Assignment on Analysis of Inward Remittance Trend

Analysis of Inward Remittance Trend:

According to the economical statistics published by Bangladesh Bank, it seems remittance inflow to Bangladesh has been gradually increased in last 20 years. Between 90s and onward till starting of 21st century remittance inflow was reported at a steady rate. After 2001 remittance inflow tour country was increasing and up to 2008-2009 a record amount of 10 million USD remittance inflows was recorded.

Table 1:Trend of Remittance inflow in Bangladesh (Year Wise)

Year

Remittances

(in Taka)

Growth
rate

Remittances

(in USD)

Growth
rate

1990-1991

27256.2

763.91

1991-1992

32414.5

0.18925

849.66

0.11225

1992-1993

36970.4

0.14055

944.57

0.1117

1993-1994

43549

0.17794

1088.72

0.15261

1994-1995

48144.7

0.10553

1197.63

0.10003

1995-1996

49704

0.03239

1217.06

0.01622

1996-1997

63000.4

0.26751

1475.42

0.21228

1997-1998

69346

0.10072

1525.43

0.0339

1998-1999

81977.8

0.18216

1705.74

0.1182

1999-2000

98070.3

0.1963

1949.32

0.1428

2000-2001

101700.1

0.03701

1882.1

-0.0345

2001-2002

143770.3

0.41367

2501.13

0.3289

2002-2003

177288.2

0.23314

3061.97

0.22423

2003-2004

198698

0.12076

3371.97

0.10124

2004-2005

236469.7

0.1901

3848.29

0.14126

2005-2006

322756.8

0.3649

4802.41

0.24793

2006-2007

412985.29

0.27956

5998.47

0.24905

2007-2008

542951.4

0.3147

7914.78

0.31947

2008-2009

666758.5

0.22803

9689.26

0.2242

2009-2010

760109.59

0.14007

10987.40

0.1339

Avg. Growth Rate

19.5%

15.45%

 

 

 

 Remittance as percent of GDP & Export

Table 2: Remittance as percent of GDP & Export

Year

As percent of GDP

As percent of Export

2002-2003

5.90

46.76

2003-2004

5.98

44.35

2004-2005

6.37

44.47

2005-2006

7.75

45.62

2006-2007

8.83

49.09

2007-2008

10.02

56.09

2008-2009

10.96

62.25

                                                                    Source: BBS, EPB, Bangladesh Bank.

The amount of remittances in terms of GDP and export earnings has also increased over the years. In 2002-03, remittances as percent of GDP and export stood at 5.90 percent and 46.76 percent respectively. In 2008-09, remittances as percent of GDP and export were 10.96 percent and 62.25 percent respectively.

 Regression Analysis:

Regression Equation:

Y= 90100.18+1.283814X

X = independent variable = Remittance inflow by CBL

Y = dependent variable = Remittance inflow in Bangladesh

Here, the volume of remittance inflow of CBL increases for Tk. 1 million, remittance inflow in Bangladesh increases for Tk. 1.283814 million. Multiple R= 0.056 indicates low degree of positive relationship between remittance inflow by CBL and remittance inflow in Bangladesh. The explanatory power of the independent variable can be assessed by the coefficient of determination (R2), R2 = 0.0032 indicates that 0.32% of the variation in the remittance inflow in Bangladesh can be explained by the variation in Remittance inflow by CBL. Numbers of observations in the sample are 5 (Year 2005-2009). P value of 0.55 means 45% certain of the estimate in order to conclude a significant relationship between the Y and X variable.

(See: Appendix 1)

Regression Equation:

Y= 2634.97+11.71237X

X = independent variable = Remittance inflow by CBL

Y = dependent variable = Profit before tax of CBL

Here, the volume of remittance inflow by CBL increases for Tk. 1 million, Profit before tax increases for Tk. 11.71237 million. Multiple R= 0.61 indicates positive relationship between remittance inflow by CBL and Profit before tax by CBL. The explanatory power of the independent variable can be assessed by the coefficient of determination (R2), R2 = 0.369 indicates that 36.9% of the variation in the remittance inflow by CBL can be explained by the variation in Profit before tax by CBL. Numbers of observations in the sample are 5 (Year 2005-2009). P value of 0.79 means 21% certain of the estimate in order to conclude a significant relationship between the Y and X variable.

(See: Appendix 2)

t-Test: Paired Two Sample for Means

Whether the mean return from remittance inflow by CBL is differing from mean return of remittance inflow in Bangladesh.

Ho:  µ1 = µ2 = There is no significance difference between the mean return from remittance inflow by CBL and from mean return of remittance inflow in Bangladesh.

H1:  µ1 = µ2 = There is significance difference between the mean return from remittance inflow by CBL and from mean return of remittance inflow in Bangladesh.

Here assumed level of significance is 5% and the appropriate test is t-Test.

