Analysis of Recent Worker Remittance Operations of Citibank, N.A., Bangladesh

Introduction Bangladesh is a developing country with a population size of around 140 million. 3. 28% of its population, working at various foreign destinations mainly as economic migrants has made it one of the major manpower exporting country of the world. Kingdom of Saudi Arabia is the single biggest overseas job market for Bangladeshis. Citibank N. A. Bangladesh, being the correspondent bank of SAMBA, a well-known financial group of Kingdom of Saudi Arabia (KSA), has been offering remittance services to Bangladeshi Nationals residing in Saudi Arabia for the last 13 years. . 1 Origin of the report This report is the outcome of the study conducted as a term paper requirement for the course “Managerial Communication” in the 1st semester of the MBA program at Institute of Business Administration. 1. 2 Problem and Purpose •Analysis of the remittance trend in Bangladesh to understand current remittance scenario. •Analysis of the illegal money transfer channels to better understand its effect on the formal money transfer channels •Analysis of the entire remittance process and structure of Citibank N. A.

Bangladesh •Developing recommendations to add more dimensions to the remittance process of Citibank based on analysis and findings. 1. 3 Scope The study covered mainly the remittance from Saudi Arabia and has been conducted within the Citibank N. A. officials through in-depth interview. 1. 4 Limitations It was not possible to get accurate information on the illegal money transfer through illegal channels. 1. 5Background Citigroup is the world’s largest, most global and most diversified financial services providers with millions of customer accounts in more than 100 countries.

Citibank N. A. , the banking arm of Citigroup, established its presence in Bangladesh in 1987 through a representative office. Citibank N. A. has been successfully offering remittance services since 1995. However it has been only catering to the need of market in Kingdom of Saudi Arabia (K. S. A). There are avenues for the bank to increase its remittance volume and revenue through innovation of new policies and careful implementation of existing ones. 1. 6 Sources and Methods of Collecting Information

The data has been collected from both primary and secondary sources. The major sources are: •Face-to-face interview with some personnel at different hierarchies of Citibank N. A. , Bangladesh. •Local and international newspapers, magazines, government circulars and various websites •Materials on the subject matter supplied by the bank Various analysis techniques such as Trend Analysis, Quantitative Analysis, Qualitative Analysis and SWOT Analysis have been used to analyze the raw data in order to fulfill the objectives of the report. . 7 Report Preview This analytical report is divided into five chapters. The first chapter is the introduction. The second chapter presents the current remittance scenario of Bangladesh by the discussion of outside employment, different fund transfer systems and market analysis of remittance. The third chapter includes an in-depth financial Analysis of remittance position of Citibank N. A. Bangladesh. The last two chapters include conclusion and recommendation respectively. Current Remittance Scenario

Bangladesh, being a huge labor surplus country, belongs to the supply side of the global labor market. Flow of migrant workers is associated with growing flow of remittance to Bangladesh. Different macro-economic reforms to increase official flow of remittance have been encouraged by the successive governments since 1990. Although there is widespread presence of different formal institutions for remittances and many of them are gradually penetrating the market, a large number of migrant workers still prefer to remit their earnings through informal systems.

This chapter discusses both formal and informal fund transfer systems to send remittance in Bangladesh as well as explains the reason of existence of informal money transfer system and ways to formalize them. 2. 1Informal Money Transfer System (IMTS) Informal Money transfer systems (IMTS) are funds transfer systems that operate outside the banking and financial system. Developed centuries ago as a way to settle financial obligations, IMTS remain the preferred remittance vehicle among migrant communities.

Characteristics, such as low transactions costs, speed, and little paperwork, render them more attractive than banking institutions. Although Hundi is the most popular forms of informal money transfer system, there are also some others like black market exchange networks, invoice manipulation schemes, trade diversion schemes, courier services and physical transfer methods, gift and money transfer services overseas via special vouchers and internet web sites, stored value, such as pre-paid telephone cards etc. 2. 1. Hundi, the most popular way of transferring remittance Hundi was developed in India before the introduction of western banking practices. It is currently a major remittance system parallel to ‘traditional’ banking or financial channels. Though it is referred to as ‘underground banking’ it is often operated in the open and advertised heavily and effectively. The components of hundi that distinguish it from other remittance systems are trust among involved parties and the extensive use of connections such as family relationships or regional affiliations.

