It is important to market this bond as a form of “patriotic” investment more than private money transfers. Similarly, Nepali citizens who reside abroad may simply not understand fixed income and bond instruments as potential investment tools

The question of how best to help migrant workers preserve their earnings and to undertake sound investments has been a topical issue of discussion in the international development and finance communities. One of the responsible factors is that huge sums of money that migrant workers bring home are spent on household consumption and a large proportion going towards education and paying off previous loans, especially in least developed countries, including Nepal.

A contention from the finance and development sector is that this money would go further if migrant workers invested at least a portion of it. They would get a return, and the central bank or the government could then utilize the money invested through bonds to invest in infrastructure such as roads and bridges, among others.

The history of Diaspora bonds goes back as far as 1930 when they were first offered by Japan and the People’s Republic of China. These bonds are basically a form of government debt that targets members of the national community abroad, based on the presumption that their emotional ties to a country make investing in such products worthwhile. Generally, they have typically been used as project financing tools for public sector, large scale infrastructure development.

Due to the successful experiences of some countries in recent times, many nations have been floating this instrument to pool financial resources from the Diaspora community to support the home country’s development process. Israel, that started offering these bonds in 1951, for instance, today builds different physical infrastructure projects from funds pooled through sales of these instruments. India was able to recover from the 1991 economic crisis soon after issuing this bond. Likewise, the infusion of capital through the ‘Resurgent India Bonds’ in 1998 helped India withstand the shock of economic sanctions.

In the case of Nepal, Nepal Rastra Bank, on behalf of the government, has been floating what is termed as “Foreign Employment Saving Bonds” (FESBs)  exclusively for overseas migrant workers, non-resident Nepalis or those who returned home from foreign employment destinations less than four months ago, since July 2010. Along with encouraging formal channels to send money, these bonds were supposed to direct remittance money to the productive sector instead of consumption only. Likewise, one of the primary aims of issuing these bonds was to promote savings culture among Nepalis working overseas and subsequently draw together their resources for the country’s development.

While governments in many countries have been able to sell these bonds to their nationals abroad successfully, this has not been so in the case of Nepal where  the sale of these bonds have generally remained under subscribed in the past owing to  lack of promotional activities to generate awareness about the debt instrument,  a short time frame for buying bonds, and the fact that migrant workers could obtain a better interest rate by merely putting their money into long-term fixed deposit accounts. It may also have been tough to convince people who fled or emigrated from home owing to political instability and paucity of employment opportunities, to purchase a product sold by that very same country, even if the leadership of the government has meanwhile changed and the worrisome issues seem no longer to exist. Still, the Government and the NRB are quite hopeful that the sale of FESBs would be satisfactory in FY 2017/18 and thus has earmarked Rs. 1 billion for this purpose. To be successful, however, priority should be accorded in having a focused, systematic and well-thought out marketing campaign as the country experiences divulge. In Nepal’s case, however, it appears that the efforts in placing the bonds have not been conscientiously planned.

It is important to market this bond as a form of “patriotic” investment more than private money transfers. Similarly, Nepali citizens who reside abroad may simply not understand fixed income and bond instruments as potential investment tools. Hence, the marketing strategy must take into consideration the level of reservations that this community may have with investing in general and redress these accordingly.

Likewise, to encourage the promotion of these bonds, it is vital that the government channel funds raised through sales of FESBs to specific projects—such as infrastructure, low income housing, power, education, health and other social amenities—that have a concrete benefit to the families of the nationals abroad or the community back home. Nepal must also do a comprehensive mapping of its nationals abroad.  Statistics on the number of Nepalese residing and working abroad are vital for facilitating the government to devise relevant strategies accordingly.

Finally, an important factor in ensuring the success in the purchase of the FESBs is the degree of interaction between the homeland and its migrants and the congeniality of that relationship as illustrated by the example of Israel. Developing innovative channels of communication and interaction ensures that the Nepali citizens abroad will maintain a certain level of connectedness with the homeland, thus further encouraging the patriotism element.

Pant works at Nepal Rastra Bank