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Table of Contents
Chapter 1: Introduction ............................................................................................................................. 3
1.1 Background of the study ..................................................................................................................... 4
1.2 Objectives of the study ........................................................................................................................ 4
1.3 Scope of the study ............................................................................................................................... 5
1.4 Rationale of the study ......................................................................................................................... 5
Chapter 2: Methodology ............................................................................................................................. 6
2.1 Sample design ..................................................................................................................................... 7
2.2 Data collection .................................................................................................................................... 7
2.3 Data analysis ....................................................................................................................................... 7
Chapter 3: Literature review ..................................................................................................................... 9
3.1 Theoretical review ............................................................................................................................ 10
3.2 Empirical review ............................................................................................................................... 15
Chapter 4: Remittance Scenario of Bangladesh ..................................................................................... 18
4.1 Remittance and economic development in Bangladesh .................................................................... 19
4.2 Cost and benefit of overseas employment ........................................................................................ 20
4.3 Remittance management by private commercial banks .................................................................... 20
4.4 Remittance management system ....................................................................................................... 21
4.5 Drawbacks in banks remittance programs ....................................................................................... 22
Chapter 5: Overview of the Studied Organization ................................................................................ 23
5.1 Overview of the conventional commercial banks ............................................................................. 24
5.2 Overview of the Islamic banks .......................................................................................................... 25
Chapter 6: Analysis and Discussion ........................................................................................................ 26
6.1 Number of expatriate Bangladeshis and their remittances ................................................................ 27
6.2 Country wise Remittances ................................................................................................................ 29
6.3 Country wise growth of remittance ................................................................................................... 31


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6.4 Country wise proportion of remittance ............................................................................................. 33
6.5: Remittance as a percent of GDP and Export ................................................................................... 35
6.6 Remittance forecasting ...................................................................................................................... 36
6.7 Total amount of remittance by types of banks .................................................................................. 37
6.8 Average remittance by types of banks .............................................................................................. 38
6.9 Comparative analysis of conventional and Islamic banks remittance (as a % of total remittance
collected by both types of banks ............................................................................................................. 39
6.10 Comparison of growth rate of remittance by Types of Banks (%) ................................................. 40
6.11 Comparison of total numbers of employees by types of banks..................................................... 41
6.12 Comparison of Total Number of Branches by Types of Banks ...................................................... 42
6.13 Comparison of employee productivity of remittance by types of banks ......................................... 43
6.14 Comparison of branch productivity of remittance by types of banks ............................................. 44
Chapter 7: Regression Analysis ............................................................................................................... 45
7.1 Multiple Regression Analysis of Remittance Position of Private Commercial Conventional Bank: 46
7.2 Multiple Regression Analysis of Remittance Position of Islamic Banks.......................................... 51
Chapter 8: Findings and Conclusion ....................................................................................................... 54
8.1 Findings............................................................................................................................................. 55
8.2 Conclusion and Recommendations ................................................................................................... 56
Appendices ................................................................................................................................................. 57
Appendix-A............................................................................................................................................. 57
Appendix-B ......................................................................................................................................... 58




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Chapter 1: Introduction
















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Bangladesh is one of the largest manpower exporting countries in the world and being a major manpower
exporting country Bangladesh earn substantial amount of remittance. Remittances earned have already
been emerged as a prime driving force to the economic growth and poverty alleviation in Bangladesh. It
has obtained second position among the foreign currency earnings sector of Bangladesh. Formally, the
export of manpower from Bangladesh has been started in 1976. In this year around fourteen thousand
people went to the Middle East for searching employment and they sent 5 crore USD remittance to
Bangladesh. After that, the numbers of migrant workers and the amount of remittance have been
increasing gradually. Thus the export of manpower has become one of the most significant foreign
currency earning sectors of Bangladesh. The foreign remittance income is not only increasing foreign
currency reserve but also playing a significant role to reduce poverty and to enhance the economic
development of Bangladesh. It contributes our national economy in a large measure by increasing foreign
exchange reserve, per capita income and employment opportunities. Remittance flows to our country
basically through formal channels and informal channels. And formal channel includes the banking
system which is again broadly categorized as Islamic and Financial banking system. This study is
concerned about the remittance performance of both type of banks in Bangladesh.

1.1 Background of the study

Remittance plays a significant role in the economic development of Bangladesh. Major portion of
remittance flow to our country through banking channel which is basically includes conventional banks
and Islamic banks. The remittance performance is not similar for both types of banking system. Thus
significant differences are found between these two systems in remittance performance. Therefore this
study is concerned with the comparative study of remittance performance by conventional commercial
banks and Islamic commercial banks.
1.2 Objectives of the study

Broad Objective:
The main objective of this study is to compare and contrast remittance performance of conventional banks
and Islamic banks and to identify the reasons behind such performance difference.



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Specific Objectives:
Some other supportive objectives of this report are as follows:
To explore the remittance scenario of Bangladesh.
To inspect various channels that facilitates the inflow of remittance.
To identify the growth rate of remittance by both types of banks.
To show how the amount of remittance is correlated to the number of branches and number of
employees of the selected banks
1.3 Scope of the study

The scope of this study is much broader. This study would help me to identify the basic distinction
between Islamic banking system and conventional banking system in remittance performance. This study
will also help me to identify the factors considered as success point for these two systems.
1.4 Rationale of the study
This study shed light on the remittance performance of Islamic banks and Conventional banks
of Bangladesh. Thus this study would be beneficial for the academicians, students and more
particularly for those who are working in the banking sector. It would help them to find out the
performance of remittances for each type of banking system which in turn would allow them to
identify the lacking in managing the remittance and take some proper steps to attract more
remittance flow through the formal banking channel.
1.5 Limitations of the study
I have tried my best to collect the relevant information and searched different websites to get the right
data. There are some limitations, which act as a barrier to conduct the program and for doing an empirical
research work. The limitations were:
Time is the main obstacle to come up with a good study
All data are not available in websites
In many cases, up to date information was not published



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Chapter 2: Methodology














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2.1 Sample design

My main objective is to compare between the performances of the conventional banks and Islamic banks
in terms of remittance. Thus we have considered the private commercial banks of Bangladesh. For this
act, we have used Intensity Sampling Design as we studied twenty three local private commercial banks
for which the last five to seven years data are available and seven Islamic banks operating in Bangladesh
to analyze Islamic banking system.

2.2 Data collection

In order to conduct the study secondary sources of data has been used. The following sources have been
used for the purpose of gathering and collecting data as required.

Secondary Data
a) Activities of Banks, Insurance and Financial Institutions Ministry of Finance (Peoples Republic
of Bangladesh)
b) Financial statements of scheduled bank
c) Bangladesh Bank Annual Report.
d) Bangladesh Economic Review.
e) Working papers.
f) Official records of Bangladesh Bank
g) Works done by others from the Internet.

2.3 Data analysis

In order to analyze the collected data, we adopted different techniques as follows.
1. Growth rate or percentage change-

Where,
P1= value of this year
P0= value of previous year


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2. Market share or percentage contribution-

3. Average-



4. Employee productivity by types of banks



5. Branch productivity by types of banks-



6. Regression analysis-
Equation- = a + b
1
X
1
+ b
2
X
2
Dependent Variable = Remittance

Independent Variable X
1
= number of employee
Independent Variable X
2
= number of branch
Here, b
1
is the slope of X
1
and b2 is the slope of X
2.
7. Hypothesis testing-
a. Null Hypothesis- Ho:
Number of Employees and Branches has no impact on amount of remittances received by
bank.
b. Alternative Hypothesis-
Number of Employees and Branches has impact on amount of remittances received by
bank.
is the estimator of b1 and is the estimator b2.
c. Confidence level- 5%
Hypotheses will be tested based on the Comparison of F distribution.
8. Graphical presentation- analyzed data will be presented through various types of charts
appropriate to the results, for example; histogram, bar charts, pie charts and cone etc.






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Chapter 3: Literature review












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3.1 Theoretical review

Remittance
Remittance refers to the portion of migrant income that, in the form of either funds or goods, flows back
into the country of origin, primarily to support families back home. The greater share of these largely
monetary flows benefits developing countries.
An International remittance transfer refers to the portion of the earnings that an international migrant
worker earns in the country of employment, and sends back to another individual, often a family member
who remains in the home country. Therefore, they are cross border person to person payments of
relatively low value. The majority of recipients largely depend on remittances to meet day to day living
expenses, emergency needs, housing, education of children, healthcare, investments in small businesses,
repayment of debt etc. Accordingly, remittances play an important role in improving the standard of
living of recipients.