In the hundi system, money is transferred via a network of hundi brokers. A customer approaches a hundi broker in one city and gives the sum of money to be transferred to a recipient in another, usually a foreign city. The hundi broker calls another hundi broker in the recipient’s city, gives disposition instructions of the funds (usually after taking a small commission), and promises to settle the debt at a later date. Unlike traditional banking, hundi makes minimal (often no) use of any sort of negotiable instrument. Thus transfers of money take place based on communications between members of a network of hundi dealers. . 1. 2 Reasons for the existence of Informal Money Transfer System (IMTS) Despite the increased pace of globalization, ease of travel, introduction of new technologies and the growth of transnational banking, IMTS have not been replaced by conventional banking. Some of the reasons behind this situation are: 1. Cost effectiveness 4. Efficiency 2. Reliability 5. Lack of bureaucracy 3. Lack of a paper requirements 6. Opportunity for tax evasion 2. 2Formal remittances to Bangladesh Most of the international remittances come from the Middle East In the last ten years.

A very important share of remittances comes from temporary migrant laborers. In the financial year 2007-2008, Middle East accounted for 62. 58 percent of the official remittance flow of which 30 percent was from Saudi Arabia. Top five remitting countries over last ten years are Saudi Arabia, USA, Kuwait, UAE and Malaysia. The statistics of the Bangladesh Bank and other sources only reflect the formal remittance. It is estimated that informal remittances account for 20 per cent of the total amount of remittances in Bangladesh.

Hence, a significant number of financial transfers do not appear in the official data. Official channels refer to demand drafts, traveler’s cheques, telegraphic transfers, postal orders, account transfers, automatic teller machine (ATM) facilities and electronic transfers. Of these, demand drafts are most popular (Siddiqui and Abrar, 2001). Expatriates and migrants using official channels have following options: 1. They can send money from a bank in the destination country to a bank in Bangladesh. The former bank must have a correspondent relationship with the latter. . They can send money through branches or subsidiaries of a Bangladeshi bank in the destination country. 3. Money can be remitted through exchange houses or banks in the destination country with which a Bangladeshi bank has a taka drawing arrangement. Analysis of Remittance Operations of Citibank N. A Citibank N. A. Bangladesh has been offering remittance services to Bangladeshi Nationals residing in Saudi Arabia for the last 10 years. It is the correspondent bank of SAMBA, a well-known financial group of Kingdom of Saudi Arabia (KSA).

SAMBA has a reputation for being at the forefront of developments in the Saudi banking sector. Citibank N. A. Bangladesh has been offering Speed Cash remittance products of SAMBA Financial Group since 1995. The brand name “Speed Cash” includes two products- Speed Cash and Safe Draft, which are branded remittance products of SAMBA. The bank had agreements with SAMBA since 1995 for Speed Cash and 1997 for Safe Draft. The bank also provides life insurance coverage to Bangladeshi nationals living in Saudi Arabia who remit funds to their beneficiaries in Bangladesh through Citibank and SAMBA Financial group.

The remitters get up to 90 days coverage from the date of remittance and also coverage for natural death and accidental deaths. In these cases, beneficiaries receive the insurance benefit from the group insurance service provider of Citibank. 3. 1 SAMBA Financial group: an overview SAMBA Financial Group was formed on February 12, 1980 pursuant to Royal Decree dated 26/3/1400 H. (according to which all foreign banks were required to sell at least 60% equity interests to Saudi nationals) to take over the then existing branches of Citibank, N. A. n Riyadh and Jeddah. SAMBA was always the acronym for the SAudi AMerican BAnk but the name was changed to SAMBA Financial Group permanently in 2003 and all references to Saudi American Bank were removed when Citibank sold all its shares to Saudi national and organizations. With its strong focus on innovation, SAMBA is continuously launching new products and services. In 2006, SAMBA won The Banker Magazine’s 2006 Technology Award in the “Technology Innovation” category the Best Bank in Saudi Arabia award for 2006 from both Euromoney and Global Finance.

