Easing the passage
- Even as hundreds of Nepali men continue to take out loans for foreign employment at exorbitant interest rates, the government is yet to come up with a scheme to stop the trend
Mar 6, 2015-
A small house of his own and some savings for his kids. That is all Yaman Prasad Oli hopes to have earned when he returns after working for a few years in the Gulf state of Qatar. That’s not asking for much, but it’s going to take him many years to see that dream come true.
Even if Oli gets the salary he expects—in accordance with the wage scale determined by the Nepal government for unskilled workers plying their trade abroad—he will have to spend at least a year paying back the debt he took to cover the costs for getting to Qatar.
Oli has already spent around Rs 200,000 to procure his passport, pay the recruitment fee and for the accommodation and travel costs incurred during his many trips to Kathmandu. He says he borrowed the money, at a 30 percent interest rate, from a money lender in his district.
“I cannot subsist on farming and doing seasonal work in the neighbouring cities. That’s why I want to try my luck abroad, even though I have to borrow the money to get out of here,” Oli, a resident of Pachhabang -2, Rolpa, said.
While a 30 percent interest rate may seem exceedingly exorbitant, many Nepalis get gouged with even higher loan rates. An Amnesty International report that was published in 2011 states that outbound Nepali workers have been known to take out loans at 60 percent interest rate.
But even as hundreds of Nepali men like Oli, out of desperation, continue to take out such loans, the government has yet to come up with a scheme to provide them the soft loans they need to venture abroad.
“The government should not wait anymore to intervene. Workers’ taking out loans at such high interest rates, especially in the Tarai, has become a huge problem,” says Bhartendu Mishra, a member of the National Planning Commission. “Many borrowers, unable to pay back their loans, have had to forfeit all their property. The government should replicate the loan models adopted by other labour-sending countries like Sri Lanka.”
Sri Lanka has a legal provision whereby soft loans are made available to its migrant workers, in addition to the decent social security scheme they can avail of. According to labour experts, the Sri Lanka Bureau of Foreign Employment provides foreign employment loans worth at least $500 to its migrant workers. Upon their return home, the workers can also take out soft government loans of up to $3,000 to build their houses. The workers have to pay nine percent of the total 16 percent interest amount, while the rest is paid by the government.
Bangladesh also provides soft loans to its migrant workers at nine percent interest. Bangladesh’s Probashi Kalyan Bank, formed in 2010 for its outbound workers, has also been providing training to thousands of workers, so that they can get better jobs abroad.
“It is an internationally accepted norm that the state is supposed to invest more in its priority sectors. For Nepal, that would be the remittance-generating sector,” says economist Dr Bishamber Pyakurel. “Remittance has become the lifeline of the Nepali economy—so much so that the entire GDP increases when it increases and decreases when it decreases. But the government continues to ignore the sector, even though remittance stands as the second-largest revenue source, after agriculture.”
Nepal received a total remittance amount of Rs 543.29 billion in 2013/14, according to the Nepal Rastra Bank (NRB). Pyakurel thinks the government has enough resources but that it does not know how and where to spend it. The government has failed to put to use even 13 percent of the capital expenditure allocated in the budget six month after the money was earmarked, he says.
It is not that the Nepali government has never tried to introduce such schemes. After King Gyanendra took over state power in 2005, the then Finance Minister Madhukar Shamshere Rana set aside funds worth Rs 100 million for outbound workers. He introduced the scheme and made the Bank of Kathmandu the lead bank in the initiative.
“But it turned out be a disastrous scheme because the planners had not done the needed homework,” says Ganesh Gurung, an expert on foreign employment. “There have been several attempts since then to come up with better schemes, but we have not had concrete achievements so far.”
In fact, several studies have been carried out by both government and non-governmental bodies, including the Safer Migration Project (a joint programme between the governments of Nepal and Switzerland) and UN Women, to design a suitable banking model that would cater to migrant labourers. Most of the findings from such research has stressed the need for the government to work with commercial banks to ensure that the loans are recouped.
But experts also say that the way things are now, neither the Sri Lankan model nor the Bangladeshi one—to introduce a soft-loan scheme—would be easy to implement in Nepal. Sri Lanka, for instance, has deployed officials to all of its embassies at the work destinations, who collect the loan payments from the workers. Nepal has neither the embassies nor the resources to afford the personnel. Nepal has only 35 officials in its six missions in Saudi Arabia, Malaysia, Qatar, the United Arab Emirates and Kuwait.
Gurung thinks one alternative would be to use the many cooperatives around the country to introduce loan schemes, as they are easily accessible and have wide networks across the nation.
The government could also study how a fund for workers was established by the Nepal Rastra Bank by the then Finance Minister Devendra Raj Pandey, says Gurung.
“For example, the government could issue Rs 10 million to each of the cooperatives for five years, at say, a six percent interest rate. The cooperatives could then offer loans to migrant workers at a 10 percent interest rate, of which the government should bear four percent. If the workers successfully pay back the amount, the government can then give the remaining four percent to the cooperative as an incentive to continue their work,” says Gurung.
Mishra, for his part, thinks that the government should form a special bank for migrant labourers with the money already pooling in the Migrant Workers’ Welfare Fund, a fund created by collecting the Rs 1,000 each outbound worker pays the government.
“There have been attempts in the past to make this happen through legal provisions,” says Mishra.
The Ministry of Labour and Employment had planned to open a Labour Bank last year, but they later aborted the idea owing to the technical and legal difficulties they would have to overcome.
“The new labour-migration policy and the Foreign Employment Act, which is being amended, will cover these issues and other welfare schemes,” says Buddhi Bahadur Khadka, chief of the ministry’s Foreign Employment Division.
When and if the changes do come about, it will probably be too late for Oli to get any benefits.
But at least for the thousands of Nepalis who will follow in his footsteps to different foreign countries, their chances at building a small house for themselves, fulfilling basic necessities, and leaving a little something for their kids will not seem like a pipe dream.
Published: 07-03-2015 13:46