Why Saudi remittances are slipping despite a record surge in workers

Bangladesh has been sending more workers to Saudi Arabia than any other destination. The numbers tell the story – 5.26 lakh in FY24, 4.52 lakh in FY23, and 6.53 lakh in FY22. Over the last three fiscal years, nearly half of all Bangladeshis who went abroad for work landed in the Gulf kingdom.

But here's where the puzzle begins. Despite this massive outflow of workers, remittances from Saudi Arabia have been in freefall. The inflow peaked at $5.72 billion in FY21, then started tumbling – $4.54 billion in FY22, $3.77 billion in FY23, and down to just $2.74 billion in FY24.

Meanwhile, the United Arab Emirates (UAE), which recruited only 2.46 lakh Bangladeshi workers in the last three years – less than half of Saudi Arabia's intake – sent back $4.64 billion in remittances in FY24. That's almost double the amount coming from Saudi Arabia.

So, where is the money going?

Experts point to several factors. The first is the growing number of undocumented Bangladeshi workers in Saudi Arabia. Many employers are unwilling to pay the high cost of Iqama (residence permits for foreign workers), leaving workers in legal limbo.

Sources from the Bangladesh Association of International Recruiting Agencies (Baira) say as many as 60-70% of Bangladeshi workers in Saudi Arabia failed to secure their Iqama in the last three years.

Without legal status, these workers earn less and cannot send money home through official banking channels. Instead, they turn to hundi, an informal money transfer system that keeps remittances off the books.

A report by Migrant-Rights.org, a GCC-based advocacy group, suggests that most workers using hundi are undocumented. Some families also prefer hundi over banks simply because they find it easier.

But there's more to the story.

Bangladesh Bank officials and analysts suggested that the rising trend of money laundering from Saudi Arabia to the UAE – and its subsequent re-entry into Bangladesh as remittances – may have something to do with the remittance disparity.

"Why are remittances from the UAE rising while those from Saudi Arabia are falling? This needs a serious investigation," said Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue.

He said, "If laundered money from Dubai is returning as remittances, that is not a simple matter either. No conclusion can be drawn without a proper investigation."

Bangladesh Bank Governor Ahsan H Mansur has also raised similar concerns. At an event for non-resident Bangladeshis on 11 January, he warned that a fraudulent syndicate is manipulating remittances.

"Not all remittances from Saudi Arabia are coming directly to Bangladesh now. They are being routed through Dubai," he said.

"A group is buying remittances from Saudi Arabia, stockpiling them, and selling them to Bangladeshi banks at higher rates, thereby destabilising Bangladesh's dollar market from abroad. Under pressure to settle payments, banks sometimes agree to pay a premium, pushing up the cost of the dollar in Bangladesh," said the governor.

Beyond the numbers

The fall in official remittances from Saudi Arabia is not just about undocumented workers or illegal money transfers. Sector insiders say there are other factors at play.

The dollar crisis in Bangladesh has forced some large conglomerates to engage with hundi networks to secure foreign currency. Meanwhile, higher payments for Hajj and Umrah also contribute to the rising use of hundi channels.

The numbers may not add up, but the impact is real. If left unchecked, this trend could further squeeze Bangladesh's foreign exchange reserves, making it even harder for businesses to operate and imports to flow, experts say.

How high Iqama fees make workers undocumented

Noman Chowdhury, immediate past vice president of Baira, told TBS, "Over the past three to four years, 60-70% of Bangladeshis who went to Saudi Arabia have faced Iqama issues. I send workers to reputed Saudi companies, but even then, at least 10% of them face Iqama problems. Because of this, they are forced to send money through hundi."

Iqama must be renewed every year, with the fee paid by the employer.

Typically, workers entering Saudi Arabia on an employment visa receive a three-month temporary permit. Employers are required to secure a work permit within this period by paying an 11,000-riyal Iqama fee for workers in non-industrial, low-wage sectors like construction, cleaning, and agriculture. Without this, workers become undocumented.

Employers currently pay 8,600 riyals per year to Saudi's labour ministry for each worker's Iqama. Additionally, they must also cover insurance and an extra 600 riyals for the interior ministry, bringing the total annual cost to 11,000 riyals per worker.

Fazlur Rahman, a Bangladeshi who has been living in Riyadh for over a decade and now works in a supermarket, has not had a valid work permit for the last two years because his employer did not pay the Iqama fee.

"As I do not have Iqama, I cannot send money through banking channels to my family. I have to use other people or non-banking channels," Fazlur Rahman told TBS over the phone on Tuesday.

"I have frequently requested my employer to renew my Iqama, but he has not taken any action," he added.

Bangladeshi migrants who faced job-related issues in various destinations have submitted around 6,755 complaints over the last year, representing a 184% increase compared to the previous year, according to the Bureau of Manpower, Employment and Training (BMET).

Approximately 80% of these complaints have come from Saudi-based jobs, according to sector insiders.

Bangladeshi workers bound for Saudi Arabia face challenges with work permits, job security, delayed salaries, and wage theft. BMET sources say 50% of issues involve Iqama, as many employers fail to provide the required residence permits.

In response, the Ministry of Expatriate Welfare blacklisted 24 Saudi companies for fraudulent practices, banning them from hiring through Bangladeshi agencies.

Bangladesh and Saudi Arabia recently discussed Iqama renewal fees and job losses due to non-renewals. On 30 January, Saudi Vice Minister Abdullah Abuthnain and Bangladesh's Expatriates' Welfare Adviser Asif Nazrul met in Riyadh to address these concerns, according to the foreign ministry.

Earlier in an interview with TBS in late 2024, Saudi Ambassador to Bangladesh Essa Youssef Essa Al Duhailan said, "Bangladeshi migrant workers in Saudi Arabia facing issues like unpaid salaries or missing iqamas can seek legal redress, contact their embassy or work with Saudi authorities to protect their rights." 

Regarding curbing hundi, he said, "This is an issue that concerns both workers and the governments of both countries. We now have digital financial platforms that allow for instant, secure remittances. If workers resort to informal systems like Hundi, it not only harms Bangladesh's economy but also the host country's economy."

Saudi hiring more workers, but mostly less skilled

Saudi Arabia has continued to be the largest overseas labour market for Bangladeshi workers, but the majority of recent recruits fall into the less-skilled category.

According to an Ami Probashi Platform report, Saudi Arabia hired more general workers than any other category last year, while the United Arab Emirates (UAE) recruited more accountants and skilled professionals.

Umrah payments contribute to more hundi transactions

Applicants for an Umrah visa to Saudi Arabia must pay fees to the Ministry of Hajj and Umrah, including transportation charges.

A Hajj and Umrah agency owner, requesting anonymity, said, "I send money through banks when the riyal rate is low, but use other channels when bank rates are higher."

Each year, 450,000-500,000 Bangladeshis perform Umrah, spending nearly Tk1,000 crore, with half sent via banks and the rest through hundi. While Hajj payments are now strictly routed through banks, hundi remains prevalent for Umrah.

Meanwhile, large Bangladeshi exporters struggling to access dollars have turned to hundi, setting up offices in remittance-rich countries to collect funds informally. "This is an open secret, especially in Saudi Arabia, Oman, Dubai, and Qatar," said Munshi Md Ashfaqul Alam, a remittance and Islamic banking expert at Bangladesh Finance Ltd.