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SANKET MOHAPATRA, DILIP RATHA, AND ANI SILWAL
important source of income for many households and have been associated with a significant reduction in poverty. Remittances have also helped finance Nepal trade deficit over the last decade. With the onset of the financial crisis, remittances to Nepal decelerated in 2009 to 9.5 percent from a staggering growth of 57.3 percent in 2008, but grew by 17.7 percent in 2010 (Mohapatra and Ratha 2010). Nepal’s remittance market appears relatively efficient in the delivery of remittances, with many international and local money transfer operators (MTOs), banks, and other institutions providing remittance services, even in remote regions of Nepal. Although a majority of people do not have accounts with commercial banks, banks typically act as distributors of remittances for MTOs, and very few Nepalese banks actively promote financial products such as savings and deposit accounts, home loans, and health and life insurance to remittance senders or recipients. The lack of valid documentation of migrants in the host countries and consequent lack of access to bank accounts and lack of bank branches near beneficiaries are some of the impediments to the use of formal remittance channels. This chapter provides an overview of migration and remittance trends in Nepal and suggests policy options to reduce costs, increase competition, and foster use of formal remittance channels. Many of these lessons are drawn from experiences of other migrant origin and destination countries. The chapter is organized as follows. The next section outlines recent trends in migration and remittances and the impact of the financial crisis on these flows. The third section provides an overview of the remittance market in Nepal. The fourth section suggests policy options for improving remittance markets. The fifth section discusses leveraging remittances for improving capital market access through remittance securitization and diaspora bonds. The sixth section discusses measures to improve migration policies and institutions. The final section concludes.
Migration and Remittances in Nepal and the Impact of the Financial Crisis Migration has historically been important to the Nepalese economy. Most migrants traditionally went to India in search of employment. This has changed in recent years, with migrants going to GCC and East Asian countries. The number of migrants has also increased dramatically. This change in the number and destination of migrants has made remittances to Nepal more linked to the global economy.
Migration Trends Migration is an important feature of the Nepalese economy. Between 2 and 5 million Nepalese, out of a population of 30 million, are currently believed to be living abroad. This is much higher than official figures. A large share of this migration is to neighboring India with whom Nepal shares an open border; these migrants are largely unrecorded