Methods of transfer

Remittances can be in the form of cash or in kind. Remittances in kind also play an important role and are often physically brought in during family visits and especially when migrants return to their home countries. According to a study on the Indian state Kerala, the majority of goods brought back were clothes (56 per cent), followed by gold ornaments and electrical goods (each 17 per cent) (Rajan and Zachariah 2007).

Remittances in cash are transferred through a number of ways. Among them are bank transfers, being hand-carried during home visits or by friends or relatives and the hundi system, in which money is transferred through non-banking sources, such as informal money changers or other businesses operating in the destination countries (Arif 2010, Siddiqui 2004). Officially reported remittances are those made through bank transfers and are, therefore, easy to track. To get the full scope of remittances in a country, data must be obtained on the flows that come in through informal channels and the most common way to obtain this data is through household or other types of surveys.

Surveys have revealed contradicting trends regarding the use of remittance channels. A representative household survey from Bangladesh reports that the majority of remittances (73 per cent) were sent through bank transfers. However, the authors of this survey also consider the plausibility that respondents had under-reported the use of informal channels given the sensitivity surrounding these types of money transfers (IOM 2009). Other surveys on Bangladesh (Siddiqui 2004, Afsar 2009), as well as surveys on Nepal and Pakistan, indicate that the majority of cash remittances are not transmitted through bank transfers. In a 2009 survey conducted on migrants in Pakistan, 60 per cent of the respondents stated that they use the hundi system (Arif 2010) while, according to the Nepal Living Standards Survey 2003–2004, some 78 per cent of remittances were transferred by persons, 2 per cent through hundi and only 6 per cent through banks (Nepal Central Bureau of Statistics 2004). Many migrants prefer to use non-bank transfer methods because they are often cheaper and faster than bank transfers. In addition, migrants as well as remittance-receivers often perceive banking procedures as being complex or explain that it was difficult for them to visit the banks during opening hours.

The majority of remittances to Turkey are transferred through banks due to the large presence of Turkish banks in the main destination country, Germany. Bank transfers between the two countries are quick and economical. Moreover, the Central Bank of Turkey offers incentives to migrant workers by allowing them to hold special foreign currency deposit accounts. Due to the large proportion of remittances sent through banks, Turkish financial institutions have been able to issue large amounts of remittances-backed bonds, which account for a good portion of the global security-backed bond market (European Investment Bank 2006).

Several countries in the subregion have made efforts to further promote remittances through official bank transfers. For example, the State Bank of Pakistan, the Ministry of Overseas Pakistanis and the Ministry of Finance launched a joint initiative in 2009 entitled ‘Pakistan Remittance Initiative’. This initiative aims to facilitate remittances and take “all necessary steps and actions to enhance the flow of remittances”.6

Bangladesh recently launched the Expatriates’ Welfare Bank with the primary objective of facilitating the migration process, bringing the cost of migration down and encouraging that remittances be sent through formal channels. The Bank is tasked with acting as an effective credit facility for migrant workers and providing soft loans to them and financial assistance to return migrants for smooth reintegration.

India also offers special bank accounts for non-resident Indians and persons of Indian origin. Deposits can be held in foreign currency as well as Indian rupees. Non-resident Indians and persons of Indian origin can also secure loans from Indian banks and purchase government bonds and securities.7
The use of official channels to remit funds to South and South-West Asia needs to be promoted further. To encourage using official bank transfers, it is necessary to further facilitate banking procedures and reduce costs as well as improve the financial literacy of migrants and remittance-receiving households. There is also scope for South-South cooperation within the subregion, as other countries could learn from each other’s experiences.


6 See

7 See