(A partnership between UKaid Sakchyam and Prabhu Bank Limited)

Background 

Inward remittance is a major source of income for thousands of households in Nepal. ‘Labour Migration for Employment – A Status Report for Nepal – 2016/17’ published by the Ministry of Labour and Employment, positions Nepal as the fourth-highest remittance recipient, as a share of GDP, in the world and the top recipient among the South Asian countries in 2017. According to a World Bank study, Nepali migrant workers sent home $8.1 billion in the Fiscal Year (FY) 2017/18, making it the 19th biggest beneficiary of funds sent by migrants in the world. As a percentage share of GDP, there was an increase from 21.2% in FY 2008/09 to 28% in FY 2017/18. All these figures highlight how crucial workers’ remittance is to Nepal’s economy.

Challenges 

Nepalis who migrate to South Korea for work are more educated compared to those in other countries. They also have higher income – a minimum monthly salary equivalent to NPR 170,000, according to a survey conducted by Access Advisory in 2015. They send money home every two to three months, with an average ticket size of around NPR 125,000.

In contrast, the migrant workers in India are from a lower-income background and less educated. These migrant workers mostly go for labour work and often involved in seasonal migration. According to a survey by NRB, their earnings are often as low as INR 3,000 (NPR 4,800) per month and only 6% earn higher than INR 10,000 (NPR 16,000) per month. Though the average income level is low, this is offset by the sheer size of the market as India has one of the largest numbers of Nepali migrant workers.

According to a Nepal Rastra Bank (NRB) study titled ‘Saving and Investment Behaviours of Remittance Receiving Households, 2017’, while 90.90% of the Nepali remitters utilize banks and remit agencies, informal sources like hundi and carrying cash are still commonly used by many migrants to remit money to Nepal. In the 2015 survey conducted by Access Advisory, the Nepali workers in South Korea said they found the informal channels more convenient, accessible and cheaper than formal channels. Workers in India send money through hundi, with friends or carry cash themselves due to the open borders and easy travel; this often exposes them to risks such as robbery and fraud.

Sakchyam’s Intervention

UKaid Sakchyam Access to Finance has partnered with Prabhu Bank to facilitate remittances of migrant workers through the formal financial channel. Prabhu Bank with its considerable experience in the remittance business will offer dedicated banking products and services to the migrant workers in South Korea and India, as well as their families in Nepal. The two sister remittance companies of the bank, Prabhu Korea and Prabhu India operating in the two focus countries of the project will provide a strategic advantage in this partnership.

The project with target districts of Sudurpaschim and Karnali provinces has the following main objectives:

  • Increase the access to financial services among the Nepali migrant workers and their families. The services include remittances, savings, loans, life insurance schemes and portfolio management
  • Enable Nepali migrant workers and their families to practice efficient money management by introducing electronic platforms for financial services such as mobile wallets and internet banking
  • Enhance the ability of the target groups to manage finances such as household financial planning, investment through various financial literacy tools

Likely Impact 

Under this partnership, the bank aims to open 21,000 new bank accounts of the Nepali migrant workers in South Korea and India, and their families back home, effectively bringing them into the formal financial fold. They plan to cross-sell other products and services such as remittance, loans, insurance, portfolio management services, and mobile wallets.

As of September 2019, the project has

  • reached 4,163 beneficiaries
  • insured 130 beneficiaries of amount NPR 91 million 
  • disbursed loan amount of more than NPR 2 million
  • collected deposit amount of more than NPR 8 million