Foreign Remittance of AIBL

4.1 Definition of Foreign Remittance:

A remittance is a transfer of money by a foreign worker to an individual in his or her
home country. Money sent home by migrants competes with international aid s one of
the largest financial inflows to developing countries. Foreign remittance can be defined
as the purchase and sale of freely convertible foreign currencies as admissible under
exchange control regulations of the country. A looser translation is the sending of the
money home while working in a foreign country. Thousands of people are currently
working and living in a country that is not their home, and sending funds regularly back
to their families in their home country.

4.2 Local Remittance:

Local Remittance is another significant part of the general Banking. The bank receives and
transfers various types of bills through the remittance within the country. The bank charges
commission on the basis of bill amount.

4.3. Functions of Foreign Exchange Department:

Foreign exchange department performs many functions to facilitate the foreign exchange
transactions. These functions are:

 Facilitating import trade

 Facilitating export trade

 Provide funded and non-funded credit facility

 Maintaining foreign currency accounts

 Selling of foreign currency bonds

The foreign exchange department consists of mainly two sections- L/C operations and
foreign
Remittance, which perform all the functions mentioned above.

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 Foreign exchange
Department

L/C operations Foreign Remittance

Import Export
operation operations Foreign Inward Outward
Current A/C Remittan Remittan
ce ce

4.4. Regulation for the Foreign Exchange Division:

Foreign Exchange transactions are being controlled by the following rules and
regulations:

 Foreign Exchange act 1047.

 Bangladesh bank issues Foreign Exchange Circular from time to time to

control the export, import and remittance operation.

 Ministries of commerce issues export and import policies giving basic

formalities for import and export.

 Sometimes CCI issues public notices for any kind of change in Foreign
Exchange transaction.

 Bangladesh bank published two volumes in 1996. These comprise the

complete instructions to be followed by the authorized dealers in
transactions related to Foreign Exchange.(Bangladesh Bank, 2012)

4.5. Types of Foreign Remittance:

In broad sense foreign remittance includes all sale and purchase of foreign currencies on
account of import, export, travel and other purpose. However specifically foreign
remittance means sale and purchase of foreign currencies for the purpose other than
export and import. There are two types of remittance:

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4.51. Outward Foreign remittance
4.5.2 Inward Foreign remittance

Foreign
Remittance

Outward Inward
Foreign Foreign
Remittance Remittance

4.5.1 Outward Foreign remittance: The sending country, where the wage earner is
located. The sender uses a bank or foreign exchange company to send money to foreign
country. Many of the receiving banks have established remittance relationship with
currency houses and banks in other countries to better facilitate the flow of remittances
into the country.

Outward remittance may be made for following purposes-

 Travel.
 Medical treatment.
 Education purpose.
 Attending seminar.
 Balance amount of F.C account.
 Profit of foreign companies.
 Technical assistance.
 New exporters up to USD 6000/- for business promotion.
 F.C. remittance can be made for fare, exhibition from export retention
quota.

4.5.2 Inward Foreign Remittance: The receiving country where the beneficiary
resides. The bank receives the money that has been sent from the sending person
in the country in which the money has been earned. There is no restriction on
inward remittances by Bangladesh bank other than the prescribedformalities to be

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 complied with by the exporters and other recipients. The authorized dealer can
freely purchase foreign currencies.

1. T.T-Telegraphic Transfer
2. M.T-Mail Transfer
3. D.D- Demand Draft
4. P.O- Pay order
Besides this, foreign inward remittance also includes remittances on account of export,
purchase of T.C, foreign currency notes and coins, Cheques issued on foreign banks in
favors of beneficiaries in Bangladesh etc.
1. T.T: Cable or telex instruction of payment is called as Telegraphic Transfer,
where foreign bank issues a T.T in a favor of someone in Bangladesh. It credits the
amount, received from the remitter to the NOSTRO A/C of its correspondent bank on
receipt of the T.T; the paying bank in Bangladesh will make payment of the proceeds of
the T.T in foreign currency o in equivalent Bangladeshi Taka to the beneficiary.
2. M.T: M.T is an instrument issued by a remitting bank to the paying bank
advising in writing to make payment of certain amount to specific beneficiary.
3. D.D: A demand draft is negotiable instrument issued by drawn on other bank
with the instruction to pay a certain amount to the beneficiary on demand.
4. P.O: Pay orders are the safest way of making payments, as they are drawn on
the bank issuing them. So there is no scope of forgery. A pay order is issued only within
the members of the Bangladesh bank clearing house (Dhaka Metro). It can be issued in
favor of a customer holding an account, by debiting his account and crediting bills
payable liability A/C. The account payees submit the pay order in their specific banks.
The banks then send the pay order to the clearing house where these are received by the
respecting issuing banks. The issuing banks verify the pay order, which are then send
back to the respecting banks and payment made by debiting the payable account.