SAMBA’s 3,000 employees operate through a network of 66 branches across the Kingdom and they have branches in London and Dubai. It has over one million customers who access their services through their branches, 450 ATMs, SAMBA. com, SAMBAphone and SAMBAmobile. 3. 2 Market Analysis 3. 2. 1KSA Market Remittance inflow from the Kingdom of Saudi Arabia, the single biggest overseas job market for Bangladeshis, continued to increase gradually over the period 1998-2007 amidst widespread fear of deportation. However remittance inflow from the Kingdom of Saudi Arabia decreased in the financial year 2007-2008.

Percentage of KSA remittance increased over 2003-2007, Though the percentage of KSA remittance inflow has decreased over the year 2003-2007, it still holds the largest share of the total remittance inflow to Bangladesh. Table 1 below shows the remittance inflow in Bangladesh from 2002-2008: Table 1: Remittance inflow in Bangladesh 2002-20032003-20042004-20052005-20062006-20072007-2008 KSA1254. 311386. 031510. 461562. 211734. 71641. 55 Total Remittance3061. 973371. 973848. 294427. 235978. 475649. 23 Percentage of KSA40. 96%41. 10%39. 25%35. 29%29. 02%29. 06% (Source: Bangladesh Bank) Currently about 1. 5 million Bangladeshis are working in the kingdom. Bangladeshi workers in KSA are sensitive more to the cost and safety than the speed of sending remittance home. The Bangladeshi workers are mostly concentrated in the big cities like Riyadh, Jeddah, Mecca and Medina. 3. 2. 2Bangladesh Market Though the amount of remittance sent to Bangladesh in legal ways was gradually increasing over last 15 years, it took a dip in 2007-08. It can be seen from following figure that nationalized commercial banks holds the largest market share and foreign commercial banks hold the second smallest market share of remittance inflow.

Figure 1: Market share of Different Banks 3. 3 The Products The bank offers two products for remittance – SpeedCash and SafeDraft. SpeedCash Under SpeedCash product, Citibank issues account payee Bangladeshi Taka (BDT) drafts after getting electronic issuance information from SAMBA on a daily basis. SAMBA branches receive cash amount in Saudi Rial (SAR) from remitters. SAMBA maintains a Remitter Account Number (RAN) for each remitter and one or multiple beneficiary detail for a single remitter according to the remitter’s request in its system.

Citibank issues SpeedCash instruments on its own branches in Bangladesh and also uses 105 locations of 3 correspondent banks Arab Bangladesh Bank, Sonali Bank & Agrani Bank. Process is going on to activate Islami Bank’s branches for issuing SpeedCash drafts on them. Citibank’s dedicated courier service delivers the drafts to beneficiary’s addresses or to their banks. The beneficiary deposits it to his/her bank for the funds to be cleared from Citibank’s or its correspondent bank branches. SAMBA funds Citibank according to the agreed terms between the two banks. SafeDraft

SafeDraft is a check (popularly called draft because of its brand name) issued by SAMBA on the Nostro account maintained with Citibank N. A. Bangladesh after receiving the cash amount in Saudi Rial from remitters. A Remitter Account Number (RAN) is created by SAMBA after getting the copies of Passport and Work permit of a SafeDraft remitter. A remitter can send remittance through SpeedCash or SafeDraft using single RAN. After issuance/printing, the draft is handed over to the remitter who sends it to his beneficiary via mail/courier or through a person physically traveling from KSA to Bangladesh.