Types of remittance
Foreign remittance means remittance of foreign currencies from one place or persons to another place or
person.
All foreign remittance transactions are grouped into two broad categories-
I. Outward Remittance and
II. Inward Remittance

Outward Remittance:
Outward remittance refers to the sending of remittance to the foreign country. When the employees send
their earning to their home country then this transfer is considered as outward remittance for the country
where they are working.
Inward Remittance:
Inward remittance refers to the inflow of foreign currency in a country sent by the employees working
outside the country.


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Steps in a typical remittance transaction

Any person or institution providing remittance services as a business is known as a remittance service
provider (RSP). The sender, the recipient and the remittance service provider (RSP) constitute the nexus
in a remittance transfer. Generally two RSPs are involved in a remittance transfer.
I. The RSP operating in the sending country is called the capturing RSP,
II. The other RSP in the receiving country is called the disbursing RSP.

Both RSPs work jointly to provide the service, with or without own offices/branches/agents. The RSPs
are networked to send and receive remittances. Each has physical or virtual access points in the
remittance delivery chain.

A typical remittance transaction takes place in three steps.

Stage 1
The sender/remitter pays the remittance to the capturing RSP (Remittance Service Provider) using cash,
cheque, money order, debit card or a debit instruction. The channel of instructions could be sent by e-
mail, phone or through the Internet, providing the essential information to the capturing RSP, enabling it
to forward the same along with the funds to the recipient. The funds transfer relating to a remittance too
involves a messaging arrangement to channel information from the capturing RSP to the disbursing RSP
and a settlement arrangement for the fund movement. These arrangements vary between different types of
remittance services, but will always have common features, i.e., a network and a procedure to interact
with access points to capture and disburse funds, depending on the way the network of access points is
created and linked.

Stage 2
After getting funds from remitters the capturing RSP instruct delivering RSP to deliver fund to the
recipients. This instruction may be given through mail, message, phone or letter.

Stage 3
After getting instruction from capturing RSP, delivering RSP makes payment to the recipients. Here
recipients need to show code or pin given by capturing RSP.



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General Principles governing International Remittance Services

The General Principles for International Remittance Services have been designed with the public policy
objective: Remittance services should be safe and efficient.
In order to achieve this public policy objective, the markets for the remittance services should be
contestable, transparent, accessible and sound. Such market should give remitters and receivers:

clear information about the price and other features of the remittance services (the remittance
industry should be transparent);
easy access to remittance services (the remittance industry should be accessible); and
reasonable protection from operational failures and criminal abuse (the remittance industry
should be sound and safe).

Channel of Remittances
Migrant workers generally transfer their remittances either through formal or informal channels.

Formal channels
Formal channel refers to the official Wage Earners Scheme (WES) and to all recorded foreign exchange
transactions. It includes principally demand drafts, telegraphic transfers and postal orders, channeled
through banks or post offices. Officially, transfer of remittance takes place through demand draft issued
by a bank or an exchange house; travelers checks ;telegraphic transfer; postal order; account to account
transfer; automatic teller machine (ATM) facilities; electronic transfer and in kind.

TT-Telegraphic Transfer
TT is the quickest method of transferring funds from one place to another. The remitting branch
sends a telegraphic/ telephonic/ Fax message to the branch at the other end, to pay a certain sum
of money to a named payee.

DD-Demand Draft
Remittances are frequently sent through demand draft in Taka issued by a bank or an exchange
house in favor of a nominee of migrant. Usually the draft is sent by post or in emergency by


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courier service. The sender in the host country takes out a demand draft from a bank or from an
exchange house and sends it to the receiving party in Bangladesh through regular postal services
or other means. The bank or the exchange houses in the destination country charges a
commission, which varies from bank to bank, for their service. So, the transaction cost of the
sender is the service charge plus the postal expenses

PO-Pay Order
It is process of money transfer from payer to payee within a certain clearing area through banking
channel. Pay Order can be issued in favor of the payee with commissions paid. The Pay Order
can be made either from the account of the issuer or by giving the account to the Bank if the
issuer has no account with Bank
Other Formal channels

There have some other official channel to transfer remittance. Those are as follows:
Account to account transfer.
Electronic transfer.
Automatic teller machine (ATM) facilities.

Informal channels

Informal channels refer to various means and ways of sending remittances in cash or kind into
Bangladesh with no official approval or record. These secret flows do not appear in government statistics
nor do they figure in government policy making.

Transfer in cash:
Available devices in the informal channel are hundi, home bound friends and relatives, personally
hand carried cash without declaration, and in the form of visa/work permit. Hundi is the most
popular method of transfer among the unofficial channels.

Informal transfer can be broadly classified into two types: cash and kind.

Cash/ Traveler's cheques:
Travelers cheques are also used as a means to send remittance. However they will be treated as
official transaction when they are encashed through banks. Migrants or their friends and relatives


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bring foreign exchange without declaring it to the appropriate authority. This can be in the form
of cash or travelers cheques. This foreign exchange can either be sold to black market dealers in
foreign exchange or kept for personal use.

Hundi system:
Hundi/ Money Courier is the most common among the unofficial channels of transfer. The Hundi
operator/agent is, in fact, an illegal foreign exchange dealer.

Steps in Hundi operation




Transfer in kind
(i)Under Baggage Rules, Bangladeshis are allowed to bring about consumer durables, gold,
electronics items, etc. for personal use. Many migrants subsequently sell most of these consumer
goods for Taka, even though this is prohibited
(ii) Gold and consumer durables are transferred to Bangladesh through different Seaports and
Airports.

Compared to formal channels, the informal channels are not only less expensive but also more convenient
and easily accessible. The fact that informal agents can deliver money on short notice with almost no
paper work and minimal commission requirement and can reach remote areas of the country very easily
makes the unofficial channels attractive to migrant workers and their families.

Remitter gives the Hundi
operator in host country
the currency of that
country or any acceptable
currency by the operator.
The agent in home
country is contacted by
Hundy agent in the Host
country
The sub-agent pays the
money to the relative of
the remitter.


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3.2 Empirical review

Determinants of Remittances
A number of factors might determine remittances. Remittances may be motivated by self-interest. For
example, people might send remittances to enhance their social status or keep a connection with parents
in the hope of inheriting their wealth. Remittances could also be viewed as repayments of loans that
financed the cost of migration.
Remittances might also be motivated by altruism or family arrangements. An insurance motive is a good
example: If some family members are located elsewhere, the welfare of the family would be less affected
by economic fluctuations in a given country. When family members in one country are hit by an adverse
shock, family members in another could help them to overcome this hardship.
In this situation migrants would decide how much to send home depending on both their own income and
the income of their family at home. Aggregate remittances would therefore depend on wages in the host
economy, income in the home economy, and the total number of migrants.
Elbadawi and Rocha (1992) examine data for four North African and two European countries and find
that remittances are positively associated with the income level of the host country and the stock of
migrants. Similarly, El-Sakka and McNabb (1999) find in data from Egypt that remittances are positively
associated with host county income.

Remittance and economic development:
The official recorded remittances are much lower than the actual remittances that take place through
official and unofficial channels. Remittances through informal channels could add at least 50 percent to
the globally recorded flows (World Bank, 2006, ibid. 85). In times of economic distress, remittances may
actually be countercyclical to the extent that migrants are motivated by altruism and send more money
home. The stability of these inflows also opens up an opportunity for developing countries to borrow at
lower cost in international capital markets by securitizing future flows of remittances (International
Monetary Fund (IMF), 2007).

Link between remittances and household development
Rapoport and Docquier (2006) show how the household members who are left behind, use migrants
remittances. Remittances are used to repay loans taken to finance migration or education, and insurance
and strategic motives. It also directly contributes to household income, allowing households to purchase
more assets; enables higher investment in business; and facilitate buying more goods, including education
and health inputs.


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Yang (2004), and Woodruff and Zenteno (2001) suggest that, at the household level, remittances can spur
entrepreneurial activity.

Link between remittances and GDP
Studies examining the relationship between remittances and GDP growth show mixed results. Faini
(2002, 2003) finds a positive relationship between growth and remittances using cross-country data.
Similarly, positive relationship between the two is also supported by several studies for Mexican
economy. For example, Adelman and Taylor (1990) find that every dollar Mexican migrants send back
home or bring back with them increases Mexicos GNP from anywhere between $2.69 and $3.17,
depending on which household income group received the remittances. Durand et al(1996) suggest that
for every $2 billion in remittances that entered Mexico, production in the economy increased by over a
$6.5 billion.