4.6. Foreign Remittance Collection Statement of AIBL Bank Ltd. (Corporate Branch):

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 (In Million Taka)
Month 2013 2014 2015 2016
January 182.80 142.20 189.10 158.40

February 131.00 115.30 150.00 133.20

March 157.60 193.30 250.00 142.40

April 117.80 250.00 131.80 166.20

May 250.00 150.00 123.40 180.20

June 175.70 193.40 196.40 191.40

July 152.00 221.40 122.80 184.30

August 210.00 119.80 182.90 156.30

September 214.90 145.10 148.60 213.00

October 281.40 179.30 194.70 166.40

November 212.40 157.10 113.60 151.00

December 257.60 123.50 200.30 160.50

Total 2342.20 1990.40 2013.60 2003.30

(In
Million
Taka)

4.7. Process of Foreign Remittance:

Fund transfer from one country to another country goes through a process which is
known asremitting process. AIBL has 146 Domestic branches. The bank has
“NostroAccount” with a foreign bank Standard Charted Bank, New York. Bangladeshi
expatriates are sending foreign remittances to their local beneficiary, through that
account.

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 Al-ArafahIslami Nostro Account
Bank Ltd. Foreign Bank

Beneficiar Remitter
y

 Now, the Bangladeshi expatriates will contact with Standard Charted Bank to
remit fund to Bangladesh.
 Then Standard Charted Bank will credit the “NOSTRO A/C” of NBL and send
the message through SWIFT.
 Next the local bank’s Head Office international division will receive telex
message and the TFMD will record the advice and generate the advice letter to
the respective branch of the bank.
 The branch will first decode the test, verify signature and check the account
number and name of the beneficiary.
 After full satisfaction, the branch transfers the amount to the account of
thebeneficiary and intimates the beneficiary accordingly.
 But sometimes the complexity arises, if the foreign Bank has no “NOSTRO A/C”
in which country where the expatriates want to remit fund. Then the Foreign
Bank has to take help of a third bank who has “NOSTRO A/C” with intended
Bank.
4.8. Importance of Foreign Remittance:
 Generally, remittances are monies transferred from one individual to
another.
International remittance are transfers of funds by foreign workers-“remitters”-who are
livingand working in developed countries typically to their families who are still living
in theirhome countries. Examples include Middle Easterners living in Europe, Latin
Americans in the United States, and Koreans or Filipinos in Japan. Although the use
remittance fund varies from country to country, the recipients of remittances commonly
rely on them for living costs, education, and investments.

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  Remittance have increased significantly and become a major source of
income for developing countries.
The topic of remittance has become a popular one in the international financial
community indecent years as both the rate and volume of remittances have increased
exponentially. Gathering accurate data on international remittances has been very
difficult for a number of reasons, including the fact that a good portion of the transfers is
made on formal basis.

Some official statistics do exist, however and they present in 2006, the word bank
reported the remittances grew to approximately 206 billion dollar others put the figure at
298 billion. These flows have led analysts to conclude that the growth of remittances has
exceeded private capital flows and official development assistance to developing
countries. Moreover, remittances are a reliable source of foreign capital; in the 1990s
they were the least volatile source of foreign exchange.

4.9. Remittance Management Software:

The system was designed with features to support corporations which require multi-
currency, multi-country operations. The following features can be used at remote
locations to collect remittances for foreign destinations.

