Foreign Remittances and the Easing of Credit Constraints: Evidence from Rural Bangladesh

This study examines the role of foreign remittances in easing credit constraints among rural households in Bangladesh. Based on a mixed-methods case study of four migration-prevalent villages, the research combined primary survey data from 221 migrant households with fifty-two qualitative interviews. These materials were triangulated with nationally representative Bangladesh Integrated Household Survey (BIHS) data where possible. Findings show that remittances relax liquidity constraints, enhance household creditworthiness, enable asset accumulation for collateral, reduce dependence on high-interest informal loans, and facilitate productive investments in land, housing, livestock, education, and small businesses. While remittances often serve as a substitute for inaccessible formal credit and costly informal borrowing, they also complement institutional finance by enhancing borrowers’ repayment capacity. Households in the study that channeled remittances into agricultural activities experienced greater development gains. This study offers micro-level evidence that contributes to the remittance–finance literature. It also highlights policy measures such as remittance-backed loan products and reducing migration costs as ways to leverage remittances for more inclusive rural financial development.