To channel inbound remittance through formal financial routes, experts have suggested remitters and financial institutions utilise mobile banking technology.

“To promote formal remittance, remitters and concerned bodies need to encourage maximum utilisation of technology such as mobile banking,” pointed out Asian Development Bank’s rural finance/microfinance specialist, Mayumi Ozaki during the National Conference on Remittance for Development in Nepal, organised by National Banking Training Institute.

Nepal, with a population of more than two million working abroad, is one of the top remittance-receiving countries in the world. In the last fiscal year, Nepal received Rs 435 billion as remittance income sent by migrant workers. “In a country like Nepal with almost 70 per cent population without access to finance, development of mobile technology that allows monetary transaction should be given priority,” she added, citing examples of Kenya’s mPesa and Bangladesh’s bKash that successfully provide mobile payment service for remittance payments.

“However, for successful remittance payments through such technology-intensive service, a good telecom infrastructure, and supportive regulation are required,” said Ozaki. “Unreliability of mobile network and strict regulations will dampen the expansion of the sector.”

The official remittance income of Nepal is equivalent to 22 per cent of the country’s Gross Domestic Product. It is believed that almost 30 to 40 per cent of the remittance is entering Nepal through informal channels such as family and friends or through channels such as hundi and the amount coming in from workers in India.

“To encourage migrant workers and their families to use formal financial channels to remit money, financial literacy is a must. They need to be sensitised about the mode of transferring money and the risk of informal transfers,” she informed.

“An ADB research done in 2012 had revealed that in Nepal 36 per cent of the remittance received is spent on consumption, 15 per cent on education, 13 per cent on loan repayments, 15 per cent on investment such as building houses, and only four per cent is saved,” added Ozaki.

Senior emigrant services officer at the Commission on Filipinos Overseas Roderigo Garcia also pointed out that financial literacy is a critical link between remittance and a country’s development.

“Since most part of the remittance is spent on consumption, there should be enough instruments that promote investment of received remittances,” he said, adding that there should be enough insurance products, pension plans, bonds and debentures and financial products in which migrant workers can invest in for future.

During the conference, NBTI’s CEO Sanjib Subba also called attention to the scope of usage of technologies such as smart cards and mobile money to keep most of the money remitted in the banking channels.

Published on: 29 November 2013 | The Himalayan Times