4.10. Remittance Software Features:

 Remitter information
 Beneficiary information
 OFAC list compliance
 Agent management
 Exchange house management
 Head office management
 Branch office management
 Cover fund management
 Remittance distribution
 Real time transaction
 Checker & Maker
 Anti-money laundering facility & transfer list check
 Various exchange house data input & data distribution facility
 Range wise commission
 Bank wise exchange rate
 Auto feedback facility
 Multicurrency conversation
 Instant remittance check

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  Bangladesh & abroad country compliance
 SMS facility(Remitter & Beneficiary)
 Online access and control
 Scheduled processing-Facilities day-to-day operations
 Automated stop payments
 Risk management

4.12. Modes of Foreign Remittance Activities of Al-Arafah Islami Bank Ltd.

Ladighirpar Branch Sylhet.

4.12.1 World Wide Exchange House:

 The Western Union

The Company is a financial services and communications company based in the United
States. Its North American headquarters is in Meridian, Colorado, though the postal
designation of nearby Englewood is used in its mailing address. Up until it discontinued
the service in 2006, Western Union was the best-known U.S. Company in the business of
exchanging telegrams. Western Union has several divisions, with products such as
person-to person money transfer, money orders, business payments and commercial
services. They offered standard "Cablegrams", as well as more cheerful products such as
Candy grams, Dolly grams, and Melody grams. Western Union, as an industrialized
monopoly, dominated the telegraph industry in the late 19th century. It was the first
communications empire and set a pattern for American-style communications businesses
as they are known today.

 Money Gram International Inc.

Money Gram is a money transfer company based in the United States with its
headquarters in Dallas, Texas. It has operation centers in St. Louis Park, Minnesota and
Brooklyn Center, Minnesota, a call center in Lakewood, Colorado, and regional and
local offices around the world. Money Gram businesses are divided into two categories,

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consisting of Global Funds Transfers and Financial Paper Products. The company
services individuals and businesses through a network of agents and financial institution
customers.

 Samba Financial Group:

Samba is one of the region’s largest and most acclaimed financial services groups with
an unrivalled reputation for world class financial solutions comparable with the best in
the world. Since inception, Samba has been leading the industry in innovation with a
long list of industry firsts, playing a major role in the modern transformation of banking
in Saudi Arabia. Indeed, their world class services, market-leading products and superior
technology have made them one of the most successful financial services brands and the
most internationally acclaimed bank in Saudi Arabia and even the Middle East.

 Xpress Money Services Ltd:

Xpress Money is one of the fastest growing money transfer brands in the world with
thriving presence across 5 continents. Established in 1999 in the United Kingdom, the
brand has grown by leaps and bounds and has spread its geographical presence across
150 countries in over a decade. Working with some of the largest banks and non-banking
financial companies, Xpress Money has been able to establish one of the largest
remittance networks in the industry. Present across 170,000 locations currently, Xpress
Money is focused on rapid expansion to the far corners of the globe.

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Secure, simple and Safe, Xpress Money is not just about international money transfers.
It’s away to make your dreams come true!

 Instant Cash:

Instant cash provides a state of the art electronic Money Transfer System. Developed for
the masses across the globe, Instant Cash charges the competitive fees for remittances
and is backed by the latest technology for reliability. The product is monitored and
serviced by our dedicated customer service professionals to deliver a fast and reliable
service. How to Pick Up a Money Transfer Money can only be received in person, just
visit our branch or an agent.

Present the ICTC Number Instant Cash Transfer Code. Tell sender's name and country
the money was sent from with amount that was sent. Show your identification card to the
agent. Sign the receipt that the Agent gives you. The Agent will give you the money that
was sent to you.

 Ez Remit:

Ez Remit launched in June 2003 is the money transfer product of BFC Exchange
Limited, in the United Kingdom and was established to provide a remittance service to
growing expatriate communities. It offers by the minute money transfer facilities across
the globe. In2009, along with Bahrain Financing Company and Bahrain Exchange
Company Kuwait, BFC Exchange Limited formerly named Ez Remit Limited, came
under the major stakeholder’s of the parent company - Bank Alkhair Formerly known as
Unicorn Investment Bank. Today EzRemit provides remittance services in over 30
countries with more than 40,000 agent locations.