The beneficiary deposits it to his/her bank for the funds to be cleared from Citibank N. A. /Citibank Bangladesh’s correspondent bank branches. Citibank has coverage of more than 800 locations in Bangladesh for SafeDraft payment. Citibank is using Islami Bank, Sonali Bank, AB Bank and Agrani Bank as its correspondent banks for Safedraft payments in Bangladesh. Citibank funds its correspondent banks according to the terms of the respective agreements with the correspondent banks. SAMBA funds Citibank according to the agreement terms between the two entities. . 4 Product Management Cash product team manages the SAMBA and various correspondent bank relations, courier / vendor relations, controls and tracks product profitability for both products. Cash Product Manager is responsible for introducing enhancements in the product delivery and offering, based on feedback from sales, operation and service teams. The product manager negotiates the FX conversion rate and other agreement terms with SAMBA and defines the standard costs and recommended prices for the products. 3. 5 Payment Initiation & Processing

SAMBA generates two encrypted files on a daily basis for all SpeedCash and SafeDrafts remittances for the day and uploads it in a FTP site. Citibank downloads these two files in the Citibank Remittance Management System (CRMS). Access to this FTP site is password protected and only designated personnel can access the site for downloading the files. Negotiation is going on with SAMBA at present for adopting Citibank standard ‘Entrust Encrypted File Transfer’ between the two banks for transferring the encrypted files. The entire Local Operating Procedure is discussed later. SpeedCash

Citibank Remittance Management System (CRMS) processes the SpeedCash transactions and generates an . imp file, which is internally imported through CitiDirect and goes to DDE system (for Pay-order / Manager’s Check issuance) via Regional Server, Global Interdict and IBBS. Due checking for the SDN (Specially Designated Nationals) names for SpeedCash drafts are done like other products in Global Interdict Server. SafeDraft CRMS decrypts the SafeDraft file sent by SAMBA and the issuance information is uploaded in CRMS database. An issuance report/file is generated from CRMS on a daily basis and is run through the GI using the web based utility.

The utility generates an SDN positive match report and due Citibank compliance measures based on that report is taken. Citibank is going through the process of establishing ‘Positive Pay’ for Safedrafts drawn on its local correspondent banks. Post implementation of Positive Pay, the correspondent banks will be honoring Safedrafts after checking the SafeDrafts against the ‘Advices’ sent to them from Citibank in addition to the existing process of honoring drafts based on signature verification and physical SafeDraft stationery authentication.

Once the planned Positive Pay process is in place for SafeDraft, if there is any SDN positive draft found through the checking, Citibank will not send the advice of that SafeDraft to the correspondent bank concerned. As a result it will not be honored by respective correspondent bank. Citibank will mark the SafeDraft ‘Stopped’ and return the funds to SAMBA. 3. 6 Correspondent Banks As it is quite inconvenient for the Citibank to operate in every nook and corner of the country for remittance purposes it has struck out deals with banks having branches throughout various locations of the country for the processing of remittance. . 6. 1Correspondent Banks for SpeedCash Citibank entered into an agreement with Janata Bank in 1995 to process the SpeedCash remittances of SAMBA to Bangladesh. This continued up to 1999 when an internal review of the process pointed out that the profitability was negative from this relationship with Janata. SpeedCash Demand drafts issued through DDE were drawn on Agrani Bank branches during this time under the agreement made by Citibank with Agrani in 1998. In March 2002, Citibank entered into correspondent banking agreement with AB Bank.

Lastly, on May 2002 Citibank started relationship with Sonali Bank, the largest nationalized bank of the country. Currently, Citibank funds Agrani, AB and Sonali in BDT for the SpeedCash drafts paid by them as per the terms of the respective agreements with them. 3. 6. 2Correspondent Banks for SafeDraft When Citibank first started processing SAMBA SafeDrafts in 1997, the instruments were drawn on Citibank itself. In September 2000, Citibank came to an agreement with Islami Bank, the largest private sector bank of the country.

