"The process of sending remittances through banks is slower and more cumbersome than with informal channels," the ADB said, adding that paperwork and documentation requirements are huge and the expatriate workers find these difficult to accomplish.

The ADB in its June quarterly economic update on Bangladesh said, "While a week, on average, might be required to receive remittances sent through banks, most informal channels do not take more than three days."

According to ADB, the hundi system, an illegal way of channeling money, relies on trust and goodwill and is efficient. Hundi operators maintain complete secrecy of transactions. The system requires much less documentation compared to the banking channels. It is also more profitable as the remitters get a premium exchange rate, which is often significantly higher than the official rate.

According to various estimates, remittances sent through the official channels constitute only 50 percent of the total remittances including that remitted through hundi.

The Bank also observed that "absence of investment opportunities, political instability, and inadequate social security is also discouraging the inflow of remittances through official channels."

However, the multilateral lending agency has recognised the role of remittances in poverty alleviation and said contribution of remittances is higher than the combined flows of FDI (foreign direct investment) and foreign aid.

According to the economic update, over 3.8 lakh workers migrated for foreign employment in 2006, which was 51 percent more than in 2005. Around 3.35 lakh workers left the country during the first half of 2007, on an average more than 1,850 a day.

Remittances increased by 25 percent annually in fiscal years 2006 and 2007 due to rise in oil prices, some policy actions, and improvement in banking and anti-money laundering activities worldwide, the Bank said.

ADB said remittances have increased very rapidly during the last decade. "If the country can sustain the present pace in migration, remittances will continue to rise."

But some challenges remain on the way to the growth, the Bank cautioned, adding "the global economic slowdown, particularly in the developed countries and Middle East, may have an adverse impact on labour recruitment from labour-exporting countries."

Future economic downswings may result in layoffs or depressed wages for low-skill labourers, it said. Because, unskilled and semiskilled workers migrate from Bangladesh. This type of labour is available in other least developed countries too, ADB said.

"Unless Bangladesh can slowly move to exporting skilled labour, a potential threat of losing to other countries always exits."

Private commercial banks can offer better remittance services to the recipients in the rural areas by expanding their networks in collaboration with licensed micro-finance institutions or even post offices, the ADB suggested.

The wide network of mobile phone companies can also be used for distributing remittances, the Bank said. The six cellphone operators have a good number of kiosks, billing centres and regional offices nationwide. These outlets, equipped with computers, printers and internet access, can be used to channel remittances in rural areas where there are no bank branches.

The Bank said the Philippines has been a major success in implementing a mobile phone-based remittance distribution system, which can be introduced in Bangladesh.

The ADB said market-oriented floating exchange rate system has provided a good incentive for official transfer of remittances, and discouraged illegal trade to a large extent.