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

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

……………………………………
Md. Ashif Hossain
Student Number: BSS 0 9 1 5 0 8
Session: 2011-2012

Supervisor

…………………………………….
Sk. Sharafat Hossen
Assistant Professor
Economics Discipline
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

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

…………………………………………

(Mohammed Ziaul Haider, Ph.D)
Head
Economics Discipline
Social Science School
Khulna University

August, 2013

Statement of Originality

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

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 0 9 1 5 0 8
Session: 2011-2012

August, 2013

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
Economics Discipline
Khulna University
Khulna, Bangladesh
August, 2013

i

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 foreignexchange 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. ii

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

iii

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
4.7 Impact’s of Foreign Remittances on Bangladesh Economy
4.7.1 Impact of Foreign Remittances on BOP

24-25
25
25-26

4.7.2 Foreign Remittances and GDP

26

4.8 Foreign Remittances in Khulna City

26-27

4.9 Chapter Summary

27

iv

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
5.7 Impact of Foreign Remittances on Social Ceremonies
5.8 Impact of Foreign Remittances on the Use of Electronics and

39-40
40
40-42

Electrical Goods
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

v

List of Tables

Number of the Tables and Titles

Page No.

Table No. 01:Variable Name and Unit of Measurement
Table No. 02:Description of the Variables

16
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

25

2012-2013
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

32

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

32

Remittances
Figure No. 07: Earning Members in Remittances Receiving

33

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

34

Remittances
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

vi

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

vii

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).

1

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
2

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 lessskilled 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.

3

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.

4

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.

5

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.

6

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).

7

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).

8

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
9

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).

10

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.

11

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.

12

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.

13

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.

14

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. 15

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. 16

Table No. 02: Description of the Variables
Name of the

Description

Variables
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

development

of

has

a

link

households

with of socio-economic

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

Frequent construction and repair of house indicates a

Houses

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

Various literatures suggest that bulk of the remittances is

Consumption

spent on consumption purposes. Therefore, in this case it is needed to know the true impact of remittances on consumption. 17

Name of the

Description

Variables
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

Today transport and communication are two important

Communication

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

The use of Electronics goods like Computer, Laptop,

Electrical Goods

Mobile phone, Tab, expensive watches and Electrical goods are TV, refrigerators, AC, Oven, etc are important.
18

Name of the

Description

Variables
Furniture and

Possession of furniture and ornaments has also been given

Ornaments

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

To identify how bulk of remittances distribute to different

Usage

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. 19

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.

20

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.
21

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

22

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

23

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
Remittance inflow
Year

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 20122013.
24

Figure No. 01: Inflow of Foreign Remittance from Major Countries (USD in million) in 2012-2013
4500
3829.45

4000
3500

2829.4

3000

2766.57

2500
1859.76

2000
1500

1186.93

991.59

1000

997.43

UK

Malaysia

500
0
Kuwait

KSA

UAE

USA

Others

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

25

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

Source: Bangladesh Bank, 2011.

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

Source: Bangladesh Bank, 2011.

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.
26

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. 27

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.
28

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
Number of Remitters
1 person

2 person

Above 2

6%
27%

67%

Source: Field Survey, 2013.

29

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

13

more than 5

5 member

5

4 member

5

6

3 member

2 memner

1

Source: Field Survey, 2013.

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.

30

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

17

more than 5

5 member

5

4 member

5

6

3 member

2 member

1

Source: Field Survey, 2013.

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.

31

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

Private Job

Business

Service

Retired/No job

12%
24%
9%

26%
29%

Source: Field Survey, 2013.

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
Government Job

Private Job

Business

Service

12%
32%

12%

23%
21%

Source: Field Survey, 2013.

32

Retired/No job

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
1 person

2 person

3 person

4 person

Above 4 person

None

14%

3%
3%
9%

59%
12%

Source: Field Survey, 2013.

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.

33

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

2 person

3 person

None

3%
9%

50%
38%

Source: Field Survey, 2013.

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

Tertiary

Households with remittances Households with no remitthances S.S.C and H.S.C

0

10

20

30

Number of Enrollment

Source: Field Survey, 2013.

34

40

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
Insufficient Income

Unemployment

Permanent Migration

Education

Others
3%

18%

35%

23%
21%

Source: Field Survey, 2013.

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

Unpaired t test of Consumption Expenditure
Two-sample t test with equal variances
Variables

Observations Mean

Consum

34

276058.8

31928.53

186173.7

211099.7

341017.9

NRConsum

34

270767.6

49881.97

290859.4

169282

372253.3

Combined

68

273413.2

29392.63

242377.9

214745.3

332081.2

5291.176

59225.36

-112956.1

123538.4

Difference

Std. Err.

Std. Dev.

[95% Conf. Interval]

diff = mean(Consumption Expd) - mean(NR Consumption Expd)
Ho: diff = 0

degrees of freedom =

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

Pr(T < t) = 0.5355

Pr(|T| > |t|) = 0.9291

t = 0.0893

66

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.

36

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
Two-sample t test with equal variances
Variables

Observations Mean

Std. Err.

Std. Dev.

[95% Conf. Interval]

Total Edu

34

74794.12

14175.11

82654.37

45954.65

103633.6

NR Edu

34

52688.24

14761.75

86075.07

22655.23

82721.25

Combined

68

63741.18

10245.55

84486.97

43290.97

84191.38

22105.88

20465.65

-18755.11

62966.88

Difference

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

t = 1.0801

Ho: diff = 0

degrees of freedom =

66

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

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.