In March, correspondent-banking agreement for honoring Safedrafts was signed with AB Bank. In May 2002, similar agreement was done with Sonali Bank to take the facility of its widespread network. In June 2002, similar agreement was signed with Agrani Bank. At present, Citibank funds Islami Bank and Agrani Bank in USD and AB Bank and Sonali Bank in BDT for SafeDrafts honored by them as per the terms of the respective agreements with them. 3. 7Documentation Documentation is one of the most important parts of remittance procedure.

Its very foolproof procedure reflects the strict demeanor of the banks. SpeedCash and SafeDraft Remitter ID Number (RAN) are not issued without obtaining some vital information like full name, nationality, complete address, telephone number, home telephone number (if any), copy of resident / work permit (Iqama) and passport for non-Saudis (to be retained), copy of Saudi ID for Saudis, beneficiary’s name, country, profession / business, source of funds. Sanctioned names are checked through the system in order to monitor transactions and the data is updated regularly. . 8Risks/Challenges The risks involved can be differentiated into various categories. The risks and the remedial measures that are already adopted or should be adopted are given below. 3. 8. 1 Customer Risks Being a non Citigroup entity, SAMBA has turned to a normal financial institution entity to Citibank Bangladesh that makes Citibank exposed to the risks of SAMBA going bankrupt or performing Citibank non-compliant practices in terms of Know Your Customer (KYC) procedure and Specially designated national/ terrorist (SDN/SDT) checking etc. Mitigates

SAMBA is taking adequate control measures through certain KYC documentation, 3. 8. 2 Customer Credit Risks SpeedCash Citibank gets funding for SpeedCash four days a week as per the SpeedCash agreement with SAMBA. The USD funds are credited to Citibank Bangladesh’s Nostro account in Citibank New York. The probability of the SpeedCash BDT account with Citibank Bangladesh being overdrawn is high during occasional long holidays when banking transactions are closed either in Bangladesh or in the US. SafeDraft The funding for SafeDrafts is done in USD by SAMBA to Citibank Bangladesh’s

Nostro account in Citibank New York once a week for the previous seven days SafeDraft issuance amount. There might be cases when a SafeDraft is presented for clearing well before 7 days if the remitter himself or the beneficiary personally carries it from KSA to Bangladesh after issuing it. In that scenario, there is the risk of SafeDrafts payment being done by Citibank or claimed by the correspondent bank before the receipt of funds from SAMBA. Mitigates: Citibank Bahrain is the PAM for SAMBA. Citi Bahrain arranges for the Code-1 approval.

To address the credit risk of SAMBA, a credit line of USD 750,000 has been allocated to SAMBA and all the SpeedCash and SafeDraft accounts maintained in Citibank Bangladesh’s books are linked to this line. 3. 8. 3 Processing Risks •SAMBA Operational risks in SAMBA might include wrong information printed on the SafeDraft, erroneous issuance file sent to Citibank Bangladesh, internal fraud by SAMBA people. Mitigates: According to Section 15 of the SafeDraft Agreement and Article 14 of the SpeedCash Agreement between SAMBA and Citibank N.

A, SAMBA is responsible for the correct issuance of Drafts and for the timely delivery and accurate transmission of the remittance information specified in the agreement. •Correspondent Branches Operational risks in Citibank’s corresponding bank branch can be delay in processing, delay in intimating Citibank about paid drafts, failure to detect and prevent fraud due to gross negligence. Mitigates: There are penalty clauses in each of the correspondent bank agreements that Citibank has entered into for SpeedCash and SafeDraft.

These penalties reduce the occurrence of the risks mentioned above and indemnify Citibank in case they happen. •Citibank N. A. Bangladesh Operational risks can be incorrect funding to the correspondent banks, delay and error in updating paid information in the Remittance Management System, lack of proper reconciliation with SAMBA and correspondent banks. Mitigates: Citibank’s internal control procedures like DCFC, PCFC, independent review by ICU ensures minimum occurrence of such operational risks. 3. 8. 4 External Agency Risks

