Approaches to the Productive Use of Remittances in Nepal- Working Paper 2018/1

Migration is an age old phenomenon in Nepal. Until the 20th century, migration was either internal or cross border to India. But with the opening up of migration for employment to Gulf countries and South-east Asian countries, there was a rise in the trends and patterns of people migrating to these countries. Increasing numbers of youth are also migrating overseas to Western countries for employment and education purpose. Remittances sent by these migrant workers have diverse implications for socioeconomic development in Nepal. With these realities in mind, this study has tried to identify appropriate, workable approaches for promoting the productive use of remittances through a review of the rural investment policy, schemes, and products in South Asia.

Remittances are not only very large, but continue to grow and remain relatively stable. They can, potentially, provide a cushion for economic shocks and have direct benefits for households, and so remittance flows and their productive use are of crucial policy concern in Nepal. Migrant workers and their families primarily use of remittances for consumption purposes. If this current trend of remittance use continues, the hard-earned money sent by migrants abroad will not be used productively, and cannot contribute to economic growth and development. Thus, there is a need for the government to formulate effective and efficient public policies to motivate Nepalis to send money home, and to devise mechanisms that channel such money into productive activities. Productive use of remittances calls for systematic efforts to divert them, and requires initiative from government to encourage investment, generate employment, and expedite national economic growth.