large-scale migration and remittance in nepal: issues, challenges, and opportunities

1

LARGE-SCALE MIGRATION AND REMITTANCE IN NEPAL:

ISSUES, CHALLENGES, AND OPPORTUNITIES

1. The scale of migration and remittance in Nepal is staggering. Almost half of all

households have at least one migrant abroad or a returnee. Estimates of the number of Nepali

migrants abroad vary widely, but the most frequently cited estimate, including seasonal workers

in India and those who use informal channels, is about 4 million – one-third of the working male

population. Foreign remittances now constitute a quarter of the income of all households and

almost two-thirds of the income for those receiving money from abroad. In FY 2009 ―official

remittance‖ measured by the Nepal Rastra Bank (NRB) totaled US$2.7 billion, or 22 percent of

Gross Domestic Product (GDP). This figure excludes remittance from India and informal flows,

and therefore total inflows could easily exceed 25 percent of GDP. International migration has

thus become the most important economic activity in Nepal. Foreign exchange earned from

migration is higher than that of export receipts and official aid combined.

2. The ubiquity of Nepali migration is confirmed by its uniform distribution. Almost

everyone is migrating – the rich, the poor, people from the Mountains, Hills, and Terai, and from

all of the country’s five development regions. Migration has spread through networks and now

involves the entire country. Worker outflows and remittance inflows are likely to continue, given

Figure Error! No text of specified style in document.1: Migrant Departures and Remittances (2001-10) Figure Error! No

text of specified style in document.2: Destinations of Nepali Migrants

639.5 618.3 696.8 794.0 909.6

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150000

200000

250000

300000

350000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Destination of Nepali Migrants

Saudi Arabia Qatar U. A. E. Malaysia Others

Source:DoFE.

Figure 3: Size of Foreign Exchange Inflows to Nepal (1996-2009) Figure 4: Largest Remittance Recipients in the

* World (Share of GDP, population above 10 million)

0.0

0.5

1.0

1.5

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Size of Foreign Exchange Inflows to Nepal (In US $ billions)

Recorded Remittances Exports of goods and services

Official development assistance Tourism Receipts

0

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10

15

20

25

Nepal Bangladesh Philippinese Senegal Vietnam Morocco Sri Lanka

Remittance/GDP

2

the scarce domestic job opportunities, large young population, and the reach of the migrants’

networks.

Migrants

3. The Nepal Migration Survey (NMS) 2009 puts the number of Nepali work migrants

abroad at 2.1 million. Their key destinations are India, the Gulf countries, and Malaysia, with

notable numbers in other developed countries such as Australia, Japan, the United Kingdom, and

the United States. India is estimated to have 867,000 Nepali migrant workers, 41 percent of the

total working overseas, and the Gulf countries another 810,000 (38 percent). Malaysia is said to

have 245,000 (12 percent), while 186,000 (8.7 percent) are in the other developed countries

mentioned above. Oft-quoted numbers of migrants in India range between 1.5-3 million. The

differences between the NMS survey and other estimates may be explained in part by the

seasonal return of many migrants to Nepal – as this survey was carried out at the peak of Nepali

farming season (May-June), when many migrants who normally reside in India were back

working on farms at home.1

4. India is also the key transit point for Nepali migrants using informal channels. Without documentation, they cannot fly out of Kathmandu, so they use informal agents in India

and often fly to destinations prohibited by the government of Nepal, such as Afghanistan and

Iraq. Women migrants who could not receive letters of guarantee from Nepali ambassadors in

destination countries for the safety of the work also migrate through India.

5. Most migrants are aged 20-44, and the out-migration is causing domestic labor

supply shortages in many rural areas. Many migrants are in their mid-20s (Figure 5) – and the

age-distribution graph of the population remaining in Nepal has a dent around that age. As a

result, the labor supply in rural areas has fallen significantly, raising real wages in many cases.