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4.13. Key Obligations for Foreign Remittance Services:
 Identity and verify the customers
 Obtain information on customers requesting electronic fund transfers
 Monitor customer’s transactions
 Maintain proper customer’s records
 Report transactions to the Financial Intelligence Unit
 Implement appropriate internal controls and systems to protect bank from being
used for money laundering and terrorist financing purposes.
 The bank must undertake specific procedures to identify customers with whom
the bank has an on-going business relationship.
 Identification and Verification of a Customer's Signature.
 Identification and Verification of Occasional Transactions.
 Obtain complete information on customers requesting electronic fund transfers
 When dealing with electronic fund transfers, the bank must obtain accurate and
complete information about the customer requesting to transfer funds or the
originator of the transfer.

4.14. Remittance Performance and Process of AIBL:

Our 10 expatriates are a source of pride for Bangladesh. They represent us abroad by
building our image. They also spread the richness of our cultures across the globe. In that
sense, they are the ambassadors of goodwill for Bangladesh. The foreign exchange they
send home is the second largest source of much needed foreign exchange for our
economic development. In fact, if we adjust import costs against export earnings of the
garments sector which brings highest amount of foreign exchange to the national
economy, remittance will figure as the single largest source of foreign exchange for
Bangladesh.

AIBL Bank Limited is continuously striving to build its remittance business by rendering
quality services through a network of reputed banks and exchange houses around the
globe along with an extensive network in the country to deliver money to the
beneficiaries in the safest form and quickest possible time.

4.15. AIBL Bank Remittance report:

Year Remittance (million taka)

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 2016 50,890

2015 38,433

2014 35,447

2013 30,669

2012 20,905

Table: Remittance from 2012 to 2016 (Source: AIBL Bank Limited, 2012)

4.16. Foreign Remittance Earned by Al-Arafah Islami Bank Ltd. Laldighirpar

Branch:
Remittance plays a significant role for any economy. It helps the poverty level in Bangladesh.
It also accounts for about 66 percent of the country’s foreign currency reserves, providing
Bangladesh with a strong and stable external position Bangladesh. Foreign remittance
Amount at AIBL is following, 2014-2017 (Jan-June): In Amount

Year 2014 2015 2016 2017 (Jan-

June)
Amount(in Taka) 214154227 193686201 213996839 128060223
(Source Bank Officer) Table 4.1: Foreign Remittance Amount at AIBL

 Interpretation: From the above table we can clear that AIBL gained highest
remittance from 2014 up to the inflow is 214154227 taka. It is also observed that
due to political crisis on 2015 the rate of remittance was downward. In this time
the amount of remittance was 193686201 taka. It plays a negative sign for our
economy.
4.17 Total income received from Foreign Remittance by Al-Arafah Islami Bank
Ltd.Laldighirpar Branch in 2016.
Month Amount (In Taka)
January 20000
February 35000
March 48000
April 55000
May 75000
June 100000
July 150000
August 110000

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 September 130000
October 113000
November 120000
December 115000

Interpretation The bar chart represents the Total income received from Foreign
Remittanceby.Al-Arafah Islami Bank Ltd. Laldighirpar Branch in 2016. Though it
started form the lowest level in January, it gradually increased until the june,2016. Then
in August it again decreased. Between July and September the foreign Remittance
Received by Al-Arafah Islami Bank Ltd.Laldighirpar Branch dramatically increased.
After July the income received are not consistent.

4.17. Features of AIBL Remittance Services:

 No service charge from beneficiaries in Bangladesh
 Instant Cash Withdrawal facility from any branches of Southeast Bank
 Confidentiality of transactions
 Instant credit to beneficiaries accounts with Southeast Bank;
 Same day cash withdrawal facility from the branches of One Bank, Mutual Trust
Bank,Jamuna Bank, Al-Arafah Islami Bank, BRAC Bank, Bank Asia, Shahjalal
Islami Bank, Mercantile Bank and First Security Islami Bank
 Same day cash payment facility from 600 outlets of reputed NGOs (RDRS,

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 Society for Social Services - SSS and Jagorani Chakra Foundation - JCF)
 Direct communication with both Sender and Receiver for solving queries relating
to cash payment/account deposit (if any)

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