The business performance is affected by support from external agencies such as couriers and correspondent banks and other externalities like natural calamities, strikes etc. Mitigates The courier risks are mitigated through vendor documentation, which restrict the banks exposure through force major clauses. The risk of frauds perpetuated by the employees of correspondent banks is mitigated by the internal regulations of the concerned banks as well as documentation with the banks. 3. 8. 5 Foreign Exchange (FX) Risk

The two remittance products are cash management disbursement product offering, and Citibank’s revenues are a combination of float, and FX and commission (for SpeedCash). Foreign exchange rate volatility might negatively hit revenue from the products. Mitigates Citibank keeps provision of daily quoting of the rate based on updated market information and a cushion over the local market rates while quoting rates to SAMBA and thus reduces the FX risk. 3. 8. 6 Market Risk: For SpeedCash, the revised agreement has revoked the ‘exclusivity’ of the agreement parties regarding remittance from KSA to Bangladesh.

Hence, SAMBA can start remittance agreement with any other local Bangladeshi bank. Mitigates In spite of the revocation of the ‘exclusivity’ clause in the agreements with SAMBA for the SpeedCash products, Citibank’s superior technology and customer service level, similar internal control procedures of the two banks due to SAMBA being a previous Citibank entity and ten years of successful relationship between Citibank Bangladesh and SAMBA for processing these two products will make it difficult for SAMBA to switch to another local bank as its correspondent bank in Bangladesh. 3. 9 Competitive Advantages

There are various aspects of the remittance products offered by the Citibank N. A that are likely to give them an edge over the other competitive financial institutions offering their services in the same area in Bangladesh. Cost SpeedCash is the premium remittance product of SAMBA, which costs remitters 25 SAR per transaction. The product features include door-to-door prompt delivery, secured payment and two-way messaging service call for the higher price. Again, SafeDraft is one of the cheapest modes of remitting money from KSA to Bangladesh. Remitters pay SAR 5 for issuing a SafeDraft.

Security & Control SpeedCash and SafeDraft have common security features of being an account payee instrument and secured transaction encryption and processing. Management Information System Citibank can provide information on issuance, inquiry, and delivery status of both SpeedCash and SafeDraft within one minute to one day. Volume and Throughput Analysis over 2003-2008 4. 1 Productwise Volume and Throughput Analysis SpeedCash Volume is number of transaction that occurs during a specific period and throughput is the summation of the monetary value of all of the transactions.

Though monthly volume of SpeedCash experienced a steady growth of over the year 2002 to 2004 but it was increased considerably after 2004 up to 2006. But in 2007 the volume jumped off significantly with a decline of 10%. However, analysis of the monthly volume of first five month of the year 2008 reveals a sign of its turning around from the decline in 2007. The estimated volume of SpeedCash (on the basis the volume of January to May) is 10% higher than that of 2007. Figure 2 illustrates volume of SpeedCash over the year 2004-2008: Figure 2: Monthly volume of SpeedCash over 2004-2008 Source of Data: Citibank N. A) If the throughput is compared with the volume it is evident that the percentage of growth of throughput for SpeedCash was higher compared to that of volume of SpeedCash. Percentage of the decrease in throughput was higher that that of volume. This trend implies that more money was sent by less people. Figure 3 shows the trend of throughput of SpeedCash over the year 2004-2008: Figure 3: Monthly throughput of SpeedCash over 2004-2008 SafeDraft SafeDraft had a higher growth rate in terms of volume and throughput than SpeedCash till 2005.

But both volume and throughput of SafeDraft started to decline constantly after March 2006. Starting from 2007 to first five months 2008, both volume and throughput of SafeDraft had a higher decline rate than those of SpeedCash . Throughput of SafeDraft was the lowest in May 2008 when monthly throughput was 1. 7 million. Figure 4 and 5 shows the trend of volume and throughput (respectively) of SpeedCash over the year 2004-2008. Figure 4: Monthly volume of SafeDraft over 2004-2008 (Source of Data: Citibank N. A) Figure 5: Monthly throughput of SafeDraft over 2004-2008 Source of Data: Citibank N. A) The percentage of growth or decline of throughput of SafeDraft was higher compared to the percentage of growth or decline of volume of SafeDraft. This trend being in line with the trend of SpeedCash strengthens the finding that more money was sent by less people. Growth of volume and throughput of two products- SpeedCash and SafeDraft over 2005 to 2008(Up to May) is shown in table 2 : Table 2: Volume and Throughput of SpeedCash and SafeDraft 2005200620072008(Up to May) Volume Speed Cash 56%4%-10%3% Safe Draft 281%-16%-57%-23% Total 177%-13%-41%-10%