Many male members of remittance-receiving households have also less incentive to work and

have reduced their labor supply, exacerbating labor shortages.

1 In addition, 1.2 million Nepalis are abroad as non-work migrants – many with student visas. There is inadequate

information on how many of them actually work while abroad.

Figure 5: Age Profiles of Work Migrants and Figure6: Non-Parametric Regressions of Probability

Non-Migrants Are Quite Different of Migration and Wealth Indices

Sources and notes: NMS 2009.

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0 20 40 60 80 100Centiles of Wealth Index

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in India in the Gulf

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Migration Probability and Household Wealth

3

6. Migrant destination countries vary by wealth status (Figure 6). Everyone, from the

poor to the rich migrate, but the likelihood of a household having a member working abroad is

highest when the household belongs to the ―middle class‖ – around the fourth quintile in terms of

wealth. There are various economic reasons for this. Households with the least wealth tend to

send members to India, but India’s attractiveness declines rapidly as wealth increases. The

opposite applies in the case of migration to other developed countries, where migration increases

in line with wealth increase. For the Gulf countries and Malaysia, the relationship is non-linear:

migration increases as wealth goes up and peaks at the fourth wealth quintile before declining to

the wealthiest quintile. In addition, as the wealth index and human development indicators are

correlated, those with less education tend to go to India. Relatively better-off and better-educated

migrants are more likely to work in ―other developed countries‖.

7. Migrant destinations tend to vary according to the place of origin of migrants. Most

migrants from Mid- and Far-Western regions travel to India. Migrants from Western and Eastern

regions dominate the Nepali workforces of Malaysia and the Gulf countries, with workers from

the Central region being a distant third. ―Other developed countries‖ are often the destinations of

those from Eastern, Central and Western regions. Migration to those ―other‖ countries is also

common for urban workers in the Central Development Region, where the Kathmandu Valley is

located. The ―likelihood‖ of migration is highest among people of the Western and Far-Western

regions, while those of the Central Development Region have the lowest, though still significant,

tendency to migrate (22 percent).

Figure 7 : Household Migration Rates by Destination


8. In terms of ethnicity, the probability of migration is above average for

Muslims/others, Hill Dalits, Hill Janajatis, and Brahman/Chhetri (in descending order).

Muslim/others and Hill Janajatis tend to go to the Gulf while the major destination of Hill Dalits

4

is India. The Brahman/Chhetris migrate to both India and the Gulf, and smaller but not

insignificant numbers go to Malaysia and ―other developed countries‖. Newars, who have the

lowest probability of migration (21 percent), have roughly equal preference for all major

destinations (India, the Gulf, Malaysia and the others).

9. About 6-7 percent of migrant workers are female. In absolute numbers, India, Kuwait

and Qatar are their major destinations. Females, on average, earn and remit more than men.

Female migration abroad used to be banned out of concern that they were vulnerable to abuse

and harassment. But recent legal changes assured equal treatment, because the ban had merely

increased female migration through informal channels and exposed them to higher risks. Women

still face high risk of abuse, though, and also have a history of being trafficked in the

subcontinent. The government, to safeguard women, has now mandated that a guarantee letter

must be obtained from the relevant Nepali Embassy before a female migrant can travel to that

country. But this practice has reduced female employment opportunities once more, and is

driving them back to risky informal channels of recruitment.

10. Migrants abroad are employed mostly in three sectors: manufacturing (32 percent),

construction (16 percent), and hotel/catering (16 percent). In India, manufacturing and

hotel/catering are the top two sectors for migrants (24 percent and 21 percent), while agriculture,

at 12 percent, comes third. This share of migrants who work in agriculture in India is

unexpectedly low, even accounting for seasonal factors. In the Gulf countries, manufacturing and

construction dominate (35 percent and 21 percent), while in Malaysia 62 percent of Nepali

migrants are working in manufacturing. Service-sector employment predominates in other

developed countries.

