-sample t test with equal variances

Variables Observations Mean Std. Err. Std. Dev. [95% Conf. Interval]

Consum

NRConsum

Combined

Difference

34 276058.8 31928.53 186173.7 211099.7 341017.9

34 270767.6 49881.97 290859.4 169282 372253.3

68 273413.2 29392.63 242377.9 214745.3 332081.2

5291.176 59225.36 -112956.1 123538.4

diff = mean(Consumption Expd) - mean(NR Consumption Expd) t = 0.0893

Ho: diff = 0 degrees of freedom = 66

Ha: diff < 0 Ha: diff != 0 Ha: diff > 0

Pr(T < t) = 0.5355 Pr(|T| > |t|) = 0.9291 Pr(T > t) = 0.4645

Notes: Household receiving remittances is denoted by Consum variable

Household receiving no remittances is denoted by NR Consum variable

Pr(T > t) = 0.4645 means t value is insignificant.

In the above case Consumption is denoted by Consum and Expenditure is denoted by

Expd.

The unpaired t test suggests that the mean difference between the two households

consumption expenditure is minor which can also be said that there is not much

difference between their consumption expenditure. But in reality, this happens rarely.

It is expected that consumption expenditure of remittances receiver households should

be statistically significant which did not appear in this research and the probable cause

of this dispersion may be because of limited number of samples or because of city

area or may also be because of convenience sampling technique.

37

5.4 Impact of Foreign Remittances on Education of Households

To make comparison between the educational expenses of the two types of household

during the last 12 months, it is found that the mean difference between observations

of educational expenditure of the remittances receiver and non receiver households is

not statistically significant. Educational expenditure is measured by adding all those

expenses that households incurred during last 12 months. This situation is shown

through unpaired t test of education expenses of remittances receiver households and

non receiver households below.

Unpaired t test of Educational Expenditure



Total Edu

NR Edu

Combined

Difference

34 74794.12 14175.11 82654.37 45954.65 103633.6

34 52688.24 14761.75 86075.07 22655.23 82721.25

68 63741.18 10245.55 84486.97 43290.97 84191.38

22105.88 20465.65 -18755.11 62966.88

diff = mean(Total Edu Expd) - mean(NR Education) t = 1.0801



Pr(T < t) = 0.8580 Pr(|T| > |t|) = 0.2840 Pr(T > t) = 0.1420

Notes: Household receiving remittances is denoted by Total Edu variable

Household receiving no remittances is denoted by NR Edu variable

Pr(T > t) = 0.1420 means the value is insignificant.

In the above case Education is denoted by Edu and Expenditure is denoted by Expd.

The above result shows that the expenses made by two types of households do not

differ much rather their spending on education is nearly close to each other.

Households receiving remittances spend little bit more on education than that of

households receiving no remittances.

38

5.5 Impact of Foreign Remittances on Savings of Households

In case of savings behavior of remittances receiver and non receiver households, it is

found that remittances non receiver households have been able to save more than that

of remittances receiver households during August 2012 to July 2013 or in the last 12

months which is shown through the following result of unpaired t test of both types of

households.

Unpaired t test of Savings


Variable Observations Mean Std. Err. Std. Dev. [95% Conf. Interval]

Savings

NRSavings

Combined

Difference

34 58235.29 24828.58 144774.2 7721.175 108749.4

34 86529.41 22116.42 128959.8 41533.22 131525.6

68 72382.35 16590.97 136812.7 39266.64 105498.1

-28294.12 33250.48 -94680.83 38092.6

diff = mean(Savings) - mean(NR Savings) t = -0.8509



Pr(T < t) = 0.1989 Pr(|T| > |t|) = 0.3979 Pr(T > t) = 0.8011

Notes: Household receiving remittances is denoted by Savings variable

Household receiving no remittances is denoted by NR Saving’s variable

Pr(T < t) = 0.1989 means t value is statistically insignificant

The above unpaired t test result suggests that the mean savings difference between

remittances receiver and non receiver households are -28294.12 which implies that

households not receiving remittances have more savings. Their unpaired t test is

statistically insignificant. The cause of this is the significant amount of remittances

was used in various types of investment by households receiving remittances during

last 12 months.

