There has been a remarkable improvement in poverty reduction in Nepal, thanks to the increasing number of Nepali migrant workers in foreign countries who are sending remittances. According to the 2011 Living Standard Survey, remittance income constitutes over 30% of the total income of the remittance-receiving families. Approximately 58% of the rural households in Nepal received remittances.
This inflow of remittances has lifted many households from poverty and successfully raised the standard of living for hundreds of low-income families. Remittances have been a single source of income that has contributed to the decrease in the poverty trend in Nepal. Even higher than foreign aid.
Remittances are the lifeline of many families and it has reshaped the economy. Nepal received a total of $8.1 billion in remittances in 2018, contributing to 25% of the Gross Domestic Product (GDP) as per the Nepal Rastra Bank.
Globally, the average cost of remittance is close to 7% of the total amount being sent. For customers, one of the other advantages of sending money to a country that receives a high volume of remittances is the service. Due to a competitive marketplace, customers can enjoy faster and cheaper ways of sending money. Make sure you compare the money transfer companies before sending money.
The top five countries that send money into Nepal are Qatar, the Kingdom of Saudi Arabia, India, the United Arab Emirates, the United States of America. Let’s take the example of sending money from the United States to Nepal, you can send $500 at a flat fee of $4.99 or send $1000 at a flat fee of $0 through money transfer companies like Xoom, InstaReM, TransferWise, WesternUnion, etc.
With the COVID-19 pandemic causing a high unemployment rate, uncertain economic situation, and global recession, the World Bank estimates that remittances to Nepal, which contribute one-fourth of the country’s economic output will fall by 14%.
COVID-19 and its subsequent lockdown measures in popular destinations of Nepali migrant workers like India, the Gulf states of Qatar, the United Arab Emirates, Kuwait, and Saudi Arabia have led to unprecedented job losses for the Non-resident Nepalis (NRN).
Many workers, often with minimal savings, no unemployment insurance, or the possibility of being homeless, are in vulnerable states in this public health crisis.
Repatriation efforts have been taken by the government of Nepal for the thousand stranded workers abroad. Many of the returnees will have to face even deeper financial problems. Even before the pandemic, many Nepali workers sold their ancestral land or took loans in order to pay for the high fees of the recruitment agencies for getting employment abroad. Paying back the loans will get harder with the sudden job loss. They might take on more debt if they have to pay for the repatriation costs. Steps to promote financial inclusion for over 60 percent of the population of Nepal who does not have access to banking or financial services is an innovative undertaking by the Central Bank of Nepal. This is in accordance with the financial literacy program of the Government of Nepal and with the UN Joint Migration and Development Initiative (JMDI) project called “Safer Remittances for Improved Livelihoods”.
Importance of Financial Literacy for Nepali Migrant Workers
Though the government recognizes the contribution of the migrant workers to the country’s economy, the use of remittances to create sustainable income-generating activities seems to be lacking. Much of the money is used by families for basic necessities instead of using it in productive investments that will break the dependency on remittances and re-migration. For the eventual economic reintegration of the Nepali returning home, building a healthy financial life right from the start is crucial. And for this reason, the financial literacy of migrant workers is a major requirement.
Financial tips for Nepali Migrant Workers returning home
If you are a migrant worker, it is important for you and your family to be financially educated. It will promote collective financial planning and setting realistic financial goals for the family as a whole. It will also encourage the effective use of remittances or financial resources. Children’s participation in financial training programs should be encouraged. Basic skills like how to make a budget and plan saving will be helpful to the family.
In many cases, the head of the household does not take part in the financial literacy training which hinders the joint financial planning and thus, proper use of the financial resources.
Most often, the women have no say in the use of money sent by their migrant spouse even though they are able to make financially sound decisions. You can be the change and let the result speak for itself.
To reach your financial goals faster, good money habits are paramount. This includes making a household budget according to the income, paying off debt, tracking your expenses, saving for retirement, or medical emergencies. Putting money aside for future investment etc.
Most banks catering to the overseas Nepali population provide online banking facilities. Use it to track, budget, and plan even when you are abroad.
Having an alternative source of income is one way to ease the dependence on remittance income and create financial security. In case of unpredictable circumstances like sudden job loss, you have other sources of income. It is easier said than done but always be on the lookout for opportunities and be careful not to fall for Ponzi schemes and other financial frauds.
The government of Nepal is exploring ways to reintegrate the returnees into the country’s workforce. One such step is providing loans at a lower interest rate for entrepreneurial activities like commercial farming by the central bank, Nepal Rastra Bank.
Being well informed about migrant specific financial products like saving plans, remittance associated loans, credit, investment, insurances, financial schemes that are being offered by the financial service providers.
International Organization for Migration (IOM) in collaboration with Nepal’s Ministry of Labour and Employment and the Central Bank of Nepal, has trained government officials, civil societies, NGO trainers, private and cooperative financial institutions to provide financial education to the families who are surviving on remittances. Along with financial literacy, providing relevant skills training, entrepreneurship development training to enhance the people's ability to generate income are also included.
Sending and receiving remittances through an informal channel exposes you theft and robbery. Hawala is an illegal channel of sending money which is usually operated by hardened criminals. They charge you an exorbitant fee and intimidate you by using your hard-earned money.
Many migrants face problems in transferring money because of a lack of knowledge on how to send money or international money transfer services. Educate yourself and your friends around you to opt for secure and safe remittances channels regulated by the government.
Access to digital remittances channels that can help you send money online that are cheaper, safe, and very convenient. Especially during the pandemic, sending money online takes away your risk of exposure through a money transfer agent in addition to your money being safely transferred to your family.
When you send money online to Nepal, you spend less money on fees and less time waiting for your money to be transferred.
At CompareRemit, you can compare top money transfer companies alongside each other for free and choose the one with the best exchange rate and the minimum transfer costs to save you money with every transfer.
These are all important for the subsequent re-entry of the returnee migrants back to the home communities. The effort of reintegration will have to be implemented at every level.
While individuals have a part to play, governments have to initiate more policies to cushion the return of it’s biggest export. Private entities like the banks and money transfer companies should also use the opportunity to solve legacy challenges like building a better network on the receive-side of remittances. And the opportunity to link the digital remittances to other financial products such as savings, credits, insurance, etc. tailored for migrants and their families.