Remittance

11. The survey estimates that foreign remittance in FY 2009 was NPR 190 billion (US$

2.5 billion), or 20 percent of GDP. If we exclude flows from India – to make it comparable

with the NRB figure of 22 percent – remittance was 16 percent of GDP. This is much below the

NRB’s estimate based on information from the financial institutions. The discrepancy is most

likely due to underreporting of income which is typical of household surveys – especially for

households whose inflows are large. Remittance from India estimated in this survey – 4 percent

of GDP – may also be an underestimate.

12. Of the US$ 2.5 billion in remittance from abroad, about half (US$1.2 billion) comes

from the Gulf countries. The remittances received from other destinations are: NPR 41 billion

(US$ 530 million, or 21 percent) from ―other developed‖ countries; NPR 37 billion (US$476

million, or 19 percent) from India; and NPR 20 billion from Malaysia (US$ 260 million, or 10

percent).

13. The amount of remittance a household receives depends on the destination of its

migrant members. On average, households with a migrant in ―other developed countries‖

receive the highest amount of annual remittance (NPR 311,000, or US$ 4,050) followed by the

Gulf (NPR 163,000, or US$ 2,120), Malaysia (NPR 113,000, or US$ 1,470), and India (NPR

62,000, or US$ 800). Internal migrants – those migrating for work within Nepal – send NPR

75,000 home on average, which adds up to 2 percent of GDP.

5

14. Per capita receipt of remittance generally increases with recipients’ household

wealth – presumably more skilled and educated migrants tend to receive better income

overseas. Of the total remittance, one-third goes to the richest 20 percent while the poorest 40

percent receives 19 percent. However, remittance reception rates are lowest among the

wealthiest, implying that only a few actually receive remittance.

15. In terms of regions, the Western Hills and Eastern Terai receive the most

remittance. The Western Hills send the largest number of migrants (20 percent), fairly evenly

distributed to various destinations. The Eastern Terai sends the second largest number of

migrants (17 percent), mostly to the Gulf and ―other developed countries‖. In contrast,

remittances received by Mid- and Far-Western regions are much lower even though they send

many workers to India. This reflects the comparatively low income-per-migrant in India.

Figure 8 : Distribution of Total Remittance by Districts


16. The channels of money-transfer vary by destination. More than two-thirds of remitters

in India hand-carry their remittance, either personally or through friends and relatives. The use of

official channels (money-transfer companies and banks) is highest for workers in the Gulf.

Workers in Malaysia use both money-transfer companies and banks, but surprisingly, many

workers also use the hundi system. More surprising was the finding that 30 percent of workers in

―developed countries‖ opted to ―hand-carry‖ remittances personally or through friends.

17. Securing a foreign job can be costly. The average cost for a worker going to Gulf

countries and Malaysia is NPR 109,700 (US$ 1,430), and NPR 378, 200 to go to ―other

developed countries‖. Getting a job in India costs about NPR 5,250. On average, migrants pay

for about 24 percent of the cost from own savings and help from family members. Loans from

friends/relatives cover 22 percent of the cost and loans from village moneylenders, nearly a one-

6

half of the cost. The average interest on these loans is high – 23 percent when borrowed from

friends and relatives and 30 percent when acquired from moneylenders.

Returnees

18. About 735,000 work migrants from abroad

were back in Nepal at the time of the 2009

Migration Survey. More than half had used India as a

destination; just over one quarter had returned from

the Persian Gulf, and about one-fifth had worked in

Malaysia and other developed countries (Figure 9).

19. Returnee migration patterns are complex,

differing markedly according to destination and

several other factors. More than half had returned in

the last few years and many, particularly those linked

to India, migrate back and forth repeatedly. They are

also more likely to be married and less likely to be

female than migrants currently abroad and non-

migrants. Typically, returnees have households with more children but fewer adult women and

elderly members, with less land holding. These are among several reasons why many returnees

choose to go back abroad for more work.