39

5.6 Impact of Foreign Remittances on Investment of Households

Investment is one of the important indicators of any economy of the world which

helps to predict the economic condition of country. To interpret the socio-economic

condition of households, investment plays a significant role as increasing investment

of households in different sectors suggests that their economic base is improving

which has a strong link with their socio-economic condition. To compare the nature

and amount of investment of remittances receiver and non receiver households the

following unpaired t test is followed.

Unpaired t test of investment



Invest 34 174529.4 55830.15 325542.9 60942.12 288116.7

NR Invest 34 54882.35 18801.56 109631 16630.29 93134.42

Combined 68 114705.9 30134.57 248496 54557.03 174854.7

Difference 119647.1 58910.99 2027.477 237266.6

diff = mean(Invest) - mean(NR Invest) t = 2.0310



Pr(T < t) = 0.9769 Pr(|T| > |t|) = 0.0463 Pr(T > t) = 0.0231

Notes: Household receiving remittances is denoted by Invest variable

Household receiving no remittances is denoted by NR Invest variable

Pr(T > t) = 0.0231 means t value is significant at 5 percent level

The above result of the investment unpaired t test of the both types of households

suggests that during last 12 months (August 2012 to July 2013) remittances receiver

households invested more and the mean difference between their investment

expenditure is 119647 that implies households receiving remittances invested 119647

40

more than that of households receiving no remittances which is statistically significant

at 5 percent level.

5.7 Impact of Foreign Remittances on Social Ceremonies

Expenditure on various social ceremonies also indicates the socio economic status of

households. During last 12 months (August 2012 to July 2013), remittances receiver

households spent 8882.353 more than that of remittances non receiver households. t

value of this variable suggests that it is not statistically significant which is shown

below.

Unpaired t test of Social Ceremonies



Social Ceremonies 34 45294.12 6468.562 37717.88 32133.73 58454.51

NR Social Ceremonies 34 36411.76 3183.659 18563.76 29934.56 42888.97

Combined 68 40852.94 3618.693 29840.5 33630 48075.88

Difference 8882.353 7209.576 -5512.029 23276.74

diff = mean(Social Ceremonies) - mean(NR Social Ceremonies) t = 1.2320



Pr(T < t) = 0.8888 Pr(|T| > |t|) = 0.2223 Pr(T > t) = 0.1112

Notes: Household receiving remittances is denoted by Social Ceremonies variable

Household receiving no remittances is denoted by NR Social Ceremonies variable

Pr(T > t) = 0.1112 means t value is not significant.

5.8 Impact of Foreign Remittances on the Use of Electronics and Electrical Goods

Use of electronics and electrical goods are also considered two important indicators of

interpreting the social status and economic wellbeing of the households. Here I have

incorporated these two items to compare the expenditure made on both of these two

items of two types of households during last 12 month (August 2012 to July 2013). In

41

the following page the impact of remittances on these two important variables are

illustrated.

Notes: Household receiving remittances is denoted by Electronics variable

Household receiving no remittances is denoted by NR Electronics variable

Pr(T < t) = 0.4438 means t value is not significant.

The unpaired t test of both of these types of goods is discussed below

Unpaired t test of electronics good



Electronics 34 67882.35 8515.244 49651.98 50557.96 85206.75

NR Electronics 34 70382.35 15417.54 89898.94 39015.13 101749.6

Combined 68 69132.35 8741.757 72086.37 51683.73 86580.97

Difference -2500 17612.78 -37665.05 32665.05

diff = mean(Electronics) - mean(NR Electronics) t = -0.1419



Pr(T < t) = 0.4438 Pr(|T| > |t|) = 0.8876 Pr(T > t) = 0.5562

The above result suggests that remittances receiver households during the last 12

months made less expenditure on electronics good than that of remittances non

receiver households. Their mean difference is (-2500) and t value is statistically

insignificant.