Link between remittance, consumption and investment
Developing countries should capitalize the amount of remittance inflows and use it for investment to
promote development and inclusive growth. Empirical evidence in this regard shows that the inflow of
remittances by the migrant workers and professionals from a developing
country helps in increasing the investment activities in the recipient country.
Adams (2005a) examines the impact of remittances on the spending behavior of households for
consumption and investments. The findings show that the households receiving international remittances
spend more at the margin on investment goods, especially, on housing and education, and spend less, at
the margin, on food items.


Link between remittances, poverty and welfare
Adams and Page (2005) used household surveys of 71 developing countries to examine the impact of
international migration on poverty. Controlling for the level of income, income inequality, and
geographical region, they find that international remittances have a strong statistically significant negative
impact on poverty. A 10 per cent increase in the share of remittances in a countrys GDP, lead to a
reduction of 1.6 per cent of people living in poverty.


Link between remittances and foreign exchange


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Remittances constitute important sources of foreign exchange earnings for many households in
developing countries. While remittances cannot be considered as a substitute for FDI and other official
development assistance, it may ease short-run foreign exchange constraints at times other financial flows
decline due to external factors. Ranjan and Subramanyam (2005) find that remittances have constituted an
important stimulus to domestic demand.

Link between remittances and employment
Frank (2001) argues that the families receiving international remittances severely curtail their work
efforts. Similarly, Rodriguez and Tiongson (2001) for Manila and Funkhouser (1992) for Managua
conclude that remittances reduce employment. Tiongson (2001) conclude that, when migration occurs,
non-migrant relatives receive remittances, which they perceive as additional non-labor income. An
increase in non-labor income then reduces their participation in local labor markets.
In contrast to these studies, Cox-Edwards and Rodriguez-Oreggia (2006) find that remittances have no
impact on the labor supply of household members in Mexico. However, at macro level, when the inflow
of remittances is used for the investment, the non-migrated families get benefited by seeking employment.















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Chapter 4: Remittance Scenario of Bangladesh






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4.1 Remittance and economic development in Bangladesh

Since 1976, remittance earnings have been playing a significant role in the economic development of
Bangladesh. The role of inward remittance on the economy has in fact been gradually increasing during
the last two decades. Flow of workers remittances in Bangladesh exhibited a continuously increasing
trend over the last 30 years in both absolute and relative terms. Total remittance to Bangladesh was only
USD 24 million in 1976. Bangladesh was the 10th largest recipient of remittances among the developing
countries considering the average for the period 1990 to 2005 (IFS, October 2007). It ranked 14
th
among
all of the remittance-recipient countries in terms of the amount of remittances received in 2005 (Global
Economic Prospects, GEP 2006, WB). Flow of workers remittances in Bangladesh reached new heights
at the end of fiscal year, FY07 as the remittance-GDP ratio jumped to 9.4 percent from 7.7 percent in
FY06. Average remittances relative to imports and exports increased to 38 and 49 percent respectively
during FY02-FY07 period from 22 and 31 percent respectively in FY97-FY01 period.

A sizeable number of Bangladeshi labor forces are employed in different parts of the world including the
Middle East. A total of 6.91 lakh Bangladeshi workers went abroad for employment during FY 2011-12.
Remittance during 2011-12 is about US$ 12.84 billion which is more than 10.24 percent that of the
average of the last year.

The role of remittances in the economies of labor sending countries such as Bangladesh is assuming
increasing importance. The growth in remittance is likely to remain one of the key factors in
maintaining a healthy level of foreign exchange reserves. The growing contribution of inward remittance
towards maintaining a healthy foreign exchange reserve (FER) has been helping Bangladesh to make up
the deficit between total export and import and maintaining the balance of payment (BOP) situation,
thereby ensuring macroeconomic stability.

The overall economic development of Bangladesh is very much dependent on increasing productive
investment opportunities and reducing poverty. Remittance has helped Bangladesh to make investments
in expanding the manufacturing sector and modernizing its agriculture. These have helped the country to
increase its exports of manufactured goods. Therefore, remittance being used as an important source of
investment has been a key driver of economic development for Bangladesh.





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4.2 Cost and benefit of overseas employment
Worker migration results in a mixture of benefits and costs for Bangladesh.

The costs may include

The loss of the labor supply in which substantial amounts of human capital are invested,


Possible distortions in the age structure of the population, rural depopulation and,


A brain drain to developed countries.

On the other hand benefits are,

A reduction in social tensions caused by unemployment and/or underemployment,


Skill acquisition of returning migrants and,


Most significantly, money transfers from migrants to their families back home.

4.3 Remittance management by private commercial banks

To assist and make it simple for the remitter to remit hard earned money to Bangladesh, both Private
conventional and Islamic banks started providing remittance services through their local & foreign
correspondents. Remittance has become a good source of income for some of the banks with strong
network abroad. They collect remittance through their global partners and disburse them to the customers.
In order to make the remittance transfer process speedy and smooth they build widespread network,
install updated software, and train their employees.

Earlier the Nationalized Commercial Banks (NCBs) were the main official channels to transfer
remittance. The NCBs have some overseas branches in United States, Europe and Middle East. Moreover,
NCBs have agreement with the foreign banks in many countries for smooth transferring of remittance.
But the process of transferring remittance through NCBs is lengthy and takes some days. So, now a day
the private commercial banks (PCBs) have become more aggressive in remittance business providing
quick and reliable services and attracting the Bangladeshi wage earners to send money home through
banking channel. Currently, Islamic Banks have over 120 international correspondents, mostly in the
Middle East, who assist in channeling inward remittances
Features of Banks one-stop remittance delivery services are as follows:
Deliver money without any charges
Assure confidentiality in transactions
On line account credit facilities to those who have accounts with bank
EFT/TT Services


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Assist in opening Wage Earners Accounts
Assist in opening accounts under different types of Savings Schemes
Inward foreign remittance is one of major sources of the foreign currency reserve of the country and in
order to encourage inflow of remittances through banking channel from the Non-resident Bangladeshis,
Private commercial Banks provide quality service for repatriation and collection of remittances with the
help of its foreign correspondents and trained personnel.
4.4 Remittance management system

It is a customized process of Private commercial Banks. This is totally banks own system where foreign
remittance was processed. Basically bank collects the remittance from the exchange houses of different
foreign countries. This exchange house collects money from the customers and then sends information
about the customers to the bank. There are two processes for sending the information to the bank.

I. EFT (Electronic Fund Transfer)
II. SWIFT (Society for worldwide interbank fund telecommunication)
After receiving this data bank process this data with the help of customized software which is prepared
for process this data. This software is called Remittance Management System (RMS) software. Some
high quality, energetic, IT specialist and dynamic young group are engage to ensure the faster and swift
service to the customers.
The exchange house collect information from the customers regarding their -
PON (Payment Order No)
Date
Beneficiary Name
Account Name
Amount
Remitter Name
Beneficiary Branch Name etc.

Typically, the cost consists of expenses on the channel and network involved in transaction processing,
franchise licensing, compliance with regulatory requirements, marketing and administration (staff cost,
security and rental of premises). Remittances are attracted not only by lower prices, but also by safety.
Since banks are regulated, they offer safer methods to send money.


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4.5 Drawbacks in banks remittance programs

First, most programs are available only to customers who have bank accounts. This requirement poses a
barrier for immigrants who are reluctant to open bank accounts for reasons such as unfamiliarity, distrust
of banks, the cost of maintaining an account, or identification restrictions.
Second, banks tend to have limited business hours, a limited presence in immigrant communities, and less
institutional commitment to meet language and cultural needs.
Third, banks have relatively weaker distribution networks in receiving countries and longer processing
times than money transfer operators.



















