The Foreign Employment Bond has become a washout for the third consecutive year with very low subscription. The designated agents were able to sell only 8.6 per cent of the total bond issue despite an attractive coupon rate of 10 per cent per annum.

“We were able to sell foreign employment bonds worth only Rs 8.6 million of the total issue worth Rs one billion,” said an official at Nepal Rastra Bank (NRB)’s Public Debt Management Department.

The issue had failed to get proper subscription in the last two fiscal years too.The first foreign employment bond, issued in fiscal year 2009-10 had seen subscription worth Rs 4.6 million of the total issue of Rs one billion at 9.5 per cent interest. Likewise, last year too, bonds worth only Rs four million of the total issue worth Rs five billion were sold.

The repetitive failure of the bondto attract enough investment from the migrant worker community has been attributed to the absence of proper marketing channels. The failure of the last two batches had got NRB to look into diverse markets allowing even Non Resident Nepalis (NRN) and returnee migrant workers to purchase the bond instead of only focusing on migrant workers in Gulf countries and Malaysia.

The bonds were sold by six agents including remitters and one commercial bank to collect application and funds from the applicants. Earlier, the bond issuer had great expectations from NRNs, as migrant workers might not have much purchasing power due to limited income. “But not only migrant workers and returnees, NRNs also did not show much interest in purchasing the bonds even though it provided assured returns,” said the NRB official.

The limited targeting had excluded migrants in India where a large number of Nepali workers areworking because none of the remittance company working in India applied for the agency. To push sales, NRB had even increased the agent’s commission to 0.65 per cent of the total amount for mediating the primary sale of the bonds.

The listless reception of the issues in the last two fiscal years had even made the central bank tone down the issue this fiscal year to Rs one billion. The government bonds, which are meant for thegeneral public, always face a tough time in getting fully subscribed despite attractive yields.

The recent issue of National Saving Bond 2076 ‘ka’ had set aside Rs 700 million worth of bonds for the general public but only saw bonds of about Rs 130 million being subscribed. The layman is missing out on booking good returns by investing in bonds due to lack of awareness about investing in government securities.

Published on: 13 July 2012 | The Himalayan Times