Unpaired T Test of Electrical Goods



Electrical 34 97352.94 11842.77 69054.6 73258.65 121447.2

NR Electrical 34 88308.82 12806.7 74675.26 62253.39 114364.3

Combined 68 92830.88 8673.845 71526.36 75517.82 110143.9

Difference 9044.118 17443.13 -25782.21 43870.45

diff = mean(Electrical good) - mean(NR Electrical good) t = 0.5185

42



Pr(T < t) = 0.6971 Pr(|T| > |t|) = 0.6058 Pr(T > t) = 0.3029

Notes: Household receiving remittances is denoted by Electrical variable

Household receiving no remittances is denoted by NR Electrical variable

Pr(T > t) = 0.3029 means t value is not significant

Their mean difference suggests that remittances receiver households spent more on

electrical good and their mean difference is 9044.118 which is minor and not

statistically significant.

5.9 Impact of Foreign Remittances on Assets of Households

There is a direct relationship between foreign remittances and assets generation. But

without making comparison between remittances receiver and non receiver’s assets it

is hard to determine how much remittances can contribute to generate assets of

households. For the convenience of data collection, assets are classified as various

types but for the analysis of data they are treated as aggregate under the head of total

assets. t test of this regard helped us to determine the amount of assets both the types

of households possess. Total assets are the addition of the value of the assets that both

types of households hold.

Unpaired t test of total assets



Total Assets 34 15300000 5644485 32900000 3845621 26800000

NR Total Assets 34 7350574 1355942 7906434 4591888 10100000

Combined 68 11300000 2921729 24100000 5508197 17200000

Difference 7978838 5805066 -3611350 19600000

diff = mean(Total Assets) - mean(NR Total Assets) t = 1.3745



43

Pr(T < t) = 0.9130 Pr(|T| > |t|) = 0.1739 Pr(T > t) = 0.0870

Notes: Household receiving remittances is denoted by the variable of Total Assets

Household receiving no remittances is denoted by the variable of NR Total Assets

Pr(T > t) = 0.0870 means t value is statistically significant at 10 percent level.

The total assets analysis of the remittances receiver and non receiver households give

the result that remittances receiver households have more assets than those of

remittances non receiver. Their mean difference is 7978838 and their t value is

statistically insignificant at 10 percent level.

5.10 Share of Foreign Remittances in Different Sectors of Khulna City

The respondents were asked to break down the major sectors in which foreign

remittances were used during last 12 months (August 2012 to July 2013). The result

was not that surprising. The following pie chart shows that the bulk of the remittances

were used to maintain households’ expenditures such as purchase of food, consumer

goods, household durables, furniture, educational expenses, etc. Land purchasing was

the second major source of remittance expenditures in Khulna city. It is interesting to

see that very few people in Khulna city use the remittances for savings. But in total,

52 percent of the remittances were used in investment in various types illustrated

below.

Figure No. 11: Remittances Used in Different Sectors of Households


32%

12%26%

11%

15%

4%

Remittances Use

Households Expenditure

Savings

Land Purchase

Build Construction

Formal Investment

Others

44

5.11 Frequency of Receiving Remittances

From the table given below, it is obvious to us that most of the households receive

remittances in the interval of 1 month. Among the 34 respondents, 10 respondents

receive remittances every month while 5 respondents answered that they receive

remittances after 2 months. Only 4 respondents receive remittances in every 3 months

while 5 respondents receive remittances in excess of 6 months. The reason for this

may be the dependency of the households on the foreign remittances. In the following

table the frequency of remittances received by households is presented.

