There are two categories of Nepalis living and working abroad, Non Resident Nepalis (NRNs) and migrant workers. Historically, Nepalis who looked for employment opportunities took advantage of the porous and deregulated borders and migrated to India and later, as more countries opened up for employment, to Gulf countries and South East Asian countries and now also in many parts of the Western World . The diaspora population is increasing rapidly which can be primarily attributed to the increasing trend among Nepali youth to go oversees for employment and education purposes.
Ranked among the top five countries in terms of the contribution of remittance to Gross Domestic Product (GDP), remittance flows currently account for 23% of Nepal’s GDP1. If channeled appropriately, remittance flows can be the engine for economic growth and development in Nepal. Currently, the bulk of the remittance flows are doing little to support economic growth and job creation in Nepal, primarily because the private sector and government have done little to explore ways to reinvest the cash flows into long-term growth engines. Further, cumbersome documentation process has prompted many Nepalis to send remittances through informal channels such as Hundi/Hawala, informal business transaction mechanisms and goes unaccounted for by traditional banking systems. Nepal Economic Forum strongly believes that the public and the private sector need to provide mechanisms to both house the capital flows from remittance, as well as to provide investment vehicles in Nepal.
Therefore, this study presents an understanding and analysis of the current scenario and practices, opportunities and challenges in the Nepalese financial system, and to identify appropriate investment avenues, to channelize the growing remittance flows into the formal and productive sectors of the economy.