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Correspondent Banking: A Crucial Strategy to Boost Remittances and Forex Reserves in Bangladesh

Correspondent Banking

Against the backdrop of a shrinking foreign exchange reserve exacerbated by the persistent challenges posed by the Russia-Ukraine war, Bangladesh stands at a crucial juncture in its economic landscape. The nation’s reserves, ostensibly robust enough to cover four months’ worth of imports, now confront an escalating strain due to a series of relentless declines. This economic quandary has thrust Bangladesh into a scenario where proactive measures are indispensable to navigate the intricate web of financial challenges.

The ongoing Russia-Ukraine conflict, with its far-reaching global implications, has cast a shadow on Bangladesh’s economic stability. As the nation grapples with the intricate ramifications of this geopolitical turmoil, a comprehensive examination of the factors contributing to the depletion of foreign exchange reserves is imperative. It is within this context that the intricate interplay between the reserves, remittance flow, and the broader dynamics of international trade assumes paramount importance. 

In this intricate web of economic challenges, the role of remittance emerges as a critical linchpin in Bangladesh’s economic machinery. Remittances, serving as a lifeline for many households, not only contribute significantly to the national economy but also play a pivotal role in bridging the ever-widening gap between imports and exports. As the remittance flow faces its own set of challenges, including disruptions caused by global events and shifts in migration patterns, addressing these issues becomes imperative to safeguard the stability of the country’s foreign exchange reserves.

This introduction sets the stage for a nuanced exploration of the multifaceted challenges confronting Bangladesh’s economic landscape, emphasizing the interconnectedness of global events and local economic dynamics. Against this intricate backdrop, the subsequent analysis will delve into the specific factors influencing the remittance flow and propose strategic measures to fortify Bangladesh’s economic resilience in the face of these challenges.

The Remittance Challenge:

In the intricate tapestry of Bangladesh’s economic landscape, the reliance on remittances from its expatriate community stands out as a pivotal factor in sustaining the delicate equilibrium of foreign exchange reserves. As the nation grapples with a persistent trade deficit, the inflow of remittances assumes heightened significance in offsetting this imbalance. However, a looming concern casts a shadow on this vital economic lifeline – the diversion of a substantial portion of remittances away from official banking channels.

The pivotal role of remittances in bolstering Bangladesh’s foreign exchange reserves cannot be overstated. These financial inflows serve as a critical counterbalance to the trade deficit, injecting much-needed liquidity into the national economy. Yet, the growing trend of remittances circumventing official banking channels has emerged as a cause for serious apprehension. When these monetary flows take detours through non-banking channels, it not only raises regulatory concerns but also amplifies the pressure on the country’s already strained reserves.

The diversion of remittances to non-banking channels introduces a layer of complexity to the economic equation, as it undermines the transparency and accountability inherent in the formal financial system. Informal channels often lack the regulatory oversight that characterizes official banking transactions, making it challenging for authorities to monitor and manage these financial flows effectively. This opacity not only poses risks in terms of financial integrity but also exacerbates the strain on foreign exchange reserves, potentially leading to an unbalanced economic scenario.

In addressing the remittance challenge, it becomes imperative for Bangladesh to implement measures that encourage and facilitate the flow of remittances through official banking channels. This entails not only enhancing the attractiveness of formal channels but also addressing the underlying factors that contribute to the diversion of remittances. By fostering an environment conducive to transparent and accountable financial transactions, Bangladesh can not only mitigate the pressures on its reserves but also fortify the resilience of its economic framework in the face of evolving global dynamics. The subsequent sections will delve into specific strategies and policy recommendations aimed at navigating this intricate landscape and ensuring the sustainable flow of remittances through official channels.

Bangladesh Bank’s Initiatives:

In cognizance of the critical role that remittances play in sustaining the country’s foreign exchange reserves, Bangladesh Bank has demonstrated a proactive commitment to addressing the challenges associated with their flow through legal channels. Recognizing the multifaceted nature of the issue, the central bank has implemented a series of strategic initiatives aimed at incentivizing and streamlining remittance transactions.

Primarily, the central bank has undertaken measures to boost the appeal of legal remittance channels. This involves the introduction of incentives and favorable exchange rates for remittances sent through official and legitimate channels. By enhancing the financial attractiveness of legal transactions, Bangladesh Bank aims to steer a greater proportion of remittances away from informal channels, thereby fortifying the transparency and accountability of these crucial financial flows.

Furthermore, Bangladesh Bank has actively sought to modernize and diversify the avenues through which remittances can be transferred. Efforts in this regard include facilitating remittance transfers through exchange houses and digital banks. By expanding the options available to expatriates for sending funds back to Bangladesh, the central bank aims to provide convenient and secure alternatives that align with the evolving preferences of the global financial landscape.