Throughput Speed Cash 66%9%-12%7% Safe Draft 330%-10%-55%-19% Total 185%-4%-39%-5% (Source of Data: Citibank N. A) 4. 2 SWOT Analysis of Citibank as a Remittance Partner 4. 2. 1 Strengths 1. Though Citibank has only four branches in Bangladesh, it has achieved higher control over the bank branches and payment locations all over the country through agreements with other correspondent banks. It has enabled Citibank to keep operating expenses at lowest level. 2. The total number of employees in the bank is not over 200. This helps an excellent environment for efficient and effective communication. 3.

The modernized technology helps the bank to keep a close eye on each transaction and rectify problems instantly, if any. 4. The Bank is at a unique position to call up on financial expertise from all over the world if needed or called for. 4. 2. 2 Weakness 1. The strong and almost full proof information security system sometimes acts as hindrances to the production process. 2. The officers of the bank have to work under tremendous workload that may result in reduced efficiency in the long run. 3. The brand name is not as well known in Bangladesh though Citigroup is the largest and most global financial service provider of the world. . Citibank does not offer the broad spectrum of banking services which makes it less lucrative to customers. 4. 2. 3 Opportunities 1. The bank can tap into the huge remittance markets in South-East Asia where many Bangladeshis live. 2. Citigroup can be the most attractive and trustworthy remittance partner for foreign companies for foreign direct investment (FDI) in Bangladesh. 3. Since Citigroup is well known all over the globe, with the correct amount of promotion, it can encourage people going abroad to transfer their funds through Citibank. 4. 2. 4 Threats: 1.

Remittance operation of Citigroup is hugely dependent upon SAMBA for promotional activities. 2. More competitors of SAMBA are entering the market as remittance partner in KSA. 3. A few more banks in Bangladesh are getting under agreement with SAMBA as remittance partner. 4. More nationalized and local banks that have larger banking networks are entering to the market as remittance partner. 5. Since Citibank Bangladesh is offering only corporate banking services, competitors can invade valuable “remittance real estate” by offering more products or services under consumer banking. 4. 3 Reason behind recent decline in Remittance from KSA:

The decline in remittance from KSA to Bangladesh through Citibank can be results of many factors some of which are described below: 1. Entry of new competitors with large branch presence in KSA 2. New agreement between National Bank Limited (NBL) and SAMBA for remittance partnership 3. Inadequate branch presence of SAMBA in KSA 4. Various promotional activities by competitors to grab the customers 5. Higher exchange rate offered by Nationalized Banks and Western Union 6. More strict Know Your Customer (KYC) policy of SAMBA to open a Remitter’s Account Number (RAN) than other competitors 7. Increase in postage cost of SafeDraft 8.

High price of SpeedCash and SafeDraft 9. Sole dependency on Cheque as mode of distribution 10. Continued popularity of Informal money transfer channel despite several initiatives of Bangladesh Government to eliminate it 4. 4 Conclusion Bangladesh has emerged as one of the top 10 remittances-receiving countries in the world in terms of volume after migrants and expatriates sent 5. 48 billion U. S. dollars in 2006. Economists say remittances are increasingly playing an important role in the Bangladesh economy, as these are only second to exports and have dwarfed the country’s external assistance and foreign investments altogether.

