Remittance In Nepal

Remittance means sending income in terms of money or goods in home by the migrants or workers who have their earning outside the country. It has become a major part for economic development in developing countries.

Remittances are especially important for low income countries. A remittance transaction is completed in three steps. In the first step, the sender pays the remittance to the sending agent or institution using cash, cheque, or money order to debit card using e-commerce and so on. In second step, the sending agency instructs its agent in the recipients’ country to deliver the remittance. In the third step, the paying agent or union operator makes the payments to the beneficiary. According to the Nepal Rastra Bank, remittance contributes 17.5 to the GDP in fiscal yr2062/63

Remittances are typically helpful to meet specific needs of the respondents’ family members and thus tend to increase their standard of living. This source is more stable than capital flows. It is said that remittances has represented more than 10 percent of GDP in Nepal in the late 1990s. It would be highly beneficial to the country, where there is natural calamities, political conflict, people war, low investment in entrepreneurial activities and economic recession.

The cost of remittance service does not really depend on the amount of principal. The real cost of a remittance transaction include labor charges, house rent, technology, networks etc. It is also known that greater competition among banks and money transfer operators brings down the cost of transaction.

If remittances are large, the recipient country could face an appreciation of the real excange rate that may make its economy less competitive internationally.

Initially, remittance in Nepal was introduced with Gurkha remittances. The Gurkhas were renowned for good qualities of soldiers. That is why British India formally recruited Nepalese youth as a regular army, which later divided into British and Indian army.

With regard to delivery of remittances, the World Bank has expressed the view that the producers of receiving remittance in Nepal is the best in compare to others.

Regarding the transfer of remittances in Nepal, the record of banking sector showed that Rs.15.9 billion was received in fiscal yr 2000/01 . Considering the increase number of workers, assuming four lakh per yr going outside the country in this perspective, remittance received was estimated at Rs. 50 billion in fiscal year2001/02. In this regard it is also estimated that more than 500 people per day are going abroad for foreign employment. From such migrants, about 100 billion per year is expected to enter into the country through remittance income only.

Contribution of remittances to GNP

Remittance as major component of current account plays a vital role in increasing current transfers in balance of payments .

Initially the share of remittance to GNP was found 1.74 percent in mid-jul;y 1991. This share increased sharply 9.38 percent after the period of mid july1999 and eventually reached to 12.03 percent in mid july 2005. On average the share of remittance to GNP was 11.03 percent during the review period from mid july 2000 to 2005. Under the transfer category of BOP, remittance income increased by 11.65 percent totaling rs.65.42 billion in 2005 sue to the increasing trend of Nepali workers going to Malaysia ans Gulf countries for employment.