BLA optimistic about new financial services

Bhutanese Living Abroad (BLA) welcome RMA and other FIs revamping their products and services

Remittances from Bhutanese Living Abroad (BLA) continue to be a source of foreign reserves. Meanwhile, the Royal Monetary Authority (RMA) of Bhutan along with financial institutions (FIs) in the country recently came up with a set of financial products and services that provide BLA with the scope to secure their savings and deposits, while aiding the government directly in the economic development of the country. The institutions, via various banking platforms, will ensure that the money, be it a single Dollar, is channeled into productive sectors for development, and all the while specifically tailored to the needs of those living abroad.

But how are thousands of Bhutanese currently living abroad taking this? Is the cohort well informed to leverage their earnings on such savings and deposit-related services? Essentially, the economic impacts of remittances on the Bhutanese economy will be determined by a number of factors, including the motivation and financial education of the migrants-how and where the beneficiaries choose to spend it, and the general political and business conditions in Bhutan and the host nation.

A 48-year-old Bhutanese nun who has been living abroad for the past 20 years studying Buddhism and preaching said that she is not aware of anything and the little money she has earned doing dharma works are still lying dormant in her foreign savings account.

“I have had nobody to look after since all my siblings are well-to-do. I was able to concentrate on my studies and the little money I earned, I spent on charity. So I am not sure what the services are but now that I am aware, I will definitely take a look,” she said. “There was no remittance in my case but I suppose the situation should change now looking at the services they provide,” she added.

Remittance, by any means, raises national foreign currency reserves, reduces current account deficit, improves household living standards, provides alternative financing sources and promotes financial inclusion, and stimulates local business and economy.

For Jigme Norbu, a Bhutanese New Yorker who also has been living in the States for the past 20 years said that he has done everything possible to his loved ones back home after financially securing his future.

“I have invested in real estate, human capacity development, community work in my village, and done everything that is possible in my capacity. If the government wants us to channel our money to invest in the long term benefit of our country, then that is the most brilliant idea,” he said. “I was first shrouded with what this whole idea by the financial institutions is but now I am pretty confident I can vouch for every penny on my saved dollars into it, satisfactorily.”

Although no official research has been done, anecdotal experiences conclude that remittances by the majority of the population are used for household consumption like food, utilities, services, and debt, stimulating the local economy. It is also used for the development of human capacity by investing in education and welfare and then comes the final part of savings and investments (mostly in fixed assets).

Overall, the economic impact of remittances, whether immediate or long-term, is determined by how much of it is spent on these three types of spending. High share of remittances spent on non-productive investments will only generate short-term consumption gains, whereas investments in productive sectors and human capital accumulation would generate employment, bolster economic growth, and reduce poverty.

An optimistic Sonam Dorji in Australia said that they do not get the luxury and the time to think about where their money is going to go other than working for it, earning and saving it for future use. “It is good that RMA has come up with such an idea which not only makes our job a whole lot easier, but is also making sure that what we send back home will be channelized into nation building on a large scale.”

Another BLA in Canada said that what she remits is a meager amount; nonetheless, she will be happy to opt for the best services provided by the financial institutions and bank her hard-earned dollars on it.

The Bhutanese Living Abroad Securities Market Direct Trading Facility is one of the initiatives launched by RMA. It will facilitate Bhutanese living abroad by offering to trade on the exchange in real time, shrugging off the need for brokers in Bhutan. To avail of this facility, people are required to open an Investment Account/Foreign Currency Account with the Bank of Bhutan (BoB) or Bhutan National Bank (BNB) Remit Bhutan platform.

An economic analyst said that involving a broker incurs so many expenditures. “There are fees associated with every transaction a client makes on an exchange, from funding your account to trading currencies and withdrawing currencies back into a bank account,” he said. “You are even liable to be taxed for your earnings and dividends.”

As experts have pointed out, it is, however, not all roses. Remittance money often fosters a culture of reliance and dependency and could distort markets, particularly real estate, and may cause inflation to skyrocket. It has social ramifications on demography given that the majority of those left behind are aging parents and young children. Above all, it renders the country’s economy volatile.

Bank officials said that the initiatives are a grand scheme of things and very timely. “It is happening at a time when droves of Bhutanese are either migrating or emigrating to other countries,” an official said, adding that while it is a disheartening event to witness, it also provides the country with a parallel latitude to bank on its advantages as well.

An economist and former minister said that Bhutan is taking the right cue from advanced economies in the region to combat the remittance issue for the greater good and will definitely see a very positive impact in the ever-growing resonance between the banking sector, economy and the population.

“In order for Bhutan and the Bhutanese to capitalize on the potentials of remittances, our country can adopt strategies to channel these funds towards productive investments and initiatives that contribute to a sustained economic development.”

One of the largest remittance recipients in 2022, India, eased the process of repatriation of funds from its diasporas by simplifying processes of opening non-resident Indian (NRI) accounts, offering attractive rates on deposits, preferential exchange rates and fee incentives to encourage the use of formal remittance channels

Likewise, the Government of the Philippines has established a remittance matching program called “Diaspora for Development Initiative” wherein government matches a certain percentage of remittance funds for investment in productive sectors.

Mexico, the second highest recipient of remittances in 2022 amounting to USD 60bn, also implemented a similar scheme called “3×1 for Migrants” to encourage diaspora resources. The Government matches three dollars for every one dollar contributed by migrants to community development projects in their place of origin.

Bangladesh has set up the Expatriate Welfare Bank, which provides financial services tailored to the needs of migrant workers and their families. The Philippines follows a similar trend as well.

Some notable factors and policies that all high remittance recipient countries have in common are enabling financial infrastructure to ease inflows, reduced transaction costs such as incentives, competitive fees and exchange rates, and diaspora engagement to channel remittances into productive sectors.

Tashi Namgyal from Thimphu