A noteworthy stride in this direction is the recent launch of the Sonali Exchange app. This digital platform represents a cutting-edge initiative designed to streamline the remittance process. The app not only offers a user-friendly interface but also incorporates features that enhance efficiency and security in remittance transactions. The launch of such technology-driven solutions aligns with the broader vision of Bangladesh Bank to harness digital advancements in ensuring the seamless and expeditious flow of remittances.

These initiatives collectively underscore Bangladesh Bank’s commitment to proactively address the challenges associated with remittance flows. By combining financial incentives, technological innovation, and strategic partnerships with exchange houses, the central bank endeavors to create an environment where the formal channels for remittances are not only more appealing but also more accessible. The subsequent sections will delve into the impact of these initiatives and explore avenues for further enhancements in the country’s quest to fortify its economic resilience through a robust remittance framework.

Sonali Exchange App and its Potential Impact:

Launched under the auspices of the Governor of Bangladesh Bank, the Sonali Exchange app represents a transformative leap in the landscape of remittance transactions, specifically catering to the corridor between the United States and Bangladesh. This digital platform has been strategically designed to streamline and simplify the intricate process of sending remittances, marking a significant milestone in the ongoing efforts to bolster the country’s foreign exchange reserves. 

One of the distinguishing features of the Sonali Exchange app is its inclusive approach, allowing residents of several states in the United States to send foreign currency to Bangladesh without incurring any costs. This fee-free initiative not only enhances the attractiveness of the legal channels for remittance but also serves as a tangible incentive for expatriates to opt for the formal and regulated means of transferring funds back to their home country. By alleviating the financial burden typically associated with remittance transactions, the app seeks to encourage a more significant proportion of the expatriate population to engage in legal and transparent financial transactions.

The potential impact of the Sonali Exchange app is met with enthusiastic anticipation, as it is poised to bring about a paradigm shift in the dynamics of remittance flows. With the elimination of transaction costs, it is expected that the app will serve as a catalyst in increasing the volume of remittances from the United States to Bangladesh. This surge in remittance inflows holds the promise of contributing substantially to the augmentation of the country’s foreign exchange reserves, thereby reinforcing its economic stability in the face of global uncertainties.

Beyond the immediate financial implications, the app also symbolizes Bangladesh Bank’s commitment to embracing technological innovation to address economic challenges. By leveraging digital solutions, the central bank aims not only to enhance the efficiency and security of remittance transactions but also to align with the evolving preferences of a tech-savvy global diaspora.

In conclusion, the Sonali Exchange app emerges as a beacon of progress in the realm of remittances, offering a seamless and cost-effective channel for expatriates to contribute to the economic well-being of their homeland. As this digital initiative takes root, its potential impact is poised to extend far beyond individual transactions, ushering in a new era of financial connectivity and resilience for Bangladesh. The subsequent sections will delve into the multifaceted aspects of this impact, exploring potential challenges and avenues for further optimization.

Challenges and Considerations:

However, the success of the Sonali Exchange app in boosting remittances depends on various factors. Notably, the app’s effectiveness may be limited if it requires users to open accounts with Sonali Exchange, which is not operated as a traditional bank branch. Many expatriates prefer keeping accounts with local banks due to the direct deposit of earnings and the use of local bank-issued debit and credit cards.

Moreover, the accessibility of the Sonali Exchange app to a broader expatriate population should be considered. If the app is not widely available or if account opening processes are cumbersome, it may not attract a substantial user base.

Compliance Standards and Regulatory Challenges:

Furthermore, compliance standards in the US financial sector are rigorous, and transactions, especially cross-border remittances, are subject to strict regulations. The app’s success hinges on its ability to comply with these stringent standards, ensuring transparency and legality in all transactions. Any deviation from these standards could lead to severe consequences, as seen in the closure of the US branch of Habib Bank due to compliance weaknesses.

The transparency and security of transactions must be guaranteed to gain the trust of users and adhere to international financial standards. Additionally, ensuring that the app complies with evolving regulatory frameworks is crucial for its long-term sustainability.

The Middle East and Remittances:

In the quest to bolster remittance flows and stabilize foreign exchange reserves, Bangladesh must strategically leverage its ties with the Middle East, a region that plays a pivotal role in the country’s economic landscape. Expatriate Bangladeshis working in the Middle East contribute significantly to the nation’s remittance pool, and establishing robust correspondent banking relationships in the region is essential for sustaining economic stability.

Bangladeshi workers form a substantial part of the labor force in the Middle East, particularly in countries like Saudi Arabia, the United Arab Emirates, and Qatar. Remittances sent by these expatriates serve as a lifeline for their families back home and contribute significantly to Bangladesh’s foreign exchange reserves.

