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Role of Remittance to reduce poverty in Bangladesh

Remittances make a powerful contribution to reducing poverty and vulnerability in most households and communities. The words of Adams are supportive to this view:
When the ‘poorest of the poor’ households receive international remittance, their income status changes dramatically and this in turn has a large effect on any poverty measure.[1]
To assess the impact of remittances on poverty reduction, it is necessary to examine whether remittances affect multidimensional aspects of household poverty.
Because, reducing poverty involves more than raising cash income and consumption levels; poverty reduction also includes building the capacity to accumulate assets that reduce vulnerability to financial shocks, and gaining access to entitlements such as education and health care that contribute to secure and sustainable livelihoods. In this backdrop, remittances have a positive impact because remittances help to empower recipients and enhance their ability to participate in social and economic institutions. Nevertheless, remittances alone are unlikely to lift people permanently out of poverty, but the interaction of remittances with other economic, social and cultural factors have the power to do so. We can understand the impacts of remittances on poverty at different levels from the following table:
Key Impacts of Remittances on Poverty at Different Levels.[2]  


Poverty-Reducing Impacts

§  Income and consumption smoothing
§  Increased savings and asset accumulation(liquid and non-liquid assets);collateral for loans; liquidity in times of crisis
§  Improved access to health services and better nutrition(potential for improved productivity)
§  Access to better education for longer, reducing child labor
§  Increased social capital and ability to participate in social groups and activities, saving clubs, money rounds, reciprocal labor pools
§  Improved access to information
§  Improved local physical infrastructure
§  Growth of local commodity markets
§  Development of local capital markets, availability of new services: banking, retail and trade, travel, construction.
§  Development of new development institutions
§   Changes to cultural practices, especially attitudes    toward girl children
§  Generation of local employment opportunities
§  Reduction of inequality between households,     particularly for poor households
§   Improved foreign currency inflows, in some countries up to 9 percent of GDP
§   Employment creation as remittances are invested in the productive sectors
§  Increased human capital as migrants learn new skills and work practices
§  Reduction in inequality among countries as remittances exceed official aid transfers in some regions

From the above stated discussion, it can be mentioned that remittances help to reduce poverty in a number of ways:[3]
First, remittances form an important part of household livelihood strategies. Remittances contribute directly to raising household incomes, while broadening the opportunities to increase incomes; and

Second, at the community level, remittances generate multiplier effects in the local economy, creating jobs and spurring new economic and social infrastructure and services, particularly where effective structures and institutions have been established to pool and direct remittances. Where these have been set up and encouraged, and where the state is supportive, remittances can make a difference, particularly in remote rural locations where state resources have not been effective.

[1] Richard H. Adams,Jr.’Remittances and Poverty in Ghana’,World Bank Policy Research Working Paper no.3838(Washington,DC:The World Bank,Feb2006),p.ii
[2] Dilip Ratha and Samuel Munzele Maimbo,op.cit.pp.95-96
[3] Ibid,p.99