20. Almost three-quarters of returnees were involved in daily wage-work during

migration. Many choose to farm or remain inactive after returning. Most try to return to the

occupations they had before migrating, but those who switch occupations after migration are less

likely to migrate again. Although, those who had been involved in entrepreneurial activities

before migration and who switched occupations upon return were more likely to migrate again.

This might be explained by the expectation that returnees are likely to move away from

―entrepreneurial‖ work (maybe to agriculture, daily wage or inactivity) if they think they will

migrate again in the near future. It is important to distinguish between ―real‖ returnees, or those

who plan not to migrate again, and those who repeat-migrate because these two groups have

distinctly different behavior patterns and needs.

21. The average foreign migrant returns

when relatively young and at peak working

age (Figure 10). The average age of returnees is

just under 30 years. More than half returned at

ages 20–30 years; three-quarters returned before

age 35. In terms of age and educational

achievement, returnees’ characteristics fall

between migrant and non-migrant populations.

Migrants tend to be younger and better-educated

than non-migrants. If we assume each cohort of

migrants has a similar age distribution, it is easy

to see that returnees are slightly older than the

Figure 9: Numbers of current returnees by

year of return


0

20,000

40,000

60,000

80,000

100000

120000

140000

160000

180000

200000

>2000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*

*Only till May-Jul

India Gulf

Malaysia Others

Figure 10: Age Distribution on Return

Source: Estimates based on Nepal Migration Survey 2009

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Smoothened trend

7

pool of current migrants but younger than non-migrants. Also, if each cohort’s education

improves with time (a reasonable assumption), returnees turn out be less literate than current

migrants but more literate than average non-migrants. Similarly, returnees are better educated

than non-migrants and at the same level or slightly less-educated than current migrants.

22. There is a need to distinguish between returnees who intend to migrate again and

those who are back for good. Of all the returnees surveyed, 37 percent said they were very highly

likely to migrate again in the next 12 months and 34 percent think it very unlikely (Figure 11).

But if we consider only the most recent returnees who returned within 12 months of the survey,

63 percent of them replied as very likely to go back abroad in the next 12 months, and another 14

percent said ―somewhat‖ likely. So 77

percent of recent returnees were considering

migrating again for work very soon. In

addition, of those who returned to Nepal two

and three years before the survey, nearly 50

percent responded most likely and 20 percent

somewhat likely—still significantly high

figures.

23. Returnees come back to

agriculture and inactivity (Figure 12).

Almost three-quarters of the returnees had

been involved during migration in daily-wage

work in manufacturing or construction, and in

work as guards, in the army or as technical

workers. But, after returning, more than two-

thirds are either involved in agriculture or

inactive. Apart from agriculture and

inactivity, the only occupation in which we

see a shift after returning is in the ―others‖

category, which comprises mostly small-scale

entrepreneurs running small shops or

services. This could indicate that although

most of the returnees are inactive or involved

in agriculture, there is a slight increase in

entrepreneurial activities. Comparison of

occupations during and after migration shows

a more detailed breakdown of the shifts –

confirming that agriculture is the largest returnee-absorber, followed by ―inactivity‖. However,

there is a non-trivial shift from agriculture to daily wage work and from technical work to

―others‖ work. Only 16 percent of returnees continued to work in the same occupation during

and after migration.

24. Returnees choose occupations similar to those they held before migration (Figure

13). This indicates a sense of failure by returnees to use their foreign experience to advantage, as

they must have been exposed to new environments and gained new skills. This may indicate

inadequate returnee incentives or lack of available opportunities. Yet there are some discernable

Figure 11: Likelihood of Re-Migration for Work in 12

Months


Figure 12: Occupation Choice During and After

Migration for Returnees


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changes. First, a larger proportion of

returnees is employed after migration than

before (i.e., less ―inactivity‖). Second, the

proportion of those employed in agriculture

and ―other‖ activities is much higher after

than before migration. The higher rate of

returnees’ ―other‖ activities may reflect a

small increase in entrepreneurial activity—

as discussed earlier. This is also apparent

when returnee activities are compared with

those of non-migrants; returnees are more

active generally and more involved in

―other‖ entrepreneurial activities.