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Chapter 5: Overview of the Studied Organization











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5.1 Overview of the conventional commercial banks
This section is concerned with the overview of the studied organizations for this report. Here all the local
private commercials bank and Islamic banks are sampled to analyze the issue. The brief knock of the
establishment of the banks and their generation is given below table:
Table 1: Overview of the conventional commercial banks
Serial No. Name of Bank Date of Establishment Generation
1 Pubali Bank Limited 1984 First Generation
2 Uttara Bank Limited 1972 First Generation
3 Arab Bangladesh Bank Limited 1982 First Generation
4 National Bank Limited 1983 First Generation
5 The City Bank Limited 1983 First Generation
6 IFIC Bank Limited 1983 First Generation
7 United Commercial Bank Limited 1983 First Generation
8 Eastern Bank Limited 1992 Second Generation
9 NCC Bank Limited 1993 Second Generation
10 Prime Bank Limited 1995 Second Generation
11 Southeast Bank Limited 1995 Second Generation
12 Dhaka Bank Limited 1995 Second Generation
13 Dutch Bangla Bank Limited 1996 Second Generation
14 Mercantile Bank Limited 1999 Second Generation
15 Standard Bank Limited 1999 Second Generation
16 One Bank Limited 1999 Second Generation
17 Bangladesh Commerce Bank Limited 1999 Second Generation
18 Mutual Trust Bank Limited 1999 Second Generation
19 The Premier Bank Limited 1999 Second Generation
20 Bank Asia Limited 1999 Second Generation
21 Trust Bank Limited 1999 Second Generation
22 Jamuna Bank Limited 2001 Third Generation
23 BRAC Bank Limited 2001 Third Generation


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5.2 Overview of the Islamic banks
The following section shows the overview of seven selected Islamic banks operating in Bangladesh
Table 2: Overview of the Islamic banks
Serial No. Name of Bank Date of
Establishment
Generation
1 Islami Bank Bangladesh Ltd 1983 First Generation
2 ICB Islamic Bank 1987 First Generation
3 Al-arafah Islami Bank Limited 1995 Second Generation
4 Social Islami Bank Limited 1995 Second Generation
5 First Security Islami Bank Limited 1999 Second Generation
6 Exim Bank Limited 2004 Second Generation
7 Shahjalal Islami Bank Limited 2001 Third Generation
















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Chapter 6: Analysis and Discussion



















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The analysis portion of the report starts with the overview of the number of expatriates of Bangladesh
over different period of time. And it also shed light on the amount of remittances over year and from
different countries of the world. Then a broad discussion is conducted on the comparative analysis of
selected conventional private commercial banks and Islamic banks in terms of total remittance earned,
percentage of remittance by both types of banks, growth rate of remittance and the productivity of
remittances.
6.1 Number of expatriate Bangladeshis and their remittances

This table shows the number of expatriate Bangladeshis and their remittances
Table 3: Number of expatriate Bangladeshis and their remittances
Fiscal
Year
Number of yearly
employment aboard
(000)
Amount of remittance
Million US$ Percentage
change (%)
Crore Tk. Percentage
change (%)
2006-2007 564 5978.47 24.5 41298.5 27.96
2007-2008 981 7914.78 32.39 54293.2 31.47
2008-2009 650 9689.16 22.42 66674.9 22.81
2009-2010 427 10987.4 13.4 76011 14.15
2010-2011 439 11650.3 6 82992.9 9.04
2011-2012 691 12843.4 10.24 101883 22.76
2012-2013 409 14461.1 12.6 108006.93 6.01

Source: Bureau of Manpower, Employment & Training and Bangladesh Bank.
* % change over the same point of time previous year




28 | P a g e



As evident from the above table and graph, the number of expatriate was highest in the fiscal year 2007-
2008. But it declined in the subsequent years. Even though the fiscal year 2011-12 lit the candle of hope
with an increase in the number of expatriate in that year but the following year, number of expatriate
declined due to visa closure in some countries in middle east and decline in immigration in Malaysia.


0
200
400
600
800
1000
Number of yearly employment aboard
(000)
Number of yearly
employment aboard (000)
0
2000
4000
6000
8000
10000
12000
14000
16000
Amount of remittance ($)
Amount of remittance


29 | P a g e


The total amount of remittance flow to Bangladesh increased over the years as indicated by the amount of
remittance and supporting graph due to the increase in number of expatriate over the years. The growth
rate of remittance, on the other hand, shows how the growth of remittance flow changed over the years. In
consistency with the high number of expatriate in the FY 2007-08, the growth rate was also high while it
drastically fell in the subsequent years till 2010-11. In the fiscal year 201-12 and in 2012-13 remittance
flow has increasing growth rate.

6.2 Country wise Remittances
It has been observed that most of the expatriates are working in Saudi Arabia, U.A.E, Kuwait, Oman,
Malaysia and Singapore. As a result significant amount of remittance is received from these countries and
the amount is increasing over the years. Number of expatriates in USA has also increased over the years
though declined significantly in the year 2009-10 and the effect is felt of the amount of remittance but in
subsequent years remittance flow regained its former glory in USA. Besides, new employment
opportunities have also been created for Bangladeshi workers in Bahrain, Qatar, Jordan, Lebanon, South
Korea, Brunei, Mauritius, United Kingdom, Ireland and Italy and other countries. Analyzing the data of
manpower export since 2012 to 2013 it reveals that more than 80 percent of total export was in different
countries of Middle East. The table below shows the amount of remittance Bangladesh received from
different countries from FY 2006-07 to 2012-13.






0
5
10
15
20
25
30
35
Percentage change (%)
Percentage change (%)


30 | P a g e

Table 4: Country wise remittances (in million US$)
FY 2006-07 2007-08 2008-09 2009-10 2010-11 2011-2012 2012-2013
KSA 1734.7 2324.23 2859.09 3427.1 3290.03 3684.37 3829.45
UAE 804.84 1135.14 1754.92 1890.3 2002.63 2404.78 2829.40
Qatar 233.17 289.79 343.36 1019.18 319.35 335.25 335.26
Oman 196.47 220.64 290.06 170.14 334.32 400.93 610.11
Bahrain 79.96 138.2 157.45 193.46 185.92 298.47 361.70
Kuwait 680.7 863.73 970.75 587.09 1075.7 1190.13 1186.93
USA 930.33 1380.08 1575.22 349.08 1848.52 1498.45 1859.76
UK 886.9 896.13 789.65 360.91 889.6 987.45 991.59
Malaysia 11.84 92.44 282.2 827.51 703.73 847.49 997.43
Singapore 80.24 130.11 165.13 1451.89 202.32 311.47 498.79
Others 339.32 444.38 501.33 453.86 798.14 884.61 960.71
Total 5978.47 7914.87 9689.16 10730.52 11650.26 12843.4 14461.13
Source: Bureau of Manpower, Employment & Training and Bangladesh Bank.


Middle Eastern countries together constitute the major sources of total remittances for Bangladesh.
Highest amount of remittance is received from Saudi Arabia. Expatriates of United Arab Emirates supply
the second highest amount of remittance. The remittance from the United States comes next to UAE.
0
500
1000
1500
2000
2500
3000
3500
4000
r
e
m
m
i
t
t
a
n
c
e

Countries
Country Wise remmittance
2010-11
2011-2012
2012-2013


31 | P a g e

Country-wise growth of remittances of expatriate Bangladeshi workers over the last few years is shown in
Table 5.

6.3 Country wise growth of remittance

Table 5: Country wise growth of remittance
FY 2007-08 2008-09 2009-10 2010-11 2011-2012 2012-2013
KSA 34% 23% 20% -4% 12% 4%
UAE 41% 55% 8% 6% 20% 18%
Qatar 24% 18% 197% -69% 5% 0%
Oman 12% 31% -41% 96% 20% 52%
Bahrain 73% 14% 23% -4% 61% 21%
Kuwait 27% 12% -40% 83% 11% 0%
USA 48% 14% -78% 430% -19% 24%
UK 1% -12% -54% 146% 11% 0%
Malaysia 681% 205% 193% -15% 20% 18%
Singapore 62% 27% 779% -86% 54% 60%
Others 31% 13% -9% 76% 11% 9%
Total 32% 22% 13% 6% 10% 13%

The above table shows the growth rate of remittance flow from different countries over the years. If we
compare the growth rates in FY 2007-08 with that of FY 2012-13 we can observe some significant
changes. In 2007-08 remittance from Saudi Arabia had 34% growth rate but it amounted to only 4% in
2012-13. This is the direct impact of visa closure for Bangladeshis in KSA and forceful return of many
expatriates from that country. UAE, Qatar, Bahrain and Malaysia also show the same trend. On the other
hand, remittance growth from Oman and Singapore increased over the time.



32 | P a g e



The above graph postulates country wise remittance growth over the last three years. Blue line represents
remittance growth in 2010-11, red line represents remittance growth in 2011-12 and the green line
represents remittance growth in 2012-13. As USA has an extreme value in 2010-11 it is excluded from
this chart to indicate true picture for other countries. The year 2010-11 had significant fluctuation for all
countries in remittance growth. Remittance growth declined in KSA, UAE, Qatar, Bahrain, Malaysia and
Singapore in that year. Except for Kuwait and Oman all the countries of Middle East have showed decline
in that year. Remittance growth has increased in the following year in all countries except from Oman,
Kuwait and UK. In the year 2012-13, remittance growth in Middle East countries declined again except in
Oman and Kuwait. All these results indicate that even though most of the remittance comes from Middle
East, the growth is very unstable. The reasons can be the political unrest and visa and immigration
problem with these countries due to the involvement of Bangladeshi immigrants in criminal activities in
these countries.