Table 3: t-Test: Paired Two Sample for Means (1)

 

Variable 1

Variable 2

Mean

9064.75

43637.64

Variance

30179370

2.95E+08

Observations

5

5

Pearson Correlation

0.866655

Hypothesized Mean Difference

0

df

4

t Stat

-6.08594

P(T<=t) one-tail

0.001843

t Critical one-tail

2.131847

P(T<=t) two-tail

0.003685

t Critical two-tail

2.776445

 

Here, the calculated value of t-Test is t Stat = -6.08594   for 4 degrees of freedom at 5% level of significance, table value of t-Test is (t Critical two-tail) = 2.776445. The calculated value has in the rejection zone.

So, reject null hypothesis. There is significance difference between the mean return from remittance inflow by CBL and from mean return of remittance inflow in Bangladesh.

Whether the mean return from remittance inflow by CBL has relationship with the mean return of Profit before tax of CBL.

Ho:  µ1 = µ2 = There is no significance relationship between the mean return from remittance inflow by CBL and the mean return of Profit before tax of CBL.

H1:  µ1 = µ2 = There is significance relationship between the mean return from remittance inflow by CBL and the mean return of Profit before tax of CBL.

Here assumed level of significance is 5% and the appropriate test is t-Test.

Table 4: t-Test: Paired Two Sample for Means (2)

 

Variable 1

Variable 2

Mean

9064.75

998.92

Variance

30179370

81251.85

Observations

5

5

Pearson Correlation

0.607724

Hypothesized Mean Difference

0

df

4

t Stat

3.386893

P(T<=t) one-tail

0.013805

t Critical one-tail

2.131847

P(T<=t) two-tail

0.027609

t Critical two-tail

2.776445

Here, the calculated value of t-Test is t Stat = 3.386893 for 4 degrees of freedom at 5% level of significance, table value of t-Test is (t Critical two-tail) = 2.776445. The calculated value has in the rejection zone.

So, reject null hypothesis. There is significance relationship between the mean return from remittance inflow by CBL and the mean return of Profit before tax of CBL.

Country wise Wage Earners Remittance Inflows:

Table 5: Country wise Wage Earners Remittance Inflows (Yearly)

USD in millions

Country

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Bahrain

67.18

61.29

79.96

138.20

157.43

170.14

Kuwait

406.80

454.38

680.70

863.73

970.75

1019.18

Oman

131.32

153.00

196.47

220.64

290.06

349.08

Qatar

136.41

161.43

233.17

289.79

343.36

360.91

K.S.A.

1510.46

1562.21

1734.70

2324.23

2859.09

3427.05

U.A.E.

442.24

512.64

804.84

1135.14

1754.92

1890.31

Libya

0.27

0.16

2.61

0.36

1.25

1.46

Iran

0.52

1.68

2.36

3.24

3.28

4.49

Sub total

2695.2

2906.79

3734.81

4975.33

6380.14

7222.62

Australia

7.15

8.89

11.34

13.11

6.78

8.45

Hongkong

5.63

5.37

6.15

8.10

9.09

8.32

Italy

41.38

78.43

149.65

214.46

186.90

182.19

Malaysia

25.51

19.05

11.84

92.44

282.22

587.09

Singapore

47.69

61.32

80.24

130.11

165.13

193.46

U.K.

375.77

517.39

886.90

896.13

789.65

827.51

U.S.A.

557.31

701.37

930.33

1380.08

1575.22

1451.89

Germany

10.10

10.95

14.91

26.87

19.32

16.50

Japan

15.99

8.71

10.17

16.29

14.12

14.74

S.Korea

18.41

16.40

17.08

19.69

18.33

20.77

Others

48.15

92.56

125.05

142.17

242.36

453.86

Sub total

1153.09

1520.44

2243.66

2939.45

3309.12

3764.78

Total

3848.29

4427.23

5978.47

7914.78

9689.26

10987.4

 Source: Bangladesh Bank website

After one eleven incident there was a chance of facing a decline in the remittance inflow but it was not happened. Because if we consider the above table we will see inflow from Middle East countries are twice larger than of summation of remittance inflow from Asian and European countries and this trend was carried forward from 90s to till this year. But due to the after affect of global economic fall down Bangladesh is facing a major decline in the remittance inflow as countries like Malaysia in Asia and U.A.E in Middle East are facing such impact and now sending so many wage earners to Bangladesh. More over due to mall practices in sending wage earners in those countries are also consider as a reason for low rate of employment in foreign countries. And this results in low inflow of remittance. In last year more than 20% fallout was recorded.

 Comparative Analysis:

Table 6: Industry Comparison (last 5 months)

Bank

MTBL

Dhaka Bank

Bank Asia

SEBL

CBL

Industry

July

6.22

6.67

10.39

3.84

9.94

7.41

August

6.32

9.14

17.08

4.73

12.15

9.89

September

7.61

9.86

16.62

4.62

11.16

9.98

October

7.78

7.89

17.36

4.94

12.29

10.05

November

7.79

8.34

16.57

5.05

11.54

9.86

Avg.