Importance of Correspondent Banking:

Correspondent banking acts as the financial bridge that connects the banking systems of different countries. For Bangladesh, fostering strong correspondent banking relationships with institutions in the Middle East is crucial for facilitating seamless and secure remittance transactions. These relationships enable the smooth transfer of funds, minimizing delays and ensuring that remittances reach their intended recipients promptly.

Ensuring Legitimate Channels:

One of the primary challenges in the remittance landscape is the diversion of funds through non-banking channels. Establishing and maintaining correspondent banking ties with Middle Eastern financial institutions can help channel remittances through official and regulated pathways. This not only ensures the legitimacy of transactions but also provides a transparent trail, aiding in compliance with international financial regulations.

Benefits of Middle East Correspondent Banks:

1. Quick and Efficient Transactions:

 Correspondent banks in the Middle East can facilitate swift and efficient remittance transactions, reducing the time it takes for funds to reach beneficiaries in Bangladesh.

2. Exchange Rate Stability: 

Collaborating with Middle East correspondent banks allows Bangladesh to negotiate favorable exchange rates, potentially increasing the value of remittances received.

3. Enhanced Security and Compliance:

 Reputable correspondent banks adhere to stringent security and compliance standards. This ensures that remittance transactions comply with international regulations, mitigating the risk of financial irregularities.

Technology Integration and Financial Inclusion:

In the era of digital banking, technology integration becomes paramount. Collaborating with Middle East correspondent banks that embrace technological advancements can enhance the efficiency of remittance processes. Mobile apps, online platforms, and digital channels can be leveraged to provide convenience to expatriates and their families, promoting financial inclusion.

Challenges and Solutions:

Challenges in correspondent banking relationships may include regulatory differences, currency exchange complexities, and the need for effective risk management. Establishing a continuous dialogue and collaboration between regulatory bodies in Bangladesh and the Middle East is crucial to overcoming these challenges. Standardizing procedures and embracing fintech solutions can streamline processes, making correspondent banking more resilient.

Bangladesh’s Strategic Collaboration with Saudi Arabia’s Major Banks :

In the dynamic landscape of global remittances, Bangladesh stands at a critical juncture, emphasizing the significance of forging robust partnerships with major financial institutions in Saudi Arabia. Among these institutions, Al Rajhi Banking and Investment Corporation, Bank Al-Bilad-Enjaz Remittance Centers, Arab National Bank, and NCB Quick Pay are pivotal players shaping the remittance corridor between the Middle East and Bangladesh.

The Remittance Landscape in Saudi Arabia:

Saudi Arabia hosts a substantial number of Bangladeshi expatriates, with many working in diverse sectors. The remittances sent by these workers back to Bangladesh are a crucial component of the country’s foreign exchange reserves. The collaboration with key Saudi banks is instrumental in ensuring the seamless flow of these remittances.

1. Al Rajhi Banking and Investment Corporation:

As one of the largest Islamic banks globally, Al Rajhi Banking and Investment Corporation holds immense importance in the remittance ecosystem. With its widespread network and commitment to Islamic banking principles, Al Rajhi facilitates secure and efficient remittance transactions. Collaborating with Al Rajhi opens doors to a vast pool of expatriates, streamlining the movement of funds from Saudi Arabia to Bangladesh.

2. Bank Al-Bilad-Enjaz Remittance Centers:

Bank Al-Bilad, through its Enjaz Remittance Centers, plays a pivotal role in providing remittance services. These centers serve as key touchpoints for expatriates to send funds to their families in Bangladesh. By establishing correspondent banking relationships with Bank Al-Bilad, Bangladesh ensures a channel that is not only reliable but also aligned with international compliance standards.

3. Arab National Bank:

Arab National Bank’s contribution to the remittance landscape is substantial. By leveraging its extensive network and financial expertise, the bank facilitates secure cross-border transactions. Collaborating with Arab National Bank allows Bangladesh to tap into a diverse expatriate base, fostering a steady and regulated flow of remittances.

4. NCB Quick Pay:

NCB Quick Pay stands out as a quick and convenient remittance platform. Its user-friendly interface and efficiency make it a popular choice among expatriates. Integrating with NCB Quick Pay enables Bangladesh to capitalize on technological advancements in remittance services, offering expatriates a seamless and rapid means to send funds to their home country.

Benefits of Collaboration:

1. Efficiency and Timeliness: 

Partnering with these major banks ensures the efficiency and timeliness of remittance transactions, reducing the time it takes for funds to reach beneficiaries in Bangladesh.

2. Enhanced Financial Inclusion: 

Utilizing the technological capabilities of platforms like NCB Quick Pay facilitates financial inclusion, making remittance services more accessible to a broader population.

3. Stability in Exchange Rates: 

Collaborating with reputable banks allows Bangladesh to negotiate favorable exchange rates, contributing to the stability of remittance values.