25. Recent returnees are more likely

to migrate again (Figure 14) as discussed

above. This finding endorses the expectation

that recent returnees have more multiple

migration experience. Returnees who have

returned within the last year of the survey

are more than 40 percent likely to migrate

again. The likelihood of migrating again

declines gradually with time since their

return. The likelihood of migrating again

declines sharply, though from a high level,

in the first 18 months of return, stays more

or less stable around 30-35 percent until five

years after return and declines again

gradually as duration of return lengthens

3.1 “Real” returnees are involved in

more professional and entrepreneurial

activities. Returnees least likely to migrate

again, the ―real‖ returnees, have different

occupational choices to those who are most

likely to migrate again. Though a large

proportion of both are involved in

agriculture and almost one-fifth are inactive,

the ―real‖ returnees are significantly more

likely to be involved in office and

professional activities, and in ―other‖

occupations, which are largely

entrepreneurial. This suggest that the ―real‖

returnees are more settled in their

occupation choices and are more

entrepreneurial than returnees who intend to migrate again. On the other hand, the ―real‖

Figure 14: Likely Re-Migration, with Year Since Last

Return (smoothed)

Note: 95 percent confidence interval shown by the shadowed region. Source: Estimates based on Nepal Migration Survey 2009

0.1

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0 1 2 3 4 5 6 7 8 9Years since last returned

Figure 15: Occupation Choices of Specified Returnees

Note: *Indicates that the differences are significant at 5 percent significance level. Source: Estimates based on Nepal Migration Survey 2009

Figure 13: Occupation Choice Before and After Migration

– Returnees Compared to Non-Migrants


9

returnees are less likely to work as cooks and waiters and as daily wage laborers. Daily wage

work could be more appealing to returnees who are likely to migrate again, because of its

temporary nature.

26. Inactivity before migration is the largest determinant of inactivity after migration. A returnee’s decision to participate in the labor market is determined significantly by whether the

returnee was active in the labor market before migration (Figure 15). A returnee who was active

before migration is 17.5 percentage points more likely to remain active upon return even after

controlling for a full set of observable characteristics. Another factor that affects returnees’ labor

market participation positively is the marital status—married returnees are 5.8 percentage points

more likely to be active workers. But if one intends to return to migration, he/she is less likely to

participate in the labor market.

Macroeconomic Impacts

27. Macroeconomic impacts of the large-scale migration and remittance are significant. Large worker outflows have reduced domestic un- and under-employment in a country where job

creation has been limited. Also, the significant foreign exchange inflows have contributed to the

balance-of-payments surplus and higher reserves. But, there are concerns that recent

developments are similar to symptoms of Dutch Disease (Box 1) although causality is hard to

prove. Remittance supports higher consumption and, as a consequence, raises imports and

appreciates the real exchange rate. GDP shares of exports and manufacturing value-addition are

shrinking – as are, anecdotally, investments in tradable sectors.

Figure Error! No text of specified style in document.16: Manufacturing as Share of GDP and Remittance

Figure 17: Exports and Remittance

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7.3 7.2 7.06.6

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Manufacturing (as % of GDP) Remmitance ($)

Source: Ministry of Finance and NRB.

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2.4 2.5 2.7

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5.9

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Exports as percent of GDP & Remittance (In US$)

Exports to other countries (as % of GDP) Exports to India (as % of GDP) Remittance ($)

Source: Ministry of Finance and NRB.

10

28. In addition, there is a risk that the Nepal government might not fully appreciate the

urgent need for policy action to move the economy forward, because of the remittance

“cushion”. This is also called the vicious policy cycle of large remittance. In this cycle, migrants

seek jobs abroad because there are limited opportunities within their own country, and send

remittance home to recipients, who then become less eager to hold the government accountable

for good economic policy than if there had been no remittance income. As a result, the

government does not feel pressed by public opinion to improve economic policy; growth and job

creation suffer and more migrants need to leave the country for lack of domestic opportunities.