37

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
Two-sample t test with equal variances
Variable

Observations

Savings

34

NRSavings

34

Combined

68

Difference

Mean

58235.29

Std. Err.

Std. Dev.

[95% Conf. Interval]

24828.58

144774.2 7721.175

108749.4

86529.41

22116.42

128959.8 41533.22

131525.6

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

Ho: diff = 0

degrees of freedom =

66

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

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.

38

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
Two-sample t test with equal variances
Variables

Observations Mean

Std. Err.

Std. Dev. [95% Conf. Interval]

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

54557.03

174854.7

119647.1

58910.99

2027.477

237266.6

Difference

248496

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

t = 2.0310

Ho: diff = 0

degrees of freedom =

Ha: diff < 0

Ha: diff != 0

Pr(T < t) = 0.9769

66
Ha: diff > 0

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

39

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
Two-sample t test with equal variances
Variables

Observations Mean

Social Ceremonies

Std. Err.

Std. Dev.

[95% Conf. Interval]

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

40852.94

3618.693

29840.5

33630

48075.88

8882.353

7209.576

Difference

68

-5512.029

diff = mean(Social Ceremonies) - mean(NR Social Ceremonies)
Ho: diff = 0

degrees of freedom =

23276.74

t = 1.2320

66

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

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

40

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
Two-sample t test with equal variances
Variables

Observations

Mean

Std. Err.

Std. Dev.

[95% Conf. Interval]

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

-2500

17612.78

-37665.05

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

t = -0.1419

Difference

Ho: diff = 0

degrees of freedom =

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

Pr(T < t) = 0.4438

Pr(|T| > |t|) = 0.8876

32665.05

66

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
Two-sample t test with equal variances
Variables

Observations

Electrical

34

NR Electrical
Combined
Difference

Mean

Std. Err. Std. Dev.

[95% Conf. Interval]

97352.94

11842.77

69054.6

73258.65

121447.2

34

88308.82

12806.7

74675.26 62253.39

114364.3

68

92830.88

8673.845

71526.36 75517.82

110143.9

-25782.21

43870.45

9044.118

17443.13

diff = mean(Electrical good) - mean(NR Electrical good)
41

t = 0.5185

Ho: diff = 0

degrees of freedom =

66

Ha: diff < 0

Ha: diff != 0

Ha: diff > 0

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
Two-sample t test with equal variances
Variables
Total Assets

Observations Mean

[95% Conf. Interval]

15300000 5644485

32900000

3845621

26800000

NR Total Assets 34

7350574

7906434

4591888

10100000

Combined

11300000 2921729

24100000

5508197

17200000

-3611350

19600000

Difference

34

Std. Err. Std. Dev.

68

7978838

1355942

5805066

diff = mean(Total Assets) - mean(NR Total Assets)
Ho: diff = 0

degrees of freedom =

Ha: diff < 0

Ha: diff != 0

66
Ha: diff > 0

42

t = 1.3745

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
Remittances Use
4%

15%

Households Expenditure
32%

Savings
Land Purchase

11%

Build Construction
Formal Investment
12%

Others

26%

Source: Field Survey, 2013.

43

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

Source: Field Survey, 2013.

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.

44

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 socioeconomic 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

45

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.

46

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.

47

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51

Appendix
Economics Discipline
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 viii Name of Variables
Number of members over 15 with secondary education

Description

Number of members over 15 with university (Hons. or Masters) education Annual per capita income in
BDT(excluding remittances)
Nature of house: Own= 1, Rented= 2, Other (specify) = (3) …………………
Profession of household Head: Job (Govt.)= 1, Job (Pvt.)= 2, Business= 3,
Service=( 4), Retired/No work (5)

i. ii. 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
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)

ix

Amount

6. Categories of Expenditure:

Food
(Monthly)

(BDT in last 12 month)
Categories
Amount (in BDT)
Purchased food

Non-purchased food Consumer goods (Monthly)
Consumer durables (Yearly)

Housing value (Monthly)

Education
(Monthly)

Primary

Secondary and
H.S.C

Tertiary

Savings (Monthly)
Investment (Yearly)
Social ceremonies (Yearly)

Household services (Monthly)

Transport and communication
(Monthly)

x

Examples
Rice, milk, flour, meat, vegetables, fruits, daily necessaries, etc.
Food from own production, gifts, donations, etc.
Clothing, shoes, fabric, etc.
Annual value of stove, gas, refrigerators, furniture, television, car and other vehicles, etc.
Monthly use value of housing or monthly rental payment.
Cost of education of family members who take primary education. Cost of education of family members who takes S.S.C and
H.S.C education.
Cost of education of family members who take Hons./Masters education. Amount you save monthly. Amount you invest monthly/yearly. Eid, Puja, family celebration, marriage ceremony, etc.
Amount you spend on water, gas, electricity, telephone and taxes.
Bus, taxi and rickshaw fares, gasoline, postage, internet, and mobile call charge, etc.

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):
(BDT in last 12 month)
Heads of expenditure
Household expenditure

Amount

Savings
Land purchase
Building construction
Formal investment

Bank
Share market

Investment in business
Vehicle purchase
Ornament purchase

Signature of the Respondent: …………………………………..
Contact Number: .........................................................................

xi