-100%
-50%
0%
50%
100%
150%
200%
Country wise growth of remmittance
2010-11
2011-2012
2012-2013


33 | P a g e

6.4 Country wise proportion of remittance

Table 6: Country wise proportion of remittances
FY 2007-08 2008-09 2009-10 2010-11 2011-12 2012-2013
KSA 29% 29% 30% 32% 28% 26%
UAE 13% 14% 18% 18% 17% 20%
Qatar 4% 4% 4% 9% 3% 2%
Oman 3% 3% 3% 2% 3% 4%
Bahrain 1% 2% 2% 2% 2% 3%
Kuwait 11% 11% 10% 5% 9% 8%
USA 16% 17% 16% 3% 16% 13%
UK 15% 11% 8% 3% 8% 7%
Malaysia 0% 1% 3% 8% 6% 7%
Singapore 1% 2% 2% 14% 2% 3%
Others 6% 6% 5% 4% 7% 7%
Total 100% 100% 100% 100% 100% 100%

The above table and the graphs below represent the proportion of remittance received from different
countries. As can be seen from the above table that more than 25% of the total remittance comes from
Saudi Arabia, although it has declined in the last year but it is still above 25%. The second highest
amount of remittance comes from UAE and it has increased over the years. USA holds third position in
supply of remittance to Bangladesh. Proportion of remittance from UK, Kuwait and Qatar have declined
as the number of expatriates to these countries declined over the years.


34 | P a g e






29%
14%
4% 3% 2%
11%
17%
11%
1%
2%
6%
2007-08
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others
29%
18%
4% 3%
2%
10%
16%
8%
3%
2% 5%
2008-09
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others
32%
18%
9%
2%
2%
5%
3%
3%
8%
14%
4%
2009-10
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others
28%
17%
3%
3% 1%
9%
16%
8%
6%
2% 7%
2010-11
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others
29%
19%
3% 3% 2%
9%
12%
8%
6%
2% 7%
2011-12
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others
26%
20%
2% 4% 3%
8%
13%
7%
7%
3%
7%
2012-2013
KSA
UAE
Qatar
Oman
Bahrain
Kuwait
USA
UK
Malaysia
Singapore
Others


35 | P a g e

6.5: Remittance as a percent of GDP and Export

Table 7: Remittances as percent of GDP and Export
Fiscal Year

As Percent of GDP

As percent of Export

2005-2006 6.89 45.62
2006-2007 8.74 49.09
2007-2008 10.02 56.09
2008-2009 10.84 62.25
2009-2010 11.77 63.48
2010-2011 10.43 50.82
2011-2012 11.11 52.92
2012-2013 8.32 60.87
Source: BBS, EPB, Bangladesh Bank.




The table and graph above shows remittances as a percentage of GDP and export. The chart signifies
growing importance of remittance in the economy of Bangladesh. Remittances are the 2
nd
most
contributing factor to our economy. The ratio of remittances to GDP and export earnings also increased
over the years. In FY 2005-06 remittances as percent of GDP and export stood at 7.75 percent and 45.62
percent respectively. In FY 2011-12 remittances as percent of GDP and export were approximately
11.11 percent and 52.92 percent respectively. In FY 2012-2013 the same was 8.32 and 60.87 percent.
8.74
10.02
10.84
11.77
10.43
11.11
8.32
49.09
56.09
62.25
63.48
50.82
52.92
60.87
0
10
20
30
40
50
60
70
Remittance as percentage of GDP and Export
As Percent of GDP
As percent of Export


36 | P a g e

6.6 Remittance forecasting
The future growth of Bangladesh will depend on promoting export, sustaining remittance growth, and
attracting an increased level of foreign direct investment (FDI). But among this three key factors,
remittance growth has been considered as the most important factor for future economic development of
the country.
According to a study conducted by Centre for Policy Dialogue (CPD), the required level of remittance in
FY2020 for a consistent 4.0 per cent, 6.0 per cent or 8.0 per cent annual GDP growth, will be US$8.9
billion, $16.4 billion and $29.9 billion respectively. In other words, remittance in FY2020 will have to be
8.86 per cent, 11.69 per cent or 15.21 per cent of GDP to achieve a consistent GDP growth of 4.0 percent,
6.0 per cent or 8.0 per cent respectively. So, we have to try to further increase the official inflow of
remittance as soon as possible. Increased level of remittances may be obtained through supply of skilled
manpower.

Table 8: Forecasted Remittance
Year Remittance Required (million US$) to
Achieve
Remittance Required (as% of GDP) to
Achieve
4% GDP
Growth
6% GDP
Growth
8% GDP
Growth
4% GDP
Growth
6% GDP
Growth
8% GDP
Growth
2013 5311.58 7759.70 11193.89 7.01 8.31 9.76
2014 5711.55 8636.54 12880.81 7.25 8.73 10.40
2015 6141.63 9612.47 14828.95 7.50 9.16 11.08
2016 6604.09 10698.68 12055.62 7.75 9.62 11.81
2017 7101.38 11907.63 19625.90 8.02 10.10 12.58
2018 7636.11 13253.19 22583.52 8.29 10.61 13.40
2019 8211.11 14750.83 25986.86 8.57 11.14 14.28
2020 8829.41 16417.64 29903.08 8.86 11.69 15.21
Source: Study conducted by Centre for Policy Dialogue (CPD)







37 | P a g e

6.7 Total amount of remittance by types of banks

Table 9: Total Amount of Remittance by Types of Banks
Year 2007 2008 2009 2010 2011 2012 2013
Private Commercial
Conventional Banks
220675 306098 358007 379164 471339 526629 589963
Islamic Banks 75552 156563 218208 230868 259093 346320 388386
Total 296227 462661 576215 610032 730432 872949 978349
Source: Activities of Banks, Insurance and Financial Institutions Ministry of Finance (2006-2012).


This graph shows the total amount of remittance collected by Private conventional banks and Islamic
banks. We can infer from the graph that conventional bank collected higher amount of remittance as
compared to Islamic banks but this doesnt necessarily mean that Islamic banks collects less remittance
than conventional banks because the data of conventional banks is the sum total of 23 banks while the
same for Islamic bank is only the sum total of 7 banks.



0
100000
200000
300000
400000
500000
600000
2007 2008 2009 2010 2011 2012 2013
R
e
m
i
t
t
a
n
c
e

year
Remittance by type of banks
Conventional
Banks
Islamic Banks


38 | P a g e

6.8 Average remittance by types of banks

Table 10: Average remittance by types of banks
Year 2007 2008 2009 2010 2011 2012 2013
Conventional
Banks
9594.57 13308.61 15565.52 16485.39 20493 22896.91 25650.57
Islamic
Banks
10793.14 22366.14 31172.57 32981.14 37013.29 49474.29 55483.71
Total 20387.71 35674.75 46738.09 49466.53 57506.29 72371.2 81134.28


As the total amount of remittances of 23 conventational bank and 7 Islamic banks dont provide a rational
data for comparing performance in remittance flow of the two bank, the above table and chart incorporate
average remittances by each type of bank. This data is free of number of sample bias. We can say from
this table and graph that on an average Islamic banks collected significantly higher remittances than
Islamic banks. The difference between remittance receipt between the two types of bank also increased
over time.Islamic banks collected more remittances over the years than the conventional bank.



0
10000
20000
30000
40000
50000
60000
2007 2008 2009 2010 2011 2012 2013
R
e
m
i
t
t
a
n
c
e

year
Average Remittance by types of Bank
Conventional
Banks
Islamic Banks


39 | P a g e

6.9 Comparative analysis of conventional and Islamic banks remittance (as a
% of total remittance collected by both types of banks

Table 11: Remittance by both types of banks as a % of total remittance
Year 2007 2008 2009 2010 2011 2012 2013
Conventional Banks 74% 66% 62% 62% 65% 60% 60%
Islamic Banks 26% 34% 38% 38% 35% 40% 40%
Total 100% 100% 100% 100% 100% 100% 100%



The above chart shows the proportion of remittances received by each type of bank over the years. We
can see from the table and graph that in the financial year 2005-06 Private Commercial Conventional
Banks collected 74% of the total remittance collected by both types of banks in that year while Islamic
banks received only 25%. In FY 2012 Islamic Banks received 40% of the total remittance of that year
while conventional bank received 60%. FY 2012-13 shows the same trend as previous year. Even though
Conventional banks still receives higher amount of remittances but the share have decreased over the
years while the share of Islamic banks increased over the years. This is why; the trend line of
conventional bank is downward sloping while that of Islamic bank is upward sloping. It also shows that
the gap between the two types of bank also decreased over the years.
74%
66%
62% 62%
65%
60% 60%
26%
34%
38% 38%
35%
40% 40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2007 2008 2009 2010 2011 2012 2013
Percentage of remittance by both types of
bank
Conventional
Banks
Islamic Banks


40 | P a g e

6.10 Comparison of growth rate of remittance by Types of Banks (%)

Table 12:Growth Rate of Remittance by Types of Banks
Year 2007 2008 2009 2010 2011 2012 2013
Conventional Banks 22% 39% 17% 6% 24% 12% 12%
Islamic Banks 24% 107% 39% 6% 12% 34% 12%


The above graph indicates the growth rate of remittance both Private conventional banks and Islamic
banks. The growth rate of both bank had ups and downs over the years. Both the banks remittances
declined from 2088-10 while increased in the subsequent two years. In the last FY the growth rate of
remittances of conventional bank remained unchanged while that of Islamic banks declined.
Although the growth rate of remittance in both types of bank shows similar pattern, except for the FY
2011, Islamic banks had higher growth rate of than conventional banks. In FY 2010 and in 2013 the
growth rate of remittances in both types of bank was equal.



