Providing financial education alone does not ensure that people gain capabilities to make the best use of remittance money they receive; access to formal financial institutions is instrumental for that. It is also important to provide people with training on starting up small businesses.
ABHAYA BAHADUR SINGH
Remittances have been the mainstay of Nepalese economy and in the recent years they have been contributing about 23% to the GDP. Nepal is among the top six countries in the world with highest remittance-GDP ratio (World Bank). Every year hundreds of thousands of Nepalese youth go to countries like Malaysia, Qatar, Saudi Arabia and India, among others, in search of employment. It is estimated that about 7.5% of Nepalese are working abroad. These are mostly unskilled laborers or those who join the armed force services in India and the UK. Being separated from the family is never easy but still an increasing number of youths make this sacrifice to earn better income and send money back home as remittance.
Concerns have been rising in the country regarding remittance being used excessively for consumption as opposed to productive investments. True, Nepalese economy would fare better if remittances were used for productive investment purposes. But how would the mostly illiterate remittance receiving family members know about making ‘productive’ use of the money sent by family members from foreign countries when they don’t even have the basic skill and knowledge required to manage their money? This is a very important question and answering this would be a key step towards addressing the problem we are facing now – making proper use of remittance money rather than spending it for consumption alone. One of the solutions could be educating the people about managing the money, or in other words, providing them with financial education.
Lacking financial education and basic financial literacy, most of the rural households of our country have little idea as to how to make the best use of remittance they receive. In most of the rural areas people lack access to formal financial services, but even in areas where these services are available they may not understand the range of services on offer. They may also lack trust in financial institutions to explore the financial choices and to make the best use of them for improving their economic well-being. The objective of financial education to the remittance receiver would be to raise their awareness regarding the temporary nature of remittance, improving their money management capacity and to sensitize them about the value of using formal financial institutions while receiving the remittance. Primarily, they are encouraged to recognize and appreciate the enormous effort and hard work of family members who have gone for foreign employment.
Through financial education the remittance receivers can identify what actions they can take to make the best use of remittance money corresponding to the stage of migration they are in: e.g. during short term the focus would be on paying back the debt incurred while going for foreign employment; in the medium term money is used basically for consumption needs and for home improvement; and in the long term money is invested for buying land or house or to start up a business. They can recognize remittance as only a temporary source of income with inconsistent flow and money and acknowledge the risks of depending too much on remittance income. The participants will understand how the remittance can be used to leverage other financial services (e.g. savings and loans) offered by financial service providers. This is quite important in the sense that they learn how to make productive use of the remittance money. Financial education makes people aware of different channels for receiving remittance and the benefits associated with the use of formal financial service providers.
Providing financial education alone does not ensure that people gain capabilities to make the best use of remittance money they receive; access to formal financial institutions is instrumental for that. In addition to financial education and access to financial services, it is important to provide people with training on starting up small businesses in order to ensure that they make ‘productive’ use of remittances they receive and are capable of improving their economic well-being. There are few initiatives of small scale to provide financial education to remittance receiving households and returnee migrants who have come back to the country after spending years in foreign countries to earn money. It is the responsibility of the Government to scale up those initiatives to reach and benefit as many people as possible.
The focus should not be only on remittance receivers but also on those who intend to travel abroad for employment. The Department of Foreign Employment can play a vital role by making financial education mandatory for those who are seeking employment abroad. The government has the policy of providing orientation to youth travelling for foreign employment. One good strategy would be to add elements of financial education in the orientation program. CTEVT can add financial education in its curriculum. Directives can be given to manpower and foreign employment agencies to provide basic financial education to job seekers and a simple technique like handing out brochures/leaflets on financial education to youths lining up for passport can also be useful.
source:SINGH,ABHAYA BAHADUR(2013),"Using remittances properly", The Himalayan Times,25 june 2013
LINK
ABHAYA BAHADUR SINGH
Remittances have been the mainstay of Nepalese economy and in the recent years they have been contributing about 23% to the GDP. Nepal is among the top six countries in the world with highest remittance-GDP ratio (World Bank). Every year hundreds of thousands of Nepalese youth go to countries like Malaysia, Qatar, Saudi Arabia and India, among others, in search of employment. It is estimated that about 7.5% of Nepalese are working abroad. These are mostly unskilled laborers or those who join the armed force services in India and the UK. Being separated from the family is never easy but still an increasing number of youths make this sacrifice to earn better income and send money back home as remittance.Concerns have been rising in the country regarding remittance being used excessively for consumption as opposed to productive investments. True, Nepalese economy would fare better if remittances were used for productive investment purposes. But how would the mostly illiterate remittance receiving family members know about making ‘productive’ use of the money sent by family members from foreign countries when they don’t even have the basic skill and knowledge required to manage their money? This is a very important question and answering this would be a key step towards addressing the problem we are facing now – making proper use of remittance money rather than spending it for consumption alone. One of the solutions could be educating the people about managing the money, or in other words, providing them with financial education.
Lacking financial education and basic financial literacy, most of the rural households of our country have little idea as to how to make the best use of remittance they receive. In most of the rural areas people lack access to formal financial services, but even in areas where these services are available they may not understand the range of services on offer. They may also lack trust in financial institutions to explore the financial choices and to make the best use of them for improving their economic well-being. The objective of financial education to the remittance receiver would be to raise their awareness regarding the temporary nature of remittance, improving their money management capacity and to sensitize them about the value of using formal financial institutions while receiving the remittance. Primarily, they are encouraged to recognize and appreciate the enormous effort and hard work of family members who have gone for foreign employment.
Through financial education the remittance receivers can identify what actions they can take to make the best use of remittance money corresponding to the stage of migration they are in: e.g. during short term the focus would be on paying back the debt incurred while going for foreign employment; in the medium term money is used basically for consumption needs and for home improvement; and in the long term money is invested for buying land or house or to start up a business. They can recognize remittance as only a temporary source of income with inconsistent flow and money and acknowledge the risks of depending too much on remittance income. The participants will understand how the remittance can be used to leverage other financial services (e.g. savings and loans) offered by financial service providers. This is quite important in the sense that they learn how to make productive use of the remittance money. Financial education makes people aware of different channels for receiving remittance and the benefits associated with the use of formal financial service providers.
Providing financial education alone does not ensure that people gain capabilities to make the best use of remittance money they receive; access to formal financial institutions is instrumental for that. In addition to financial education and access to financial services, it is important to provide people with training on starting up small businesses in order to ensure that they make ‘productive’ use of remittances they receive and are capable of improving their economic well-being. There are few initiatives of small scale to provide financial education to remittance receiving households and returnee migrants who have come back to the country after spending years in foreign countries to earn money. It is the responsibility of the Government to scale up those initiatives to reach and benefit as many people as possible.
The focus should not be only on remittance receivers but also on those who intend to travel abroad for employment. The Department of Foreign Employment can play a vital role by making financial education mandatory for those who are seeking employment abroad. The government has the policy of providing orientation to youth travelling for foreign employment. One good strategy would be to add elements of financial education in the orientation program. CTEVT can add financial education in its curriculum. Directives can be given to manpower and foreign employment agencies to provide basic financial education to job seekers and a simple technique like handing out brochures/leaflets on financial education to youths lining up for passport can also be useful.
source:SINGH,ABHAYA BAHADUR(2013),"Using remittances properly", The Himalayan Times,25 june 2013
LINK
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