Unveiling the Dynamics of Informal Remittances: An In-Depth Study of Hundi Practices in Bangladesh

This study explores the reasons behind the persistent use of informal remittance systems, particularly hundi, in Bangladesh. It aims to identify the key factors driving individuals to choose informal channels over legal, formal remittance services. The research employs a quantitative approach, surveying 310 respondents across Bangladesh to understand their experiences with informal and formal remittance systems. Data were analyzed using statistical methods, including correlation and factor analysis, to uncover the motivations for preferring informal systems like hundi. The study reveals that users prefer hundi due to its lower transaction fees, faster service, accessibility in rural areas, and minimal bureaucratic requirements. Cultural acceptance and trust in the reliability of informal systems also play a significant role, despite users’ awareness of legal implications. This research expands the understanding of remittance behaviors in developing economies by integrating cultural, economic, and legal dimensions of informal systems. Methodologically, it provides a robust framework for analyzing remittance practices through a combination of survey data and statistical analysis. Policymakers should focus on reducing fees and improving the accessibility of formal remittance channels while raising awareness of the legal risks associated with informal systems. Expanding rural banking infrastructure and simplifying formal remittance processes are key strategies to transition users towards legal channels.