While the World Bank has identified Bangladesh as one of only three big economies that had increases in remittance inflows in 2020, along with Pakistan and Mexico (Ratha et al. 2020), and remittances have long made up a substantial share of people’s income in the country, preliminary results from a recent study supported by the Asian Development Bank Institute (ADBI) finds surprising resilience for remittance inflows into the rural economy during the first wave of the coronavirus disease (COVID-19) pandemic in Bangladesh.
In collaboration with Socioconsult, a well-known survey company in Dhaka, we conducted a study throughout 2020 to develop a more panoramic view of what is happening in rural areas that might offer insights into how to achieve a quick recovery for Bangladesh’s economy, a goal shared by the Asian Development Bank (ADB), other multilateral development partners, and the Government of Bangladesh.
Our study is based on a three-round survey (June 2020, September 2020, and January 2021) of the most widely used Mahabub Hossain Panel Data (MHPD)1 samples of more than 2,200 households. The households are nationally representative rural samples that were obtained through multistage random sampling and used to capture the short-to-medium-term impacts of the first wave of the COVID-19 pandemic. Repeating the surveys for the same samples every 3–4 months throughout 2020 allows us to observe the changes in the rural economy, offering evidence of the quick recovery of consumption and the economic conditions of rural households and their associated factors. The first-round survey targeted all 2,846 respondents of the survey in 2014 and used detailed contacts provided by the households at the time. In the following rounds, the survey only targeted those who had given complete answers in the previous round.
Our first-round data, conducted in June 2020, document several adverse impacts from the containment measures, such as delayed harvests during the dominant rice (Boro) season in 2020, difficulty in selling farm produce, labor and material input disruptions and cost increases, and reductions in remittance receipts and non-farm business sales (Malek, Troung, and Sonobe 2021). We also find that rural households had to reduce their food consumption and receive food support from the government and cash support from the private sector during the first 3 months of the pandemic. However, when we combine the data from all three rounds, our results reveal a more positive picture for rural areas, suggesting quick recovery among farm and non-farm businesses, remittance income, food consumption, and overall economic conditions, especially in the third round (Malek, Troung, and Sonobe 2021).
Such a quick recovery in the rural economy is not surprising because Bangladesh is still agrarian and heavily dependent on the agricultural sector, with employment and livelihood shares of approximately 50% and 70%, respectively. Media reports suggest that many displaced workers from urban sectors and students who stopped their studies due to the COVID-19 lockdown measures needed to stay in their rural houses and contributed to both rural farm and non-farm production. The country’s central bank monthly remittance data show that inward remittances hit bottom in March–May 2020 but quickly recovered in June and peaked in July with the flows reaching a record value of around $2.6 billion. Consistent with the macro remittance data, we find a considerable share of sample households receiving remittances from their absentee members working overseas or within Bangladesh. The share of overseas remittance recipients quickly recovered from around 6% during March–May 2020 to over 11% in September–December 2020. The same trend is observed for domestic remittances as well, with the domestic economy undergoing a quick recovery in 2020. Around 30% of households reported receiving money or food support from the government, NGOs, or friends or neighbors, etc., mostly received in the first-round period after the lockdown measures were imposed across the country.
Together with the descriptive evidence, our regression analysis suggests a significant positive relationship between the remittance inflow variables and food consumption expenses, consumption experiences, and changes in economic conditions. Deeper analysis also indicates a possibly more optimistic picture of food consumption equity in contrast with the widening food gap warned by scholars and international organizations, and such evidence appears to be more profound among remittance recipient households compared to their non-recipient counterparts. We find possible evidence of rapid conversion between different quantile groups for real food distribution. In March–May 2020, the real food consumption spending of the top consumers was more than 4 times higher than the bottom consumers, but the bottom group quickly caught up, and the gap dropped to under 2 times in September–December 2020.2
Although our study does not claim a causal relationship between remittance inflows and rural recovery, it may help to reinforce the claim made by the Asian Development Bank (2021) on the crucial role of remittances for domestic demand and consumption amid the pandemic, which fueled the collapse of other foreign currency sources, foreign direct investment, and exports, in many low- and middle-income developing economies.
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1 In the Bangladesh context, the MHPD samples are a unique dataset created and maintained by the late Mahabub Hossain (1945–2016), one of the most-respected agricultural economists in the region. The MHPD has been tracking the rural households of the country over a time span of about 3 decades (1988–2014) through five different rounds (1988, 2000, 2004, 2008, and 2014) and has already been used for around 70 academic studies and in formulating numerous policies for a number of government, nongovernmental (e.g., BRAC), and international development organizations (e.g., the World Bank) (Malek 2021).
2 The results are analyzed in the context of the first wave of COVID-19 pandemic, which prevailed from March 2020 to April 2021 and when the pandemic was mainly an urban phenomenon in Bangladesh. Since April 2021, COVID-19 (especially the Delta variant) has been spreading further to rural areas, and remittance inflows also appear to be decreasing. The findings may change if we revisit the analysis in the future using more recent data.
References:
Asian Development Bank. 2021. Asian Development Outlook 2021: Financing a Green and Inclusive Recovery. Manila: Asian Development Bank.
Malek M. A. 2021. “Background Report on Mahabub Hossain Panel Data in Bangladesh, First Draft. Challenges and Opportunities of Population Aging in Asia: Improving Data and Analysis for Healthy and Productive Aging (ADB TA-6556 REG)”. Presented and submitted to the Asian Development Bank, May 2021.
Malek M. A., H. T. Truong, and T. Sonobe. 2021. Changes in the Rural Economy in Bangladesh under COVID-19 Lockdown Measures: Evidence from a Phone Survey of Mahbub Hossain Sample Households. ADBI Working Paper 1235. Tokyo: ADBI.
Ratha, D., S. De, E. J. Kim, S Plaza, G. Seshan, and N. D. Yameogo. 2020. Migration and Development Brief 33: Phase II: COVID-19 Crisis through a Migration Lens. Washington, DC: KNOMAD-World Bank.
I have gone through your study summary and as an associate professor of Economics and education planner my observation almost same to your findings. It’s no doubt that remittance inflow increase recently due to government incentives when it flows in authorized financial channel. Short term income flow in rural Bangladesh generate circular flow of income and create investment opportunity too.