 MIN RATNA BAJRACHARYA |
With so much money moving home, the mechanisms to get it here have become significant. More than 30 banks and money transfer companies compete to deliver remittances even to remote areas, but an estimated 60 per cent of remittances still make their way into the country through informal means like hundi because of regulatory constraints.
Unskilled, illiterate and often illegal workers abroad do not have access to banks, and their high charges deter them from using formal channels from countries like Japan and the UK. Informal routes are the only option for many, leading experts to believe that the real annual remittance figure is probably double the official Rs 1.5 billion.
Narabahadur KC of C G Finco says some simple, practical steps could make a difference: "The government could create access points in other countries where our workers can learn about sending their money home," he told a Roundtable on Money Transfer and the Remittance Economy organised by Himalmedia recently.
Women working as maids in countries like Kuwait and Saudi Arabia often find it hard to get their money home, says Diwakar Thapa of Hulas Remittance. "Their employers delay the transfer or sometimes don't send it at all," he says.
Here in Nepal, less educated people in rural areas often do not understand how money transfers work. "Many don't remember the code number or the name of the agency or don't know about exchange rates," says Krishna Tandukar of Bank of Kathmandu.
It is largely due to remittances that the proportion of Nepalis living below the poverty line has fallen 11 percentage points to 31 per cent over the past ten years. Experts say the total remittances are increasing only because the number of Nepalis going abroad is increasing, not because they are earning more.
And the falling dollar and the drying up of British Gurkha remittances will make the increase less dramatic.
In the 2006-07 tax year alone, an estimated 240,000 Nepalis migrated to work in the Gulf and Malaysia, where the total number of Nepalis has now surpassed one million. There are another two million in India.
It's not only about getting the money home, but also what families back home are spending the money on, says Arun Bajracharya of Union Money Transfer. "For over a year, much of a worker's earnings are spent on repaying the loan he takes to go abroad, usually at a very high interest rate," he says. Because the majority of migrants are poor, the money is used initially to provide basics like food, clothes and education for the family.
But researchers have been struck by the amount spent on consumer electronic goods, jewellery and vehicles. Once they have spare cash, few migrants are looking to invest the money for the long term. "There is a need to create a partnership between the worker, his family, the government and financial institutions to create an accumulated fund that can be used for investment," says Pradyumna Pokharel of Nabil Bank, pointing out that only one-third of Nepalis currently have access to banking.
Remittances are expected to continue going up, but would no doubt increase faster if bureaucratic barriers and transfer costs could be reduced and workers better trained before they go abroad, enabling them to take higher-paying jobs.
The view in the banking sector is that the government should see foreign employment as a development opportunity. Says Surendra Malla of Union Money Transfer: "We must have an integrated approach so the money injected into the economy promotes sustainable economic growth."
Let's not forget India
No one knows for sure, but at any given time there are estimated to be at least two million Nepalis working in India. Most are seasonal migrants who go to supplement their income because they can't grow enough food to feed the family. Others stay for longer periods but come home for the holidays. And there are another estimated 70,000 Nepali citizens serving in the Indian Army.
A back of the envelope calculation of an average Nepali sending home a very conservative Rs 7,000 a year would put the remittances from India alone at Rs 1.4 billion, which means Nepal's annual remittance from India is double the official amount from 'third countries'.
However, nearly all this money comes into Nepal through the hundi system or is carried in as cash, and there is no record of the amount. "Money from the Gulf can be transferred to Nepal in three seconds, but from India it is a cumbersome process and there is no record of how much money is coming in," explains Vivek Niraula of Everest Bank.
In January, Nepal Rastra Bank and the Reserve Bank of India set up a committee that recommended a formal remittance system between India and Nepal. It identified Nepal SBI Bank and the State Bank of India as the two banks to provide money transfers between the two countries.
