REMITTANCE BUSINESS IN NEPAL

Presented By:

Sumit Maheshwari

Introduction

A Remittance is a transfer of MONEY by a foreign worker to his or her home country.

Significance of Remittance

1. Micro Implication

• Remittances are used for basic subsistence needs such as food, clothing and health care

• Funds are also spent on building or improving housing, buying land and cattle, and durable consumer goods

• It also funds development projects

2. Macro Implication

• Provides foreign currency to national reserve

• Increase national income, finance imports and contribute to balance of payments

• Affect home country real GDP per capita growth positively

Remittance Status in Nepal

According to UNDP ‘Human Development Report 2010’, remittance was the factor behind Nepal’s success in last 40 years.

Remittance has contributed significantly to the reduction of poverty in the last 15 years.

World Bank’s report ‘Migration and Remittance Fact book 2011’ says Nepal is among top 5 countries with remittance amounting to 23 percent of the GDP.

Data's of Remit Inflow

Remittance inflow to Nepal US$ (Billions) (source World Bank)

YEAR REMIT IN US$ BILLIONS

2003 771

2004 823 

2005 1,212

2006 1,453

2007 1,734

2008 2,727

2009 2,986

2010 3,513 expected

Problems of Remittance• Harms the tradable sector by appreciating the real

exchange rate

• Reduces labor market participation

• Remittances were also seen to increase dependency

• Create social problem such as marital conflicts and family stress

Continued.

Raises level of Inflation Savings produced by it are frequently directed to

purchase of non-productive assets. Increases Dependency on family members. Country may face economic shocks when remittance

flow is disrupted.

Channels for Remittance Currently, it is estimated that about 60%of the remitted money to

Nepal enters through formal channels.

Formal ChannelsFinancial Institutions, Money exchanges

Informal ChannelsHundi and etc.Self Carry, Friends and familyIn kind

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