What Happened With the 4% Freelancer Remittance Incentive In Bangladesh?
Tanvirul Islam
Foreign remittances are a major contributor to Bangladesh’s economy, and capitalizing on this by offering a remittance incentive is a practical and impactful approach. The government of Bangladesh did something similar when it implemented a remittance incentive policy to boost remittances into the country. They announced a 2% remittance incentive exclusive to wage earners in July 2019 and boosted it to 2.5% later, in January 2022.
Similarly, the Bangladeshi government announced a 4% incentive for freelancers - who contribute about a billion dollars annually to the remittance pipeline in Bangladesh. The announcement was hailed as a game-changer. But for many, that promise feels like a mirage. The announcement was never fulfilled, and the promise was left hanging. Things don’t add up—and no one’s explaining why.
Foreign remittance has been a major contributor to Bangladesh’s economy for a long time. It has been responsible for over 35% of export earnings until 2019. In July 2019, the government announced a remittance incentive of 2% to promote legal ways to send money home and encourage more people to practice it. This worked like a charm; in fiscal year 2020-2021, incoming remittances increased by over 6 billion USD and reached a record high. The incentive was further increased to 2.5% on the 1st of January 2022, and expatriates have been sending money home legally since then.
This remittance incentive targeted at wage earners is easy to receive. Simply transfer your international funds to your local account, and you'll receive an extra 2.5%.
The eligibility requirements for this incentive are:
The remittance must come from abroad through an official banking channel or mobile financial services.
There is no maximum limit for remittance transactions to qualify for the incentive.
No documentation is required for amounts up to $5,000
For remittances exceeding $5,000, recipients may need to submit proof of the source of income (e.g., employment contracts or work-related documents).
The recipient must be a Bangladeshi citizen with a local bank account or a wallet registered with an MFS.
Upon receiving the remittance, the bank or MFS provider processes the incentive automatically and sends it to the recipient's account.
Introduction of 4% Remittance Incentive
Things took a unique turn when, in 2022, an incentive of 4% targeted explicitly towards freelancers was announced. This should have been great for remittance inflow, but somehow, the idea was shelved without any clear announcement, leaving confusion.
Since then, there has been constant confusion about who announced the 4% incentive, what the motive was, who received it, and many other unanswered questions.
It was announced that freelancers providing their IT services on 55 selected platforms or marketplaces will be eligible for a 4% incentive on up to $5000 of their earnings. The incentive was limited to 55 platforms.
What Could Have Changed With this Incentive?
Had this incentive been implemented, it could have changed Bangladesh’s position in the global economy and put the country on the map as one of the top three freelancing nations next to India and the Philippines. Here are some of the positive changes that could have come into effect:
Increased Remittance Through Official Channels
With this incentive, the government would have seen a significant increase in remittances coming into the country. Consequently, there would have also been a decrease in using unofficial channels like Hundi to send money home.
The country’s foreign exchange reserves would have also strengthened and helped stabilize the economy.
Formalization of Freelance Earnings
More accurate reporting of freelance earnings with this incentive would have helped with data maintenance, GDP calculation, and growth driven by the digital economy. This would also help put more freelancers in the formal banking system, improving records and raising financial inclusion.
Enhanced Freelance Sector Growth
This incentive would have seen increased youth interest in freelancing, and the industry would have seen major growth, leading to more remittance in the country. As a growing industry, the interest of global clients in Bangladeshi freelancers would also have increased and led to more success for this sector.
Greater Policy Attention on Freelancers
With more active freelancers and their substantial presence as economic contributors, the government could configure policies tailored to their needs. Getting a credit card for a freelancer is a hassle if they manage to get one. The government could launch credit cards, loans, and insurance policies that are more inclusive and allow all freelancers to participate actively.
The Complicated Process of Availing The Incentive
When the 4% incentive was announced, the masses assumed it was similar to the 2.5% incentive. However, that was not the case, and it was dealt with through poor messaging and announcements.
