Proposal for a Bangladeshi Migrant Worker Retirement Plan

The government could bolster financial security for Bangladeshi migrant workers with a new retirement savings initiative managed by the Economic Relations Division (ERD). This proposal would allow overseas workers to save a portion of their 2.5% government incentive on remittances, along with any additional contributions they wish to make, into a retirement fund. With partial government matching, a tax-free income stream, and various amenities, this plan offers comprehensive benefits for workers and has the potential to curb informal remittance practices like hundi and contribute to economic stability.

Current Data on Remittance and Migrant Workforce

• Total Remittances Sent: In the last fiscal year, Bangladeshi migrant workers sent over $21 billion in remittances, a crucial source of foreign exchange for the nation. This significant inflow underscores the potential for a retirement plan, allowing a fraction of this amount to be directed into a structured savings program.
• Returning Workers: Since the COVID-19 pandemic, approximately 500,000 workers have returned to Bangladesh. Many of these returnees face financial uncertainty, with limited retirement savings. A structured plan would offer these individuals and those currently working abroad a secure way to build future financial stability.
  

Potential Fund Growth in Five Years
With partial government matching and contributions from migrant workers, this retirement fund could accumulate substantial savings over time. For example, assuming a conservative 1% of the annual remittance amount (around $210 million) is contributed annually, the retirement fund could grow as follows:

Year	Estimated Contributions (Million USD)	Estimated Growth with Matching & Investments (Million USD)
1	$210	$220
2	$220	$242
3	$230	$265
4	$240	$290
5	$250	$316

After five years, the fund could potentially grow to over $1.3 billion, depending on matching contributions and investment growth. This structured savings pool would provide participants with significant financial security while supporting economic stability through secure investments.

Flexible Contributions and Government Matching
The proposed structure allows workers to save part of their 2.5% incentive plus any additional amounts, with a government match for a certain percentage. This flexible setup enables workers to contribute more as their finances allow, maximizing savings. Maintaining this approach would make the plan accessible to workers across income levels.

Proposed Amenities and Tax-Free Earnings

• 1. Life Insurance: Affordable coverage for workers and their families.
• 2. Airport Concierge Service: Streamlined support for migrant workers upon return to Bangladesh.
• 3. Dead Body Transportation: Assistance for families in transporting deceased workers back home.
• 4. Matching Loans for Real Estate Purchases: Matched loans for home purchases in Bangladesh.

The fund would also be tax-free, with no taxes on income earned from the retirement plan, maximizing the return for workers and adding a financial incentive.

Equity Loans Against Fund Balance
Workers would have the option to borrow against their savings, with an equity loan of up to 70% of their accumulated fund balance. This feature offers financial flexibility for emergencies or investments without exhausting their retirement savings.

Reducing Informal Channels: Hundi and Money Laundering
This plan may reduce the reliance on informal channels, such as hundi, for remittance transfers. By offering secure, government-backed savings with tax-free growth, migrant workers may be more inclined to use official remittance channels, contributing to economic transparency and stability. Money laundering risks associated with informal remittance flows would also be minimized, further strengthening national security.

Encouraging Financial Inclusion and Stability
With ERD overseeing investments in safe instruments like government bonds and fixed deposits, the fund would offer a low-risk, stable growth path for retirement savings. A retirement fund like this, supported by accessible benefits and transparent oversight, would provide a secure retirement pathway for millions of Bangladeshi migrant workers while fostering financial inclusion and strengthening remittance channels.

This proposal represents a comprehensive, forward-thinking approach to support the financial security of migrant workers and create lasting benefits for both individuals and the national economy.