22%
39%
17%
6%
24%
12%
12%
24%
107%
39%
6%
12%
34%
12%
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013
Growth rate of remittance by types of
bank
Conventional
Banks
Islamic Banks


41 | P a g e

6.11 Comparison of total numbers of employees by types of banks

Table 13: Total Number of Employees by Types of Banks
Year 2009 2010 2011 2012 2013
Conventional Banks 42715 49094 53800 59102 59706
Islamic Banks 15965 17747 20251 22491 24594
Total 58680 66841 74051 81593 84310

Source: Activities of Banks, Insurance and Financial Institutions Ministry of Finance (2006-2013).

This graph shows the number of employee of both Private Commercial Conventional and Islamic Banks
during the financial year 2009-2013. Employee is an important factor as they come to direct contact of
client and thus make customer satisfied. Both of the banking systems show increasing trend in this case.
So we can say both of the banking systems are contributing in our economy by creating employment. The
number of employees of conventional bank is almost twice that of Islamic banks. We cannot compare the
two types of bank on the basis of the given values as the number of conventional bank and Islamic bank
are not equal in this study.


0
10000
20000
30000
40000
50000
60000
2009 2010 2011 2012 2013
year
No. of Employees by types of Bank
Conventional
Banks
Islamic Banks


42 | P a g e

6.12 Comparison of Total Number of Branches by Types of Banks

Table 13: Total Number of Branches by Types of Banks
Year 2009 2010 2011 2012 2013
Conventional Banks 1868 2122 2272 2475 2608
Islamic Banks 502 600 682 751 812
Total 2370 2722 2954 3226 3420

Source: Activities of Banks, Insurance and Financial Institutions Ministry of Finance (2006-2012).


Above graph indicates the number of branch of both Private Commercial Conventional and Islamic
banks. The table and the graph suggest that the increase in number of branches of bank is higher in
conventional bank than in Islamic banks. On an average each conventional bank had 143 branches while
each Islamic bank had 72 in the year 2009. In the year 2013 each conventional bank had 200 branches and
Islamic banks had 116 on average.
Variables r
2
F-test Value P-value of F-test
0
500
1000
1500
2000
2500
3000
2009 2010 2011 2012 2013
year
No. of Branches by types of Banks
Conventional
Banks
Islamic Banks


43 | P a g e

Remittance Vs Employee, Branch 97% 63.661 .001



6.13 Comparison of employee productivity of remittance by types of banks

Table 15: Employee Productivity by types of banks
Year 2009 2010 2011 2012 2013
Conventional Banks 8.38 7.72 8.76 8.91 9.88
Islamic Banks 13.67 13.01 12.79 15.40 15.79



This graph illustrates employee remittance productivity of both types of banks. It measures amount of
remittance collected by employees. Both types of banks had increasing trend in terms of employee
remittance productivity, but Islamic Banks employees were more productive in generating remittances
than that of Private conventional banks which implies that employees of such kind of banks contributing
more in case of collecting more remittance efficiently.
0.00
5.00
10.00
15.00
20.00
2009 2010 2011 2012 2013
P
e
r

e
m
p
l
o
y
e
e

r
e
m
i
t
t
a
n
c
e

year
Employee productivity by types of
Bank
Conventional
Banks
Islamic Banks


44 | P a g e






6.14 Comparison of branch productivity of remittance by types of banks

Year 2009 2010 2011 2012 2013
Conventional Banks 191.65 178.68 207.46 212.78 226.21
Islamic Banks 434.68 384.78 379.90 461.15 478.31


The data and the graph above shows the productivity of branches for both Private Commercial
Conventional and Islamic Banks. It measures amount of remittance collected by branch. In case of
productivity of branches both of the banking systems are showing increasing trend, which is a good sign.
From the bar chart we can see that Islamic banks are in better position than conventional banks. Islamic
banks experienced more branch productivity than that of Private conventional banks which implies that
Islamic Banks are collecting more remittance through their branches compared to Private Commercial
0.00
100.00
200.00
300.00
400.00
500.00
2009 2010 2011 2012 2013
p
e
r

b
r
a
n
c
h

p
r
o
d
u
c
t
i
v
i
t
y

year
Branch productivity by types of Bank
Conventional
Banks
Islamic Banks


45 | P a g e

Conventional Banks. In all of the last five years, branch productivity of Islamic banks is twice more than
conventional banks.












Chapter 7: Regression Analysis







46 | P a g e






7.1 Multiple Regression Analysis of Remittance Position of Private
Commercial Conventional Bank:

Variables Regression Equation r
2
F-test
Value
P-value
Of F-
test
Remittance
Vs
Employee,
Branch
Remittance = -193637.234 - 4.49 *Employee +
390.198*Branch
95% 19.665 .048

R (coefficient of correlation):
It is the coefficient of correlation. It shows the positive or negative correlation between remittance and
number of employee and number of branch. Here the value of R is .976 which indicates that the
independent variables (employee and branch) are strongly positively correlated with the dependent
variable (remittance).
R
2 (
coefficient of determination):
It is the coefficient of determination. R
2
indicates the degree or extent of explicability of the change in
dependent variables by the independent variables. Here the value of R
2
is .95 meaning that 95 % changes
in the dependent variable can be explained or attributable to the changes of the independent variables.
And the least part (1 - .95) = 0.05 is changed by other factors which are not considered. But it cant show
the practical and logical change of the dependent variable happened by the independent variables.
Adjusted R
2
:
It is the actual coefficient of determination. If we add an independent variable then the R changes and
Adjusted R
2
shows logically how much value change is possible and thats why the value of Adjusted R
2
is always less than the value of R
2
. From our accepted date the value of Adjusted R
2
is .903. This value
which is close to the value of R
2
indicates goodness of fit of the model.


47 | P a g e

Standard Error of Estimate:
It shows how much error or variability stands between the predicted result and actual observed result.
Here the value is 30429.16 which show the amount of variability of our predicted result and the actual
result acquired from the real observation.



ANOVA
ANOVA
a

Model Sum of Squares df Mean Square F Sig.
1 Regression 3.641 2 1.82 19.665 .048
b

Residual 1.852 2 9.26

Total 5.493 4

a. Dependent Variable: Remittance
b. Predictors: (Constant), Branch, employees

Regression Sum of Squares (SSR):
How much error are 3.641 reduces by using regression rather than mean is shown by SSR. The value
comes showing the extent to which we are able to minimize the error through using the multiple
regression tools.
Error Sum of Squares (SSE):
Here the Residual is SSE. It is shown how much error is not possible to remove by using regression
because of some independent factors, which is not considered. The value comes 1.852 showing the extent
to which error is remaining after the regression and can be minimized with the increment of the dependent
variable.
Total Sum of Squares (SST):
The sum of SSR and SSE together forms the SST. In this observation the value is 5.493 that come after
adding the SSR and SSE.
Degrees of Freedom (df):
Here, the value 2 is degrees of freedom for the numerator and the value 3 is degrees of freedom for the
denominator.
F Distribution:


48 | P a g e

F Distribution shows whether our taken model is rejected and accepted as a whole or on an average, but
not individually. So it is showing whether there is any relation between dependent variable and
independent variables as a whole.

I nterpretation of F value:
Our Null Hypothesis (Ho: Beta1 = Beta2 = 0) is that the (branch and employee) are not related to
Remittance. It means if we give any value to X1 and X2 then the value of remittance became constant.
The Remittance is not dependent on number of employee and number of branch .So Alternative
Hypothesis (Not Equal to Zero) is that the employee and branch are related to Remittance. It means if we
give any value to X1 and X2 then the value of remittance became changed. The Remittance is dependent
on number of employee and number of branch.

Table Value:
At a 5% significance level, for 2 numerator degrees of freedom which is regression and for 3 denominator
degrees of freedom which is residual, the table value is 9.55.