The World Bank showed that poverty rate fell faster in Bangladesh’s capital Dhaka, northeastern Sylhet and southeastern Chittagong regions between 2000 and 2005, thanks mainly to the robust remittances flowing into the areas. The remittances Bangladesh received in 2006 were equal to 9. 1 percent of GDP. So far, the central bank has given license to 635 exchange houses to set up offices in the foreign countries to facilitate inward remittance. Local banks, which have either opened exchange houses abroad or developed linkages with foreign banks, have quickened elivery of money at home, now taking maximum 72 hours to reach the recipients anywhere within the country. Senders and receivers of remittances to Bangladesh, see themselves faced with a number of obstacles to remit and to use money for different purposes. The main hindrances relate to the costs of sending money; the geographic accessibility of financial institutions to receive money; the availability of financial services aimed at remittances; availability of investment opportunities; opportunities for community development projects by migrants etc. The different Govt. nstitutions including Bangladesh Bank with foreign partners like DFID are taking measures to remedy these problems. Through analysis of migration trends and remittance trends it can be inferred that the pace of remittance is set for new records everyday. However for sustainable remittance flows there is much that needs to be done. Since remittance is very important to our country, it is necessary that the government should take further initiatives to increase the rate of formal remittance and should implement policies that would slowly reduce remittances through informal channels.

There are a lot that can be done by the different kinds of banks, which facilitate flow of remittance. The banks may try to reduce profit from each transaction, revisit the delivery model, offer more financial solutions, try to make more profit by increasing the volume of transactions and thus reroute the majority share of the money from the informal channels into the formal channels. Recommendations Informal channels of remittance transfer are quite dominant compared to formal channels because of their cost, speed, reliability and widespread networking.

Taking these factors into account, there are a number of possible ways that can be used by Citibank N. A. to tap into the untapped informal market: 1. Mobile phones and companies’ networks can be used to access the remote areas of Bangladesh for remittance delivery. Citigroup has a relationship with Vodafone Ltd. where the two parties are involved in a mobile-based remittance transfer service. Bangladesh has every opportunity to avail such technology. 2. Local NGOs’ have higher number of branches spread across the country than local banks in Bangladesh.

Since Citibank has strong banking relationship with some of the largest NGOs’ in Bangladesh it can easily strike a deal with them to distribute remittance over an extensive region in Bangladesh. 3. As KSA remittance market is already captured by the Bangladeshi banks, Citibank N. A. Bangladesh can target emerging and prospective remittance providing countries such as Malaysia, U. S. A and other Middle Eastern countries like Oman for providing remittance services. 4.

Citibank being the most global bank in the world can be an attractive and trustworthy remittance partner of foreign companies interested to invest in Bangladesh as Foreign Direct Investment (FDI). This will definitely improve the falling numbers of remittance inflow through Citibank in this country. Apart from adopting the above measures, Citibank may also choose other ways to deliver the money to the beneficiary other than the traditional PayOrder like money card (for repeat remitters), internet remitting solutions (which will give the client the benefit of sending remittance 24 hour a day).

Quick marketing solutions like offering of special exchange rates and reducing turnaround time for money delivery can build up a special brand appeal for the Bank in the remitter’s mind as well as the beneficiary’s mind. Ultimately all these positive solutions can make Citibank a major player in the remittance market, once again. Bibliography 1. Leonides Buencamino and Sergei Gorbunov, Informal Money Transfer System: Opportunities and Challenges for development finance. November 2002 2. Patrick M.

Jost and Harjit Singh Sandhu, The hawala alternative remittance system and its role in money laundering . January 2000 3. Hawala and Other Informal Value Transfer Systems: How to Regulate Them? Adapted from a paper published in Risk Management [2003] 4. Tasneem Siddiqui and Chowdhury R. Abrar ,Migrant Worker Remittances and Micro-Finance in Bangladesh 5. Hill, Charles W. L. and Gareth R. Jones. Strategic Management Theory. (5th edition). Houghton Mifflin Company. 6. Hawkins, Del I. Best, Roger J. and Coney, Kenneth A. Consumer Behavior. (7th edition). McGraw-Hill.