4. Transparent and Compliant Transactions: 

Major banks in Saudi Arabia adhere to stringent regulatory and compliance standards. This ensures the transparency and legitimacy of remittance transactions, reducing the risk of financial irregularities.

Addressing Challenges:

Engaging in collaboration with major Saudi banks undoubtedly presents a plethora of advantages for enhancing economic ties and facilitating financial transactions between nations. However, it is imperative to acknowledge and strategically navigate the challenges that accompany such partnerships. Notably, regulatory differences, currency exchange complexities, and risk management emerge as key hurdles that demand prudent consideration and proactive measures.

Regulatory disparities between Bangladesh and Saudi Arabia can pose intricate challenges to the seamless operation of collaborative initiatives. Divergent financial regulations, reporting standards, and compliance requirements necessitate a nuanced approach to ensure that the collaborative efforts align with the legal frameworks of both nations. Establishing a framework for harmonized regulations or fostering bilateral agreements can significantly alleviate these concerns, providing a structured foundation for collaborative financial endeavors.

Currency exchange complexities constitute another intricate facet of cross-border collaborations. The variations in currency values, exchange rates, and transaction fees demand meticulous attention to prevent financial discrepancies and optimize the cost-effectiveness of transactions. Employing advanced financial technologies, such as automated currency conversion systems, and fostering partnerships with reputable financial institutions can contribute to streamlining currency exchange processes.

Risk management emerges as a paramount consideration in the realm of international financial collaborations. The inherent volatility of financial markets, geopolitical uncertainties, and macroeconomic dynamics can expose collaborative ventures to various risks. Implementing robust risk assessment frameworks, conducting regular audits, and incorporating risk mitigation strategies are indispensable components of a comprehensive risk management approach. Furthermore, fostering transparency and open communication between collaborating entities can facilitate the swift identification and mitigation of potential risks.

To overcome these challenges, regular communication and cooperation between the regulatory bodies of both countries are fundamental. Establishing channels for continuous dialogue ensures that regulatory frameworks remain aligned, addressing evolving challenges and fostering an environment conducive to cross-border financial collaborations. Bilateral discussions between regulatory bodies can lead to the development of standardized procedures, facilitating smoother operations and minimizing regulatory hurdles.

While collaboration with major Saudi banks holds immense promise for economic growth, addressing challenges is an inherent part of this dynamic process. By proactively navigating regulatory disparities, streamlining currency exchange processes, and implementing robust risk management strategies, Bangladesh can maximize the benefits of such collaborations. The commitment to open communication and cooperation between regulatory bodies emerges as a linchpin in overcoming challenges, paving the way for a resilient and mutually beneficial partnership between the two nations.


In emphasizing correspondent banking and legal remittance channels, Bangladesh Bank demonstrates a commitment to stabilizing the country’s foreign exchange reserves. The Sonali Exchange app, while a commendable initiative, faces challenges related to user accessibility, compliance with international financial regulations, and establishing trust among users. As the nation awaits the formation of a new government, the focus on strengthening correspondent banking relationships and promoting legal remittance channels remains crucial for Bangladesh’s economic resilience in the face of global uncertainties. Continuous monitoring, adaptability, and collaboration between financial institutions and regulatory bodies will be key to the success of such initiatives in the long run.

The significance of Middle East correspondent banks for Bangladesh in the realm of remittances cannot be overstated. Strengthening these banking relationships not only ensures a consistent and legitimate flow of funds but also contributes to the overall economic stability of Bangladesh. As the nation navigates through global economic uncertainties, nurturing and expanding these ties should be a central focus for policymakers, financial institutions, and regulatory bodies alike. By harnessing the potential of correspondent banking in the Middle East, Bangladesh can fortify its economic foundations and pave the way for sustained growth.



Billal Hossain
Billal Hossain
Billal Hossain, a seasoned professional with a Master's degree in Mathematics, has built a rich and varied career as a banker, economist, and anti-money laundering expert. His journey in the financial sector has seen him in leading roles, notably in AL-Rajhi Banking Inc. in the Kingdom of Saudi Arabia and as Foreign Relations and Correspondent Maintenance Officer of Bank-AL-Bilad. Beyond the confines of traditional finance, Billal has emerged as a prominent writer and commentator, contributing thought-provoking columns and theses to various newspapers and online portals. His expertise spans a wide range of important global issues, including the complexities of economics, political dynamics, the plight of migrant workers, remittances, reserves, and other interrelated aspects. Billal brings a unique analytical perspective to his writing, combining academic rigor with practical insights gained from his banking career. His articles not only demonstrate a deep understanding of complex issues but also provide readers with informed perspectives, bridging the gap between theory and real-world application. Billal Hossain's contributions stand as a testament to his commitment to unraveling the complexities of our interconnected world, providing valuable insights that contribute to a broader and more nuanced understanding of the global economic landscape.


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