Definition of Remittance
Subject: Economics | Topics:


The word Remittance originates from the word “remit” which means to transmit money/ fund. In banking terminology, remittance means transfer of fund one place to another. When money transferred from one country to another, this is called Foreign Remittance.

 Classification of Remittance

Foreign remittance may be classified into two types:

       Inward Foreign Remittance.

       Outward Foreign Remittance.

Inward Foreign Remittance

Inward Foreign Remittance means Remittance received from abroad. In other words remittance coming into our country from other countries by the remitter by way of permissible banking channel through freely convertible Foreign Currencies is called ‘Inward Foreign Remittance’ from the beneficiary country’s point of view. From the remitter’s point of view it is called outward Foreign Remittance.

Outward Remittance

Outward remittance of funds be made by means of T.T. D.D. T.T. etc. the remitter has to deposit money along with the application contains name and address of the payee name of the currency etc. All outward remittances must cover the transactions approved by the Bangladesh Bank.

Mechanisms for Remittance

The mechanisms to remit funds are as follows:

  •       FCAD- Foreign currency A/C Dollar.
  •       Foreign Currency A/C Dollar.
  •       MFCD- Mudaraba foreign currency deposits.
  •       PFC- Private Foreign Currency.
  •       FCAD- Exp. – Foreign Currency A/C Dollar export.
  •       NRO- Non Residence Dollar.
  •       NRT- Non Residence Taka.
  •       PDAP- Properly Development A/C Dollar.
  •       PDAP- Properly Development A/C Pound.

Instruments of Foreign Remittance

Cash for          : Dollar, Pound, France Fr. Riyal or any other currency.

T.C.                 : Travelers Cheque.

F.D.D              : Foreign Demand Draft.

T.T                   : Telegraphic Transfer, Cable transfer or swift transfer.

M.T                 : Mail Transfer.

I.M.O              : International Money Order.

P.O                  : Payment Order.

Banking plays an important role in the economy of any country. Bangladesh is the third largest Muslim country in the world with around 150 million populations of which about 90 percent are Muslim. These people possess strong faith on Allah and they want to lead their lives as per the construction given in the holy Quran and the way shown by the prophet Hazrat Mohammad (Sm). But Islamic banking system was developed here up to 1983 was centered to interest, which strongly prohibited repeatedly in Islam. This interest based banking system had been in action right from the British colonial period and employment of the Muslims in banks was more or less restricted. During the period 1947-1971 when country was a part of Pakistan but the rulers did not take any practical attempt to establish economic system based on Islamic Principles.

Since independence, Bangladesh saw a new trend in banking both at home and abroad. Islamic banking as a new paradigm started in Bangladesh in 1983 with the establishment of the first Islamic bank “Islami Bank Bangladesh Limited”. The innovation of interest-free banking systems, proved its worth in the country’s money market and many new banks have been established to operate in compliance with Shari’ah and many traditional banks have opened their Islamic banking braches.

The report mainly consists of seven sections. The introduction chapter consists of origin of the report, objectives, methodology of the report and also some limitations in doing the report. In the first section there is an introduction to Islamic banking systems. In chapter 2, the report defines about the background, rationale, objectives & ideology of Islamic Banking system. Chapter 3 focused on an overview of IBBL expressing its business philosophy, objectives, goals, mission, vision, products, management structure, organizational structure, and business principles. Chapter 4 provides brief idea about the functions of IBBL, which includes deposit accounts, investment methods, and foreign exchange business. Chapter 5 represents an overview of Foreign Exchange Branch. Later a brief idea of the International Banking Wing (IBW) is given. IBW manages the foreign exchange operations of IBBL. The Foreign Exchange Department includes import, export and remittance and other related affairs that are presented next. In chapter 6 import services and financing products are described. Import performance from different point of view is presented in this chapter. The seventh chapter deals with export, and export performance as well as other related aspects. In chapter 8 inward foreign remittances is covered with discussion on performance from many aspects and related discussions. In the ninth chapter supporting business practices to international banking are discussed. In the tenth chapter, there is SOWT analysis and the problems for Islamic banks, problems of IBBL, and development plans of IBBL are discussed. There are limitations, which are identified, and some recommendations to overcome those limitations. In Chapter 11 there is Findings, Recommendation & Conclusion.

For the continued expansion of the Islamic Banking system, a number of issues pose serious threats to the Islamic banks and these are needed to be carefully addressed. This paper discusses and makes recommendations on the more pertinent of these issues particularly the development of an Inter-Bank Islamic Money Market, activation of Shari’ah Supervisory Boards, enactment of a full-fledged Islamic Banking Act, development of New Financial Products in line with the Islamic Shari’ah, and extension of investment in line with PLS framework, especially by constituting consortium or syndication by the Islamic banks. The paper suggests that diversification of investment should be emphasized.


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