The largely battered hundi system because of travel restrictions, the zero-interest rate on deposit products in western countries, repeated floods in Bangladesh, and a massive collapse in demand in many nations hosting migrant workers from this South Asian nation have taken the inbound remittance to a level that was never seen before.
The stream of remittances, credited for alleviating poverty in lower- and middle-income countries, is so strong that it has baffled economists and made the World Bank reverse its forecasts about the flow of the remittance.
This too came when the world was struck with a recession, one of the deepest since the Great Depression.
A good number of migrant workers have lost jobs due to the economic downturn caused by the coronavirus pandemic. The flow of Bangladeshis going abroad in search of jobs has also ebbed. But the crisis has had little impact on remittance.
Migrant workers remitted $2.11 billion last month, which was way higher than $1.64 billion flown to the country in the same month a year ago.
October's receipts were the third-highest monthly flow in history, behind July's $2.59 billion and September's $2.15 billion.
Between July and October, remittance hit $8.82 billion, up from 43.24 per cent year-on-year.
Bangladesh received a record $1 billion in just 12 days of November, a rare feat in such a short span of time, according to the finance ministry.
Remittance has been on the rise in recent months.
Both Eid-ul-Fitr and Eid-ul-Azha, the two religious festivals making up the major spending seasons in the Muslim-majority nation, were celebrated during the period. A significant part of the country faced a number of floods this year. As a result, the expatriates sent more money to their struggling near and dear ones.
Ninety-five per cent people in Bangladesh suffered a loss of income due to the shutdown and social distancing measures enforced by the government during the peak of the pandemic in the country, according to a Brac survey.
Studies show that remittances tend to rise during downturn phases in the economic cycle. Migrants send more money home to support their financially distressed families, wrote Zahid Hussain, an economist, in January.
But perhaps a more important reason for a whopping 53.5 per cent year-on-year increase in remittance flows in the third quarter was the damage from the floods that inundated more than one-quarter of the country's landmass, affecting nearly 1 million homes and 4.7 million people, said the World Bank in October.
Other plausible explanations include pent-up remittances after the shutdown in the second quarter, a shift in flows from informal to formal channels, and the 2 per cent cash incentive the government granted to remitters.
The stagnated hundi system – an illegal cross-boundary financial transaction – has mainly driven the remittance growth, said Tasneem Siddiqui, the founding chair of the Refugee and Migratory Movements Research Unit.
The restriction on the movement globally has created a standstill situation for the global hundi cartel, she said.
"The ongoing upward trend of remittance is a highly extraordinary phenomenon for any nation during the ongoing business slowdown," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Along with the migrant workers, some expatriate Bangladeshis, who run businesses abroad, may also have transferred funds to the country as part of their portfolio investment, Mansur said.
A portfolio investment is an ownership of a stock, bond, or other financial assets with the expectation that it will earn a return or grow in value over time, or both.
It entails passive or hands-off ownership of assets as opposed to direct investment, which would involve an active management role.
Many countries in North America and Europe now face the deadlock of a zero per cent interest rate. It would take at least four to five years for a country to get rid of the situation, he said.
So, Bangladeshi diasporas now send money as the interest rate on deposit products offered by local lenders is much higher than those in the countries they are now based, said Mansur, a former official of the International Monetary Fund.
Local banks offer 4-6 per cent interest rate on deposits.
"Beneficiaries of remittances can easily receive remittance through burgeoning mobile financial services and agent banking outlets. This has also undermined the hundi system," said Md Arfan Ali, managing director of Bank Asia,
The two per cent incentive introduced by the government in July last year, has also encouraged remitters to send their hard-earned money through the banking system, said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
But, he warned, that money-launderers may use the formal channel to whiten their black money during the pandemic.
Bangladeshi workers were largely employed in the sectors that are essential to the economies of the host countries, for which it took time for them to become unemployed, said Zahid Hussain in October.
More than one crore Bangladeshis live in about 160 countries. Most of them are low-paid migrant workers in the Middle East and Southeast Asian countries.
Studies show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households, according to the World Bank.
A fall in remittances affect families' ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
Inbound remittance in Bangladesh is expected to accelerate by about 8 per cent to $19.8 billion this year.