Workers opting for informal mode to remit money

Though the number of Nepalis leaving for overseas jobs has grown by double-digits, flow of remittances has continued to decrease in recent months, indicating that more people are opting for informal mode of money transfer.

The government had initially attributed the drop in remittances to time-lag impact of the global financial crisis, when Nepalis faced cut in working hours and earned less. But given that more people have continued to find overseas jobs, experts now assess it could be due to increased transfers through hundi, the informal channel.

Latest statsitics of Nepal Rastra Bank (NRB) shows that Nepal received remittances amounting Rs 143.95 billion during the first eight months of 2009/10, growing at just at 9.9 percent over that received in the same period last year. Number of Nepalis leaving for overseas job, on the other hand, has continued to grow by over 11 percent during the period.

Statsitics from the Department of Foreign Employment shows that 173,297 Nepalis left for overseas jobs during the period, up from 155,734 recorded during the same period last year.

“Drop in the value of US dollar, slashed working hours and drop in earning are few big factors behind the low growth rate of remittances.

But what we also doubt is, more people could be using informal channels to send money back home,” said Ganesh Gurung, migration expert and member of National Planning Commission, who looks after foreign employment.

He attributed such possible shift in mode of transfer to lower service charge of Hundis as compared to formal money transfers. As per the government estimation, around 40 percent of the remittance enter the country through informal channel such as hundi and hand carry.

Chandra Dhakal, chairman of IME, a leading money transfer company, agrees, "Fresh reports even pinpoints that foreign agents too are paying commissions to Nepali manpower agents through informal channel,” he told Republica.

Manpower agents did not agree with the report though. Instead, they claimed that workers might have refrained from remitting money because the value of US dollar has declined in recent months.

Despite such new trends, foreign employment agents said that remittance inflow would grow in months to come due to easing of the impact of global financial crisis.

“Earnings of Nepali workers for last couple of months have started to increase of late. This will have its impact on remittances inflow figures in coming months,” said Gyan Prasad Gaire, vice president of Nepal Association of Foreign Employment Agencies (NAFEA).