Table No. 07: Interval Time of Receiving Remittances

Time Number of Respondents Percent (%)

01 Month 10 29.41

02 Month 05 14.71

03 Month 04 11.76

04 Month 06 17.65

06 Month 04 11.76

Above 06 05 14.71


5.12 Chapter Summary

The above discussion and data analysis regarding impacts of foreign remittances on

socio-economic condition of households reveals that most of the foreign remittances

during last 12 months in Khulna city came from USA and 67 percent of remittances

senders are single persons. 29.41 percent of households received remittances in every

month which they spent heavily on households’ expenditure and others investment

purposes in last 12 months. The impacts on remittances on investment are significant

as well as on total assets. But this impact is not much more on consumption and

consumer goods, durables and education, saving compared with remittances non

receivers’ households.

45

Chapter Six: Findings and Conclusion

6.1 Findings of the Research

The major findings of this research differ from the existing research works conducted

in other parts of our country which adds a new dimension of this research of socio-

economic impact on foreign remittances in Khulna city. So, the following findings are

summarized from this research.

i. Before undertaking this research we knew that Middle Eastern countries are

the senders of bulk of remittances to Bangladesh. In FY 2012-13, the bulk of

the remittances came from KSA, UAE and Kuwait but this research reveals

that during the last 12 months counted from August 2012 to July 2013, the

bulk of the remittances came from USA (26.47%) which was followed by

Dubai and UK in Khulna city.

ii. Most of the households received remittances from a single person which is 67

percent of total remittances inflow in last 12 months.

iii. More than 50 percent of households in this study area are dependent on one

earning member.

iv. Remittances receiver households have high level of educational enrollment

than households receiving no remittances. That is why remittances receiver

households spend more on education compared with remittances non receiver.

v. Most of the people in Khulna city migrated due to insufficient income which

was followed by education, unemployment, permanent migration and other

reasons.

vi. A significant amount of foreign remittances was spent on consumption

expenditure during the last 12 months (August 2012 to July 2013) which was

32 percent but the research’s finding suggests that remittances receiver

46

households spent a little bit more than that of households receiving no

remittances during last 12 months.

vii. In the last 12 months in Khulna city remittances receiver households spent

more on investment on various sector such as 26% of remittances inflow was

invested in land purchase, 11% on building construction and 15% on formal

investment in Banks and other businesses. So, in total above 50 percent of

remittances were invested.

viii. Remittances receiver households did not save much in the last 12 months

because of investing more on various sectors and their savings was less than

that of remittances non receiver households.

ix. The impact of foreign remittances on social ceremonies is positive which

means households receiving foreign remittances spent more in the last 12

months started from August 2012 to July 2013.

x. Households receiving foreign remittances spent more on electrical good like

TV, refrigerators, Oven, AC, etc than electronics good like computer, laptop,

mobile phones, watches, etc. but households receiving no remittances during

last 12 months (August 2012 to July 2013) spent more on electronics good

than that of households receiving remittances.

xi. The total assets which are the value of all those assets owned by households

are significantly different in two types of households. In total households

receiving remittances have possessed more assets that those of households

receiving no remittances.

47

6.2 Concluding Remarks

The research has made an attempt to understand through a field investigation and

analysis how foreign remittances impact socio-economic condition of households

compared with households receiving no remittances in Khulna city. The findings and

analysis of the research reveal that socio-economic impact of the foreign remittances

on households of migrants is positive. This research reveals that foreign remittances

not only are used in households’ consumption but also a significant portion of foreign

remittances are used in various types of investment activities that are somewhat

different from other research works in this field. We can also conclude that

remittances receiver households spend more on education which is also treated as an

investment in human capital. From this research it is also found that in Khulna city

remittances receiver households spend more on electrical goods and social ceremonies

which are considered as important indicators of improving socio-economic condition

of households. To conclude, the migration and remittances in Khulna city affect

significantly the migrant sending households by improving their socio-economic

condition. The study gives this indication within its limited scope, how the bulk of

foreign remittances were used by households of migrants in Khulna city during the

last 12 month counted August 2012 to July 2013. This does not represent the holistic

picture for the entire country, further research is indeed needed on this topic to

comprehensively analyze and understand the socio-economic impact of remittances

on households.

