It is important to note that the effectiveness of utilising remittances in the productive sectors depends on so many factors
Every year, 500,000 young individuals enter the labour market in Nepal. Consequently, creating suitable employment opportunities for them has become a significant challenge for the government. In the changing global landscape, the youth show increased inclination to actively participate in the overall social and developmental transformation process. However, they lack opportunities, leading to negative sentiments and frustration. Consequently, many of them decide to seek employment opportunities abroad. Statistics indicate that approximately 3,000 Nepali youths leave the country every day, either on work or student visas, and a considerable portion of them may choose not to return.
Remittances play a significant role in the Nepali economy, contributing 23.4 percent to the GDP even during times of crisis. However, the utilisation of remittances in the productive sectors is not given sufficient priority through a comprehensive and systematic approach, mechanisms and instruments. The Ministry of Labour and Employment bears the overall responsibility for managing migration labour and productive use of remittances. The Foreign Employment Promotion Board plays a vital role in undertaking various initiatives for the effective utilisation of remittances in the productive sectors. However, the board lacks its own institutions at the provincial and local government levels. At the local level, an Employment Promotion Centre exists, but it is already overloaded with daily administrative tasks and regular projects and programmes.
For business promotion, some specific business and technical knowledge is required. Promoting entrepreneurship, fostering enterprise development, encouraging private sector investment, providing support for self-employment initiatives, ensuring effective delivery of business development services, facilitating access to finance, conducting resource mapping, enhancing the capacity of local and provincial governments to establish a conducive business environment through policy frameworks, promoting coordination among inter-governmental organisations, facilitating technology development and dissemination, conducting product development testing, establishing incubation centres, implementing start-up support programmes, and managing funds for start-ups are the major themes encompassing enterprise development. However, the themes and responsibilities of enterprise development are divided among various government organisations in Nepal, leading to significant challenges in coordinating their efforts.
Enterprise and entrepreneurship development is not an easy task. Responsible institutions and human resources for this endeavour must be equipped with an entrepreneurial mindset and possess the necessary technical business know-how to navigate the changing dynamics of the business and market landscape. However, the private sector and entrepreneurs often face challenges in working with the bureaucratic mindset and processes due to their inherent nature. Therefore, achieving a balance between an entrepreneurial mindset and a bureaucratic working style is crucial to ensure the productive utilisation of remittances.
Here are some examples of how remittance can be utilised in the productive sectors through entrepreneurship and small business development. A migrant worker returning to their home country may use remittance funds to establish a local manufacturing or service-oriented business, could invest in modern farming techniques, purchase equipment, or improve irrigation systems, leading to increased agricultural productivity. This, in turn, can enhance food security and generate the income of rural communities. Remittances can be invested in education and skills training programmes for human capital formation. Remittance inflows can be directed towards infrastructure development projects, such as roads, bridges, schools, hospitals and other public facilities.
It is important to note that the effectiveness of utilising remittances in the productive sectors depends on factors such as supportive government policies, financial infrastructure, access to credit, and a conducive business environment. When it comes to utilising remittances in the productive sectors, there isn't a specific "business model". Here are some common approaches to leveraging remittances in the productive sectors, such as direct investment, microfinance and financial services, business incubation and business development service programmes, skill development, and training for migrants and left behind families. Another important could be promotion of public-private partnerships in collaboration with private sector entities, non-profits or international organisations to leverage remittances in the productive sectors. Digitalisation can play a crucial role in leveraging remittances in productive sectors. Digital platforms and mobile applications can be developed to facilitate access to financial services, provide market information, connect entrepreneurs with potential customers, or offer e-commerce solutions. Targeting women or left-behind families for SMEs (small and medium enterprises) promotion requires specific strategies that address their unique needs, challenges and opportunities.
Ultimately, the business models employed will vary based on factors such as the local context, sector-specific market dynamics, available resources, and the preferences and capabilities of the remittance recipients themselves. Addressing these challenges requires a multi-faceted approach involving financial education programmes, policy reforms, infrastructure development, access to financial services, and targeted support for entrepreneurship and SMEs. By creating an enabling environment that encourages and facilitates the productive use of remittances, Nepal can unlock the potential of these funds for sustainable economic growth and development.
A version of this article appears in the print on June 26, 2023, of The Himalayan Times.