7.15

8.38

15.60

4.64

11.42

9.44

                                                                                                                          Source: The City Bank Limited

Illustration 11: Industry Comparison

Now form my analysis I found that The City Bank Ltd. positioned itself on above the industry average line which is a great achievement in this year. Unlike other bank The City Bank is showing a smooth growth rate of remittance inflow and only in few years of operation it positioned itself as a Bank of Performance among the expatriates Bangladeshis who feel safe and sound while sending remittance to their love ones in Bangladesh. Now the reason behind this success can be point out in some key points like-

Strong Management

Quality Service

Wide area of Coverage

Customer Orientation

Proper Feedback Facility

Technological Advancement

Futuristic decision making

Analysis of CBL’s Foreign Exchange Performance

Table 7: Trend of NBL Foreign Exchange performance ( Taka In Million)

Year

Export

Growth

Import

Growth

Remittance

Growth

2005

18218.97

21363.21

4158.70

2006

28211.22

54.85%

32096.39

50.24%

8473.00

103.74%

2007

19151.15

(32.12%)

20308.89

(36.73%)

4932.05

(41.79%)

2008

14765.80

(22.90%)

30894.10

52.12%

9827.50

99.26%

2009

13815.40

(6.43%)

28717.80

(7.04%)

17932.50

82.47%

The Graphical Presentation is given below:

Illustration 12: Foreign Exchange Performance of CBL

Despite the political unrest and labor turmoil, export amount stood at Tk. 13815.40 million at the end of FY2009, registering a negative growth of 6.43% percent over that of FY2008.Import payments during FY2009 stood Tk. 28717.80 million registering a negative growth of 7.04% percent compared FY2008.

During the last two years, the bank signed money transfer agreement with overseas exchange companies. As a result, remittance flow has increased significantly. In the year 2009 total amount of the flow of remittance was Tk. 17932.50 million as against Tk. 9827.50 million in 2008 registering an increase of 82.47%.

 Growth Analysis of City Bank’s Remittance:

Table 8: Remittance Inflow of CBL(Taka In Million)

 Year

2005

2006

2007

2008

2009

Inflow

4158.70

8473.00

4932.05

9827.50

17932.50

Growth Rate

103.74%

(41.79%)

99.26%

82.47%

Illustration 13: Remittance Inflow of CBL

The bank has been continuing to extend special importance to foreign remittance from the very beginning of its establishment. With this view, we have started business in inward foreign remittance with overseas remittance exchange house companies by establishing Drawing Agreement. As a result remittance inflow of CBL rises to TK 4158.70 million from TK 17932.50 million in year 2005 to year 2009.

 Forecasting Inflow of Remittance of CBL

Table 9: Remittance Inflow of CBL (Taka In Million)

Year

2009

2010

2011

2012

2013

Income

17932.50

26898.75

40348.125

60522.19

90783.28

As for calculating remittance earning is not directly related with any micro economic variable and is dependent on macroeconomic conditions, that means if economical condition in host countries are favorable, than remittance inflow will be generated, and as for The Bank the income is generated from the commission earning so as quantity of remittance increases so do the income . But for simplicity and in need of forecasting, consider average growth 48.74% in remittance inflow. As a consequence in end of year 2013 CBL may achieve TK 90783.28 million remittance inflow.

 The Graphical Presentation is given below:

 Illustration 14: Forecasting inflow of remittance of CBL

  Number of Drawing Agreement:

Table 10: Number of Drawing Agreements

 

Year

2005

2006

2007

2008

2009

2010

Drawing Agreement

5

7

9

14

21

24

 

Number of Drawing agreement has a significant impact on remittance inflow thus in remittance income, because the more number of drawing agreement is signed between exchange house and the Banks the more the remittance inflow will be received. And this is evident form CBL’s income and number of Drawing agreement trend.

Country wise list of Exchange Houses having Drawing Agreement with CBL

Table 11: Country wise list of Exchange Houses

Country Name

No of Exchange Houses

Bahrain

1

Kuwait

3

Oman

4

Qatar

4

U.A.E.

5

U.K.

6

U.S.A.

1

 CBL Contribution in Total Remittance:

The amount of remittances comes through CBL in terms of total remittance has also increased over the years. In 2005, CBL remittances as percent total remittance at 17.59% percent. In 2009,

CBL remittances as percent total remittance at 26.89% percent.

Table 12: CBL Contribution in Total Remittance

Year

CBL

BNG

percentage

2005

4158.7

23646.97

17.58661

2006

8473

32274.6

26.25284

2007

4932.05

41298.5

11.94244

2008

9827.5

54293.24

18.10078

2009

17932.5

66674.87

26.89544

The Graphical Presentation is given below:

Illustration 16: CBL Contribution in Total Remittance

Overcoming the Barriers:

Form the inception of The City Bank Limited; it is striving to increase the flow of remittance to keep the contribution in the country’s economy and to meet up their internal demand in foreign trade business. Despite of some limitation at present CBL has 97 branches all over the country covering a satisfactory area for creating a proper channel of remittance.

To overcome the barriers of smooth flow of remittance the following initiative will be taken-

Increase number of drawing agreement.

Introducing electronic remittance cared system or RPC.

Digitalizing the fund transfer process.

Increasing the network coverage.

Drawing agreement with local NGOs.

Remittance