48

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Appendix


Khulna University

Thesis Questionnaire

Socio-economic Impact of Remittance on Households: A Study on Khulna City

Dear Respondent(s),

This research is being conducted as a partial fulfillment of BSS (Hons.) in Economics

of Khulna University. Information that you provide will be used for academic purpose

solely and will be kept secret.

Sample No. :

Name of the survey area: Khulna City Date:

Name: ………………………………………. Address….………………………

Relationship to the Migrant: Family System: …………………

1. Does your family receive remittances?

A) Yes B) No

2. Mention the cause of migration :

Coding: Insufficient income (1), unemployment (2), Education (3), Permanent

migration (4) and Other (5)

3. Basic Information of Households:

Name of Variables Description

Family size (measured in number)

Age of household head (in years)

Profession of household head

Number of earning members

Number of males over age 15

Number of females over age 15

Number of children under age 5

Nature of house

ix

Name of Variables Description

Number of members over 15 with

secondary education

Number of members over 15 with

university (Hons. or Masters)

education

Annual per capita income in

BDT(excluding remittances)

i. Nature of house: Own= 1, Rented= 2, Other (specify) = (3) …………………

ii. Profession of household Head: Job (Govt.)= 1, Job (Pvt.)= 2, Business= 3,

Service=( 4), Retired/No work (5)

4. Nature of Remittances Inflow:

4.1 How many times you receive remittances in last 12 months?

Answer:

4.2 What is the total amount of remittances (in BDT) received in last 12

months?

Answer:

4.3 From which country you receive remittances?

Answer:

5. Household Income (excluding remittances):

(BDT in last 12 month)

Sources Amount

Small business (in BDT)

Paid job (in BDT)

Earning form agriculture (in BDT)

Earning from industrial investment (in BDT)

Interest received (in BDT)

Others (in BDT)

x

6. Categories of Expenditure:


Categories Amount (in BDT) Examples

Food

(Monthly)

Purchased food Rice, milk, flour,

meat, vegetables,

fruits, daily

necessaries, etc.

Non-purchased

food

Food from own

production, gifts,

donations, etc.

Consumer goods (Monthly) Clothing, shoes,

fabric, etc.

Consumer durables (Yearly) Annual value of

stove, gas,

refrigerators,

furniture, television,

car and other

vehicles, etc.

Housing value (Monthly) Monthly use value of

housing or monthly

rental payment.

Education

(Monthly)

Primary Cost of education of

family members who

take primary

education.

Secondary and

H.S.C

Cost of education of

family members who

takes S.S.C and

H.S.C education.

Tertiary Cost of education of

family members who

take Hons./Masters

education.

Savings (Monthly) Amount you save

monthly.

Investment (Yearly) Amount you invest

monthly/yearly.

Social ceremonies (Yearly) Eid, Puja, family

celebration, marriage

ceremony, etc.

Household services (Monthly) Amount you spend

on water, gas,

electricity, telephone

and taxes.

Transport and communication

(Monthly)

Bus, taxi and

rickshaw fares,

gasoline, postage,

internet, and mobile

call charge, etc.

xi

Other (Monthly) i.e. legal, personal

services.

7. Assets Profile:

Categories Valuation in BDT

Housing

Electronics goods (i.e. Computer, Laptop, Mobile

phones, Tab, expensive watch etc.)

Electrical goods (i.e. TV, Refrigerators, Oven, AC,

etc.)

Furniture

Ornaments

Real assets Land

Building

Store/Shops

Others Share and stocks

FDR

DPS

8. Heads of Expenditure (from remittances):


Heads of expenditure Amount

Household expenditure

Savings

Land purchase

Building construction

Formal investment Bank

Share market

Investment in business

Vehicle purchase

Ornament purchase

Signature of the Respondent: …………………………………..

Contact Number: .........................................................................

Socio-economic Impact of Remittance on Households: A Study on Khulna City

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