The 4% incentive had much more restrictive elements, leaving a smaller chunk eligible. It was not clear that payments should be withdrawn directly from one of the 55 selected platforms to a local bank. Using any third-party apps like Elevate Pay, Wise, etc. makes you ineligible for the incentive.
However, no one ever received the incentive after completing the transactions directly from any listed platforms. Slowly, people started realizing that it was never implemented or mentioned again after initial announcements.
The criteria set for this incentive were complicated compared to the 2.5% incentive for wage earners. It was highly likely that your bank would ask for documentation, including proof of income and any other proof, to verify all the details needed. These verifications may include:
Using one of the 55 marketplaces
Proving your services are ITES-related
Your transfer did not use any third-party app
Documentation and verification with banks seldom end smoothly, so taking advantage of this incentive was going to be challenging. Moreover, this incentive never included remote workers who worked foreign jobs; it was only for freelancers.
All of this leads to lack of clear directive from the government. Consequently, creating confusion between the beneficiary and the banks resulting in a very challenging process for claiming the 4% incentive that was promised.
It was also speculated that excluding 3rd party apps and using local banks for direct transfers meant dealing with a poor exchange rate, stealing away from the whole point of the incentive.
Why the Split in Incentive Structures?
The incentive announced for wage earners was streamlined from the very beginning and followed a simplified process. As a result, wage earners could dive right in and make the most of the incentive.
On the other hand, the 4% incentive since its announcement was seen as a complicated incentive to receive with many restrictions. Treating digital nomads differently than foreign wage earners shows a lack of empathy towards local residents bringing in remittance. Additionally, the announcement only talked about incentives for freelancers, not remote workers who work equally hard to bring foreign remittances into the country.
Incentivizing wage earners boosted the country’s remittances, and extending the same support to freelancers and remote workers would have further aided the country's economy. We claim that the incentive should be equally implemented for wage earners, freelancers, and remote workers, leaving behind no discrepancies.
This leads to the question that why was the 4% incentive not simplified and made easy to receive despite the fruitful results of the 2.5% incentive for wage earners?
How Can the Government Ensure Freelancers and Remote Workers Benefit from the 4% Incentive?
The incentive should have been implemented with simplified qualification measures. Create a hassle-free application process for freelancers to get recognized and verified by the government. Tailor the documentation requirements according to how freelancers' contracts work on different platforms and include all verified platforms. Once the freelancer is verified, they should be able to receive incentives on all their transactions as seamlessly as expatriates get for their 2.5% incentive.
The incentive should also have included remote workers who work foreign jobs from the comfort of their homes in Bangladesh. Their efforts to bring in remittance should not be overlooked.
How We Commit To Freelancers and Remote Workers?
Elevate Pay is so much more than just a money transfer app. We are dedicate with providing freelancers and remote workers a solution that they can not just rely on, but always count on. As a platform, as a community, and as a source of all payment solutions for freelancers. We do this by providing you with free USD account powered by Bangor Savings bank where you can directly receive your international earnings. This allows you to save your earnings in USD and save never worry about inflation impacting your earnings.
While we protect your savings, we also provide you with instant transfers to your local currency with the best FX rates and a flat fee of $1.50. We believe in complete transparency of transactions and show you the exact amount that you will receive in your account before you initiate the transfers.
Conclusion
The 4% remittance incentive for freelancers in Bangladesh promised great potential but never became a reality. Its complicated eligibility criteria, poor messaging, and lack of implementation left freelancers feeling excluded and overlooked. If implemented effectively, this incentive could have significantly boosted remittance inflows, strengthened the economy, and positioned Bangladesh as a global freelancing hub.
Simplifying the process and broadening its scope may pave the way for future initiatives to support freelancers and the growing digital economy. The lesson here is clear: clear communication, inclusivity, and streamlined processes are essential for success in policy implementation.