Thursday, July 13, 2017

Central bank plans to incentivise remittance to check hundi

The central bank is planning to incentivise remittance to check the hundi, the illegal method of sending money back home by the migrant workers, and bring it into the formal channel.
Responding the lawmakers at the Finance Committee meeting of the Legislature-Parliament, today, deputy governor of the central bank Chinta Mani Siwakoti said that the Nepal Rastra Bank is planning to bring incentive scheme to encourage the migrant workers send the remittance through banking channel.
However, he said that the Nepali migrant workers in South Korea send only 0.84 per cent of the total amount through the formal channel as there is no official channel to send remittance to Nepal. "Though the government sends workers to South Korea on government-to-government agreement, the formal channel has not been utilised by the workers there to send money to Nepal as the Korean government has not yet allowed the Nepali remittance companies and banks to set network.
"Due to poor banking access, migrant workers have to rely on the informal channels," he said, adding that central bank is making the bank accounts mandatory for the migrant workers.
Informing the panel Global IME chairman Chandra Dhakal said that his company is planning to expand money transfer business in South Korea. The South Korean government has recently introduced a law, allowing foreign companies to open remittance services, he said, urging the government to make it mandatory for migrant workers to open bank account under the Employment Permit Service (EPS).
According to the central bank, Nepal received Rs 623 billion remittance in the first 11 months of the current fiscal year. The figures stood at Rs 665 billion and Rs 617 billion in 2015-16 and 2014-15 respectively.
However, only 70-80 per cent of the total remittance is being sent through formal channels, according to the central bank study. The country received rest of the amount through informal channels, popularly known as Hundi.
Since these informal channels are generally perceived to be less secure, sensitive to misuse for illegal purposes, and less beneficial to the country’s economic development, the central banks and other authorities have been expressing concerns over the use of informal channels to remit funds.
Likewise, Siwakoti said that the government has also been facing challenges to formalise remittance inflow from Dubai. "Most of the migrant workers prefer purchasing gold and other goods rather than remitting money from Dubai," he added.
The government has allowed Nepalis to go to 110 countries to work. There are 1,033 licenced recruiting firms and 40 companies working as fund transfer managers abroad.
The lawmakers on the occasion, asked the government to launch schemes to encourage migrant workers to send remittances through the formal channel. Urging the government to take carrot and stick approach for bringing remittances into the country through formal channel, they also asked to announce schemes to increase the flow of remittances from South Korea, India and the United Arab Emirates (UAE) through the banking channel.
Former finance minister Surendra Pandey, on the occasion, said that the government should provide incentives to migrants who are working to attract more remittances through banking channel.
"The Pakistani government has provided incentives to their migrant workers to increase the inflow of remittance through formal channel by paying transfer charge that is incurred while remitting money,” he said, asking the government to replicate Pakistan model. "Nepal has received remittance worth Rs 4 trillion in the last 20 years but the inflow of remittances has been slowing down since the last few years, thus, the government should incentivise it."
Likewise, finance minister Gyanendra Bahadur Karki, on the occasion, informed that the government was committed to attract remittances. "We have discussed with the Nepali ambassador based in South Korea to establish a formal channel to bring remittance from the country during our visit there last month,” he added.
Finance secretary Shanta Raj Subedi, on the occasion, said that the outflow of migrant workers has been declining since the last three years. "The outflow of migrant workers has been declining since the devastating earthquakes of 2015,” he said, adding that decline in outflow of the Nepali migrant workers has hit the remittance inflow. "The government has not been successful in attracting migrant workers to invest in the Foreign Employment Saving Bonds."
Any significant drop in remittances, which equals to 30 per cent of the country's GDP, will hit the country's foreign exchange reserve and balance of payment (BoP) situation.
Likewise, former finance minister Dr Ram Sharan Mahat said that the government needed to develop a mechanism to channelise the remitted money in the productive sectors. "Some 27 per cent of the money that the migrant workers bring home is deposited in the banks and financial institutions," he added.
Also speaking at the meeting, minister for Labour and Employment Farmulha Mansur said that the ministry was bringing a rule that require overseas job aspirants to have two bank accounts before flying abroad. “They can directly transfer their money for saving purpose in one account, while the other account will be opened on their family member's name could be used to transfer money for household expenses," he said, adding that the  mandatory provision will help in increasing the use of formal channel.

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