Munich Personal RePEc Archive

How Do Migrants’ Choice of Remittance Channel? The Case of Bangladesh

Kazi Abdul, Mannan and Gin Kok, Wei (2009): How Do Migrants’ Choice of Remittance Channel? The Case of Bangladesh. Published in: Asian Migration and Diaspora Studies , Vol. 15, No. 2 : pp. 33-56.

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Abstract

In many developing and transition economies, remittances from labor migrants constitute a large share of households’ disposable incomes. Economy-wide, remittances are often a major source of external finance that surpasses official development assistance and foreign direct investment. In this paper we study the choice of transfer channels by households. With a total sample size of close to 1,800 households, the survey was designed to be representative of households at the national level, for each major geographic region, and for each major type of locality. Explanatory variables include socioeconomic characteristics of the migrant and other household members, the pattern of migration and financial information. Our regression analysis has identified several important reasons why approximately two-third of the Bangladeshi migrants and their families in our sample do not use formal transfer channels. Key reasons not to use a formal transfer channel include an emphasis on low transfer cost, a migrant’s irregular legal status in the host country, and short migration spells. Migrants who mostly use informal services are more likely to be in high-income countries, reside in the host country illegally, remain abroad for periods longer than one year, not have a bank account, and care primarily about the cost of the transfer. Some of these determinants suggest the presence of distortions that can potentially be reduced through appropriate policy measures. This study suggest that the main starting points for policy interventions are the cost of money transfers, the treatment of irregular migrants in host countries, and the linkage between remittances and financial sector development.

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