Figure 18 : Vicious Policy Cycle of High Remittance

Box 1: Dutch Disease

The term ―Dutch disease‖ is used to explain erosion of external competitiveness and the decline in

manufacturing that occurs when a large amount of foreign exchange flows into an economy. The term

originated in the Netherlands where vast amounts in sales proceeds flowed into that country following the

discovery of North Sea gas.

Higher disposable incomes (due in this case to remittance inflows) can trigger an expansion in demand,

which for externally driven prices of tradable goods cause relative prices of non-tradable goods and

services to rise. These higher prices lead to an expansion in the non-tradable sector and contraction of the

tradable sector. With higher demand, wages also tend to rise. By definition, an increase in the price of non-

tradable goods relative to that of tradable goods translates into real exchange-rate appreciation.

Wages can also rise due to a decline in labor supply. Migration directly reduces labor supply in countries

from whence migrants originate. In addition, the increase in household income due to remittances may lead

to a further decrease in labor supply as households engage in more leisure and work less. A shrinking labor

supply, in turn, puts upward pressure on wages, which raises production costs, which can lead to a further

contraction of the tradable sector.

When combined, these effects could cause erosion in international competitiveness and may lead to a

contraction of the tradable sector, although the extent varies widely by country.

11

Household Benefits and Costs

29. At the household level, remittance has significantly increased income and

consumption. The added income is spent largely on consumption and education of children.

Male members of remittance-receiving households also appear to be enjoying more leisure and

working less. Consumption has become a major driver of GDP growth. In FY 1996-2004 poverty

declined from 42 percent to 31 percent. More than half of the decline is due to remittance. It is

tentatively estimated that between FY 2004 and FY 2010, the poverty incidence declined further,

to 21 percent. Had there been no increase in remittance from FY 2004, poverty would have

declined to just 27 percent.

30. Migration has financial and social costs. Migrants pay high, often excessive, fees to

recruitment firms, and the high interest rates charged on these informal loans magnify the overall

cost. Reducing these costs and lowering the barriers could help make migration more pro-poor.

But there are also social costs in family separation, potential abuse by employers or recruitment

agencies, and health risks such as sexually-transmitted diseases. Female migrants often face

higher financing costs, and are more vulnerable to such abuses. The costs need to be carefully

monitored and, where necessary, reduced.

Policy Recommendations

31. Maintaining macroeconomic stability in a high-remittance context requires prudent

monetary and fiscal policies and enhanced supervision of the financial sector. Macroeconomic prudence can limit public-sector demand that would otherwise augment the

already high aggregate demand created by remittance. High remittance also tends to raise the

value of financial sector assets. Therefore, improving supervision of financial institutions could

help to improve overall intermediation and limit the accumulation of risky assets – such as real-

estate lending based on inflated prices.

32. Most importantly, the investment climate needs to be improved to encourage

efficient use of remittance for investment and job creation. While the large remittance flows

are expected to continue, the government may wish to consider more fundamental adjustments to

change the nature of migration incentives – by facilitating economic growth and creating more

jobs at home. Policies to strengthen infrastructure, make the labor market more flexible and

improve trade facilitation are important priorities. Migration should become a choice rather than

a requirement for survival.

33. Improvements should be made in at least two functions at household level. These

concern the recruitment process and the markets for remittance services and costs. For both

issues, it is critical that up-to-date information is collected and made available to prospective

migrant workers.

