Spend the money wiselyNepal receives a massive amount in remittance, which can and should be used for development
Nepali migrant workers have spread out across the world over the decades, and the money they send back home has become a mainstay of the economy. The number of countries open to foreign employment has increased to 109, and remittance inflow has been swelling over the years. The money thus received is spent on family expenses and buying property, which means that much of the remittance gets lost without benefiting the national economy. Several studies have shown that most of the remittance is used for household purposes such as educating the children, fulfilling basic home needs, building homes and repaying loans. While they can be seen as safe investments, they become non-productive assets in macroeconomics, and hence contribute less to the country’s real income.
Therefore, strategic management of the remittance is required to assist the long-term development of the country. While a majority of the remittance that comes to Nepal is sent by workers who have a relatively higher marginal propensity to consume, there is also a certain group of highly skilled workers, such as medical doctors or information technology professionals who provide a higher contribution to output.
With an increasing number of Nepalis working abroad, the country has been receiving a good amount of money. A simple example of this trend can be seen in the inflow of money during the Dashain festival in Baglung district. Baglung received remittance totalling Rs400 million. A single money transfer firm distributed remittance to more than 100 clients amounting to more than Rs10 million daily. The growing number of remitting agents in different villages can be taken as evidence of the rising inflow of remittance. This is evidence that remittance has transformed the lives of a large number of urban and rural Nepalis.
Nepal’s national development requires strong macroeconomic factors for which strategic management is needed. Such management is only possible with adequate research and knowledge of spending. In certain cases, lack of knowledge about the proper use of remittance has even led to bankruptcy after returning from a foreign country. Hence, in Nepal’s case, where there is a high rural population, correct calculations and a need-based approach for investment are required.
Classes for prosperity
To this end, the financial literacy classes operated in a few municipalities of Khotang district can be taken as a good exercise. Run as a joint effort of Balsewa Samaj Nepal and the Safer Migration Project, these classes were given to families who have members working as migrant workers abroad and receive remittance. During these classes, people are taught how to manage the remittance, and how foreign employment can be made productive by establishing a sustainable source of income. Apart from the training, the formation of associations of migrants and their commitment to their home country should be ‘institutionalised’ for positive macroeconomics or development impact of remittance.
Countries have adopted different approaches to this end. Thailand offers investment schemes and business set-up advisory services through a foundation. The migrant workers are provided credit cards at the time of departure and are secured through solidarity groups. In the Philippines and Sri Lanka, no fee is charged for renewing a person’s passport if the voucher of bank transfer of remittance is attached with the application.
The right fit
Similarly, the Philippines and Mexico have introduced pension plans for returning migrant workers. Loans are also given to the families of migrant workers to be repaid with the remittance they send home. India has given preferential access to capital goods and raw material imports to recent returnees starting productive activities. Instead of copying something done in other countries, Nepal should select a practice that is suitable to its context and will contribute to economic development.
Although there is lack of accurate data on the actual volume of funds transferred, it is clear from the various evidences that remittance flows are substantial and a stable form of development finance. Remittances have provided support and help to family members remaining in Nepal. Economic growth, exchange rates and interest rate policies play the role of an imperative factor on remittance inflows. To maintain them, it is necessary that initiatives be taken to further strengthen the streamlining of the financial system.
Foreign employment intends to draw money and development through remittance. However, inadequate information about foreign jobs, lack of skill training, lack of pre-departure preparation, lack of assurance of a safe working environment and lack of guaranteed rights of migrant workers are causing hindrances.
This is detrimental at both levels: individual and national. While a poor migration policy is resulting in deaths and jeopardising the rights of migrant workers, mismanagement of remittance and the skill of returnees is harming the economic development of the country.
Regmi is an advocate