Acceptance Criterion and Rejection Criterion
If the calculated value of F is less than the table value of F then the null hypothesis is accepted
subsequently the alternative hypothesis is rejected.

If the calculated value of F is greater than the table value of F then the null hypothesis is rejected
subsequently the alternative hypothesis is accepted.

As calculated value of F is 19.665, which is greater than the table value of F 9.55, so our Null hypothesis
is rejected and alternative hypothesis is accepted. Hence the conclusion comes that the number of branch
and employee are related to Remittance.
Multiple Regressions:

= a + b
1
X
1
+ b
2
X
2
= -193637.234 - 4.49 *Employee + 390.198*Branch
In this multiple regression equation, we have demonstrated the relationship between Remittance with
number of branch and number of employee.



49 | P a g e

Dependent Variable = Remittance

Independent Variable X
1
= number of employee
Independent Variable X
2
= number of branch
Here, b
1
is the slope of X
1
and b2 is the slope of X
2.
If the number of branch and number of employee is
zero then,
= -193637.234
The value has no economic explanation as remittance cannot be negative if bank has no employees or
branches.
Now, the value of b
1
or the slope of X
1
is -4.49 it means if the number of employees increase by 1person
then the remittance of the Bank decreases by 4.49 million taka assuming all other variables is constant. It
indicates the inefficiency of the banks employees and any addition of employees will reduce banks
remittance earning.

Next, the value of b
2
or the slope of X
2
is 390.198. It means if the number of branches increase by 1 unit
then the remittance of the Bank increases for 390.198 million taka assuming all other things is remaining
same.

Coefficients
a

Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -193637.234 168528.048

-1.149 .369
employees -4.489 6.690 -.219 -.671 .571
Branch 390.198 109.643 1.163 3.559 .071
a. Dependent Variable: Remittance

The betas of the independent variables represent the degree of the influence of the independent variables
on the dependent variables. From the coefficient table, the following facts were pointed out,
Employee = -.219
Branch = 1.163
Here, beta for branches is higher than the beta of employees. So, branches exerts more influence on
Remittance.




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51 | P a g e

7.2 Multiple Regression Analysis of Remittance Position of Islamic Banks

Variables Regression Equation r
2
F-test
value
P-value
Of F-test
Remittance
Vs
Employee,
Branch
Remittance = -166926.77 + 54.86*Employee
-975.84*Branch.
97.2% 34.95 .028

R
Here the value of R is .986 that indicates that the independent variables (branch and employee).are
strongly positively related with the dependent variable (Remittance).
R
2
:
Here the value of R
2
comes .972 meaning that 97.2 % changes in the dependent variable are happening
for the changes of the independent variables. And the least part (1 - .972) = 0.028 is changed by other
factors which are not considered. But it cant show the practical and logical change of the dependent
variable happened by the independent variables.

Adjusted R
2
:
In this regression the Adjusted R
2
is .944. It shows actually how much dependent variable (remittance) is
changed for the changing of independent variables (branch and employee).

Standard Error of Estimate:
It shows how much error or variability stands between the predicted result and actual observed result.
Here the value is 17670.38 that show the amount of variability of our predicted result and the actual result
acquired from the real observation.



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ANOVA:

ANOVA
a

Model Sum of
Squares
df Mean
Square
F Sig.
1 Regressio
n
2.182 2 1.091 34.946 .028
b

Residual 6.244 2 3.122

Total 8.488 4

a. Dependent Variable: Remittance
b. Predictors: (Constant), branch, Employees

Regression Sum of Squares (SSR):
The value of SSR is 2.182 showing the extent to which we are able to minimize the error through using
the multiple regression tools.

Error Sum of Squares (SSE):
The value SSE 6.244 showing the extent to which error is remaining after the regression and can be
minimized with the increment of the dependent variable.

Total Sum of Squares (SST):
In this observation the value is 8.488 that come after adding the SSR and SSE.

Degrees of Freedom (df):
Here, the value 2 is degrees of freedom for the numerator and the value 3 is degrees of freedom for the
denominator.

Table Value:
At a 5% significance level, for 2 numerator degrees of freedom which is regression and for 3 denominator
degrees of freedom which is residual, the table value is 9.55.

As our calculated value of F is 34.946, which is greater than the table value of F 9.55, so our Null
hypothesis is rejected and alternative hypothesis is accepted. Hence the conclusion comes that the number
of branch and employee are related to Remittance.


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Multiple Regressions:
= a + b
1
X
1
+ b
2
X
2
= -166926.77 + 54.86*Employee - 975.84*Branch.
In this multiple regression equation, we have demonstrated the relationship between Remittance with
number of branch and number of employee.

Here, b
1
is the slope of X
1;
b
2
is the slope of X
2.
If the number of employee and branch is zero then,
a = = -166926.77
The above value has no economic interpretation.
Now, the value of b
1
or the slope of X
1
is 54.86 it means if the number of employee increases by 1 person
then the remittance of the Bank increases for TK. 54.86 assuming all other variables is constant.
Next, the value of b
2
or the slope of X
2
is - 975.84. It means if the number of branch increases by 1 unit
then the Remittance of the Bank decreases for TK 975.84 assuming all other things is remaining same.
Therefore, Islami banks branches are performing inefficiently in terms of remittance.


Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -166926.766 56140.013

-2.973 .097
Employees 54.862 20.928 2.550 2.621 .120
branch -975.849 595.112 -1.595 -1.640 .243
a. Dependent Variable: Remittance

The betas of the independent variables represent the degree of the influence of the independent variables
on the dependent variables. From the coefficient table, the following facts were pointed out,
Employee = 2.550
Branch = -1.595
Here, beta for employee is higher than the beta of other independent variable. So, employee exerts more
influence on Remittance.





54 | P a g e










Chapter 8: Findings and Conclusion













55 | P a g e

8.1 Findings

The major findings of the study are as follows:
Countries of Middle East are the major sources of remittances. Around 80% of the remittances
come from Middle East countries, where more than 25% remittance comes from KSA.
Though KSA and UAE are in the top position in year 2012 but the growth rate of Bahrain and
Singapore are very higher than that of UAE and KSA. The growth rate of Bahrain and Singapore
are 61% and 54% respectively whereas those of KSA and UAE are 12% and 20%. In the year
2013 remittance growth in all countries declined except for USA, Oman and Singapore.
There is no basic difference in remittance management by conventional banking system and
Islamic banking system. As the dealings in remittances dont defy any Shariah rules.
Both types of banks gets commission for the transferring of fund which may vary from bank to
bank based on quality of performance but not for the compliance with Islamic Shariah
Both branch productivity and employee productivity of Islami banks are higher than that of
conventional bank.
Per employee productivity of Islami banks are 6 million more than conventional banks while the
branch productivity of Islami banks is almost double than that of conventional banks and the gap
between productivity is increasing in each year forward.
From regression analysis we found that employee and branch are strongly positively related with
Remittance in conventional banks. Strong relationship between employees, branch and remittance
is also found in Islamic banks. But according to the regression coefficient, increasing branch
brings more remittance for conventional bank. On the other hand, increased number of employees
brings more remittances.
Proportion of remittances received by Islami banks is increasing while that of conventional bank
is decreasing over the years.
Though the main motive of this study is to identify the distinction of remittance performance by
the conventional banks and Islamic banks but there is no operational difference. But from
quantitative analysis it is found that the Islamic banks perform better than conventional banks.



56 | P a g e

8.2 Conclusion and Recommendations
Remittance earnings have been playing a significant role in the economic development of Bangladesh
through increasing the foreign reserves which is 21283.5 till August, 2014. In the fiscal year 2012-13
remittances were 94.4 % of the total foreign currency reserve. Remittances generally reduce the level and
severity of poverty and lead to higher human capital accumulation, greater health and education
expenditures; better access to information and communication technologies; improved access to formal
financial sector services; enhanced small business investment; more entrepreneurship; better preparedness
for adverse shocks such as droughts, earthquakes, and cyclones. It has been observed that most of the
expatriates are working in Saudi Arabia, U.A.E, USA, Kuwait, Oman, Malaysia and Singapore. Besides,
new employment opportunities have also been created for Bangladeshi workers in Bahrain, Qatar, Jordan,
Lebanon, South Korea, Brunei, Mauritius, United Kingdom, Ireland and Italy and other countries. Total
Amount of Remittance injected in Bangladesh in 2013 was 9,78,349 million taka in which the injection of
remittance through Private Commercial Conventional Banks was 5,89,963 million taka and through
Islamic Banks was 3,88,386 million taka. The average inflow of remittance through Private Commercial
Conventional Banks is less than that of Islamic Banks because most of the workers tend to migrant to
Middle East. Private conventional Banks collected more remittance compared to Islamic banks so it can
be said that private conventional banks are more capable to attract customers. However, currently, Islamic
Banks have over 120 international correspondents, mostly in the Middle East, who assist in channeling
inward remittances. So in near future Islamic banks have wide range of opportunity to enlarge their
remittance market. According to our conducted analysis, proportion of remittances received by
conventional bank is decreasing over the years while the same is increasing in Islamic banks. Banks have
to overcome a number of challenges to develop banking based remittance services. Though both types of
banks are experiencing higher trends in remittance growth, they should provide much competitive
services than other channels. Private Commercial Banks should build a widespread network especially in
Middle East to deliver remittance in a convenient way. Both the private conventional banks and Islamic
banks should make the remittance transfer more transparent regarding cost, service charges and safety.
Private Commercial Banks and Islamic Banks have to adhere to regulations to limit money laundering
and terrorist financing to make sure that the remittance channels are not abused by criminals or terrorists.