Recommendations for:

(i) Improving the Recruitment Process

12

a) Publicly disseminate up-to-date information on recruitment, assessment of recruitment

company performance, costs of migration, available financing methods, and how and

where to receive training and orientation. Civil society could play a productive role in this

information dissemination.

b) Provide migrants with pre-departure orientation courses to provide them with basic

information, financial literacy, and knowledge of the languages and cultures of destination

countries. Basic skills training would also be advantageous.

c) Simplify and systematize the recruitment approval process in consultation with recruiters

and returnee migrant workers.

d) Re-energize ―economic diplomacy‖ at Nepali embassies in destination countries, giving

them a greater role in verifying employment letters and contracts and in monitoring

implementation and employment conditions of migrant workers. Labor attachés in major

destination countries could assist the process. Define necessary qualifications of labor

attaches and appoint them as soon as possible. Consider requesting major destination

countries to open embassies in Kathmandu.

e) Intensify communication with governments of destination countries for reviewing

recruitment practices and enforcing regulations and bilateral agreements. Negotiate

bilateral memoranda of understanding with destination countries and make these public.

f) Improve dialogue on migration with the government of India. Not only is India the largest

destination, but it is also a transit territory for Nepalis heading to other countries, including

the Gulf, through informal channels. Improved information collection and better

enforcement of regulations would benefit migrants and recruiters.

g) Enhance bilateral communication with Qatar. Nepali workers pay airfare and commissions

to Nepali recruitment agencies that, in turn, pay their dues to Qatari recruitment companies.

Migrant workers should not be burdened with these costs, according to Qatari Law and the

bilateral agreement between Nepal and Qatar.

h) Develop a communications program to build public awareness about migration. Such a

program could help to reduce misunderstandings and fraud. The program should include

information on trafficking of women, girls and boys.

i) Periodically review the restrictions on migration to specific countries and lift bans, where

applicable.

j) Strengthen enforcement of regulations on recruitment agencies by developing and

implementing an effective monitoring and regulatory system that rewards good practice

and penalizes malpractice. Establish an independent industry ombudsman to handle

complaints from or against the various stakeholders.

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k) For female migrants, in particular, pursue bilateral country agreements and monitor their

implementation to improve conditions for these workers instead of trying to prevent their

migration. Disseminate information and provide counseling and shelter services in Nepal

and destination countries.

(ii) Improving Remittance Services and Lowering Costs

a) Develop an efficient electronic fund-transfer mechanism, such as the Automated Transfer

System, to improve the payment infrastructure.

b) Consider introducing mobile phones and pre-paid cards for remittance services and

encourage post offices to handle payments.

c) Improve the legal and regulatory framework for addressing issues related to transparency,

consumer protection, capital adequacy, anti-money laundering, risk management, dispute

resolution, and reporting to licensed remittance service providers (RSPs). Establish a

system to ensure that only financially sound RSPs are licensed.

d) Consider banning exclusive transfer and payment agreements in order to nurture a

competitive remittance service market.

e) Increase communication with destination governments, and enter into bilateral agreements

with as many of them as possible. Discuss with these governments the possibility of

introducing ID cards for migrants, which could be used to open bank accounts, among

other things.

34. Migration has clearly become the core of Nepal’s development strategy. This shift

was not planned but evolved naturally and has significantly enhanced disposable incomes and

reduced the incidence of poverty. The benefits could be enhanced by further reducing job-search

and recruitment costs, limiting, if not eliminating, abuses and other problems of migration, and

lowering the transaction costs of sending money home. These measures could increase the access

of poorer migrants to more productive foreign employment and, in turn, help the country of

Nepal earn a greater share of globalization’s benefits.

35. Sound economic and financial policies are crucial to help Nepal grow with more

than high remittance inflows. Policymakers should know that no country has ever succeeded in

sustaining growth and job creation on remittance alone. Experience shows that improving the

investment climate, which leads to sustained growth and private-sector job creation, are the best

ways to enhance the development impacts of remittance. Once again, successful improvement in

the investment climate can help to make migration more a matter of choice than a survival

strategy.

large-scale migration and remittance in nepal: issues, challenges, and opportunities

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