57 | P a g e

Appendices
Appendix-A

References
1) Committee of Payment and Settlement Systems, The World Bank, 2007 General
Principles for International Remittance Services.
2) INAFI Asia International Conference on Migration and Development.
3) Working Paper Series: WP1202, Behavior of Remittance Inflows and its
Determinants in Bangladesh.
4) International remittances and financial inclusion: Role of Banks by Rose
Siriwardhane.
5) Barua, S., Majumder, M. and Akhtaruzzaman, M. (2007) Determinants of Workers
Remittances in Bangladesh: An Empirical Study Working Paper No. WP 0713,
Policy Analysis Unit, Bangladesh Bank.
6) Bangladesh Economic Review -2007-13.
7) Activities of Banks, Insurance and Financial Institutions Ministry of Finance
(Peoples Republic of Bangladesh); [2005-2013].
8) http://www.bangladesh-bank.org/econdata/wagermidtl.php



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Appendix-B
Data set
Remittances of Private commercial banks
Conventional Bank 2013 2012 2011 2010 2009 2008
Uttara Bank 47237.2 43585.6 49844.7 43200.7 44635.3 36073.2
AB Bank 237 255 250 210 198 186
National Bank 69467 67513 59469.4 49145.3 44381.5 39877.8
City Bank 37970 34800 30936 24496 17933 9828
IFIC Bank 15,774 14,305 12,724 13455 13145 12277
UCB Bank 81956.4 76848.3 68534.3 54522.1 4914 4466
Estern Bank 44635.3 36073.2 33546.6 21635.3 17823.2 16647
NCC Bank 16856 14861 13854 12502 13392 12098
Prime Bank 32628 39890 36890 28433 26447 22699
Southeast bank 38620 37990 36860 28436 23456 17543
Dhaka Bank 21461 15,840 13,201 11,097 9,786 7,867
Mercantile bank 9215.4 8305.8 9308.1 5108.1 5061.3 4722.9
Standard bank 3496 4676 3815 1044 697 830
One Bank 3437 2865 2491 1031 769 308
Mutual Trust Bank 18447.4 16642.3 14832.43 8956.32 6400.42 5888.87
Premier Bank 4872.4 4607.7 4745.12 2669.5 2223..10 2164.27
Bank Asia 21443.6 27561.2 24441.71 18441.71 15555.1 11648.3
Trust Bank 16443.3 15642.3 13832.43 8756.32 6000.42 5788.87
Jamuna Bank 3787.09 3647.07 3360.03 1594.11 2657.64 3165
DBBL 42856.5 41945.3 45813.2 27116.6 30400.3 36968.2
Pubali Bank Ltd 40658.98 38746.3 30690.8 23057.15 26892.3 32968.2
BCBL 527 525 367 253 223 208
Brac Bank 17936.3 16863.6 13920.6 11867.4 9786.4 10889.1
Total 589962.87 563988.7 523727.4 397027.6 320553.9 295111.7
Remittances of Islamic commercial banks
Islamic Bank 2013 2012 2011 2010 2009 2008
Islami Bank Bangladesh Ltd 369018 300915 236607 214629 194716 140404
Social Islamic Bank 6740 6822.1 5134.9 1099.4 1923.5 2341.1
Shajalal Islamic Bank 2583 5421 5340 6156 10473 9498
Al-Arafa Bank 7042.5 23120.4 6876.2 4431.9 2832.28 2672.04
First Security Islamic Bank 712.78 585.84 558.75 843.47 1011.8 4731.6
EXIM Bank 2289.48 3112.12 3001.78 3036.42 2452.33 1428.46
Total 388385.76 339976.5 257518.6 230196.2 213408.9 161075.2



59 | P a g e


Number of employees of Private commercial banks
Selected Banks 2009 2010 2011 2012 2013
AB Bank Lltd. 1952 2008 2096 2,070 2179
Bank Asia Ltd. 1031 1237 1390 1485 1,600
BRAC Bank Ltd. 5907 7151 6619 7403 6624
DBBL 1785 2794 4015 5268 4666
Dhaka Bank Ltd. 924 1109 1240 1455 1450
Eastern Bank Ltd. 878 973 1214 1343 1498
IFIC Bank Ltd. 2193 2315 2383 2,422 2,574
Jamuna Bank Ltd. 1215 1511 1786 2006 2206
Mercantile Bank Ltd. 1303 1526 1668 1981 1,814
Mutual Trust Bank Ltd. 841 1050 1269 1,317 1,378
National Bank 2960 3442 3758 4126 3919
NCC Bank 1496 1622 1944 1,811 2,192
One Bank Ltd. 1039 1247 1472 1608 1810
Prime Bank Ltd. 1844 2139 2292 2544 2710
Southeast Bank Ltd. 1254 1373 1526 1655 1704
Standard Bank Ltd. 821 1018 1049 1270 1320
Trust Bank Ltd. 1041 1026 1209 1265 1290
The City Bank Ltd. 2424 2685 2772 2,765 2,647
Pubali Bank 5115 5903 6219 6689 7362
Premier Bank 893 965 1117 1259 1283
Uttara Bank 3291 3262 3780 3986 4045
UCB Bank` 2508 2738 2982 3374 3445
Total 42715 49094 53800 59102 59716

Number of employees of Islamic banks
Selected Banks 2009 2010 2011 2012 2013
Al-Arafah Islami Bank Ltd. 965 1086 1842 2110 2387
First Security Islami Bank Ltd. 995 1189 1535 2090 2367
Islami Bank Bangladesh Ltd. 9588 10350 11465 12188 12,980
ICB Islamic Bank 713 679 686 688 656
Social Islami Bank Ltd. 965 1086 1375 1625 1802
Shahjalal Islami Bank Ltd. 1299 1671 1624 1,881 2,173
Exim Bank Ltd 1440 1686 1724 1909 2229
Total 15965 17747 20251 22491 24594




60 | P a g e

Number of Branches of Private commercial banks
Selected Banks 2009 2010 2011 2012 2013
AB Bank Lltd. 78 82 86 87 89
Bank Asia Ltd. 41 49 63 73 86
BRAC Bank Ltd. 70 79 81 86 88
DBBL 79 96 111 126 136
Dhaka Bank Ltd. 50 56 61 71 74
Eastern Bank Ltd. 39 49 59 67 71
IFIC Bank Ltd. 82 95 99 106 112
Jamuna Bank Ltd. 54 66 73 83 91
Mercantile Bank Ltd. 53 65 75 86 91
Mutual Trust Bank Ltd. 44 67 76 86 92
National Bank 131 145 154 165 171
NCC Bank 65 79 87 93 101
One Bank Ltd. 39 50 39 64 70
Prime Bank Ltd. 84 94 102 113 117
Southeast Bank Ltd. 56 76 84 94 103
Standard Bank Ltd. 41 58 68 70 74
Trust Bank Ltd. 42 59 69 72 82
The City Bank Ltd. 87 88 89 90 92
Pubali Bank 386 399 406 419 423
Premier Bank 38 52 64 79 86
Uttara Bank 211 211 211 215 220
UCB Bank` 98 107 115 130 139
Total 1868 2122 2272 2475 2608

Number of Branches of Private commercial banks
Selected Banks 2009 2010 2011 2012 2013
Al-Arafah Islami Bank Ltd. 42 64 88 100 110
First Security Islami Bank Ltd. 52 66 84 100 117
Islami Bank Bangladesh Ltd. 231 251 266 276 286
ICB Islamic Bank 32 33 33 33 33
Social Islami Bank Ltd. 42 64 76 86 94
Shahjalal Islami Bank Ltd. 51 63 73 84 92
Exim Bank Ltd 52 59 62 72 80
Total 502 600 682 751 812