As a nation, we are adept at nitpicking. We have almost perfected the art of armchair criticism. An earthquake has shaken the very core of our country, and, yet, thousands of aftershocks later, the louder voices are not of rationality and resolution but of delirium and division. The delirium has come in many forms—criticism of the government, planning commission, INGOs, foreign aid, the donor conference, and most recently, the budget. Some of the criticisms are probably justified, but, in the absence of credible alternatives, they hold little water.
Suman Giri Rashesh Shrestha
Right now our definition of a better world is limited to "not this", which is a pretty big set to sample from. After being set back by almost US $7 billion and some years, perhaps it is time for us to start narrowing that set. Our goal with this article is to alter the ongoing narrative on the post-earthquake situation with constructive ideas, and to stimulate discussion around planning and rehabilitation. We propose a few ideas to get things started.
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Using remittance
Labor migration is the backbone of our economy and fuels remittance, which now accounts for 29 percent of our GDP. The Nepal Living Standards Survey (NLSS) reveals that 56 percent of all households receive remittance, most of which comes from foreign countries other than India. Remittance income, at least in theory, is a great source of cash for earthquake affected households to self-finance rebuilding.
However, not all of the incoming money is usually available to be spent on such purposes. According to the same survey, more than a quarter of the remittance money coming from the Middle East is used by households to pay off debt, some of it incurred in financing the process of migration itself. These households will have a better chance at rebuilding their livelihoods if the government can help minimize their burden of debt and allow them to fully utilize the incoming remittance.
This can be done by providing grants to households to help them repay their loans. On a broader level, such immediate loan repayment scheme plays two crucial roles. It allows indebted households to improve their financial standing. It also helps creditor households that are equally likely to be in need of cash. Many households in Nepal rely on loans from friends and relatives, which is a common strategy for livelihood management. The system works well if households in need of cash can find others with excess cash. But in large-scale calamities like this earthquake, all households are in need of cash at the same time which can break the system.
Government intervention can help both lending and borrowing households rebuild during such times. Before the grants are handed out, a rigorous mechanism needs to be in place to verify the credibility of the loans, the time period in which the loans were taken, and the financial need of the involved parties.
Once the burden of existing high-interest loan has been lowered, steps can be taken to leverage future remittance flows to today, when it most needed, by instituting a low-interest loan program collateralized against future remittances. Similar to "payday loans" in countries like the US, such loans can help manage immediate cash-flow problems for many of these households. Unlike regular payday loans, which are notorious for their high interest rates, these loans can be offered at low rates since the aim is to help the rebuilding process, not to make profit. NGOs can implement such a program, freeing up government resources to help poorer households without remittances.
Care should be taken to make sure the loans aren't exploitative. Interest rate should be charged only to cover defaults and make the program self-sustaining. For these households, this program can prove more effective than microfinance, which can be redirected to more enterprising activities. The two-pronged approach of i) reducing existing loan burden through grants and ii) providing low-interest loans collateralized through future remittances will ensure that most of the money is used in rebuilding.
Involving migrants
The flip side of labor migration is that a large fraction of Nepalis is abroad. The 2011 Census showed that 0.6 million 15-34 year-old Nepalis were working in the Middle East and another 0.21 million in ASEAN countries. This limits us in terms of the manpower that we will require for the rebuilding process. Incentivizing workers to return for financial reasons is unlikely given the high wages they can earn abroad.
Once the government has a clear understanding of the types of skills and the quantity of manpower required, perhaps a push can be made at a diplomatic level to allow workers to return on a sabbatical. The government can even utilize the relief-funds to reimburse the companies involved to some extent, or have the respective countries do so as part of their aid package. But a clearly defined path of reintegration into the workforce and detailed insight into the necessary timeline for the required labor contributions is required for this approach to succeed.
Another option is to focus on workers who have already returned. Many returnees were employed in semi-skilled construction jobs, and their experience can be valuable during the rebuilding. Statistics show that most migration returnees either stay inactive (22 percent) or return to the agricultural sector (47 percent). This means much of the skilled labor is underutilized due to lack of proper planning. The government can target such individuals and provide them with required financing, and other resources (training, networking, etc.) to encourage them to start entrepreneurial activities centered on construction and rebuilding.
This is where microfinance can play an important role. Microfinance already reaches more than eight percent Nepali population; so there is already an infrastructure which can be mobilized for rebuilding. Nepal Rastra Bank lists 35 microfinance development banks. However, some modifications to existing models might be necessary. The government and the NRB, which oversees microfinance institutions, can outline rebuilding-related industries as "priority area" for the next few years. They could also establish an organization that guarantees all loans made under this program, thus protecting lending organizations against bad loans. However, lending institutions must be required to conduct due diligence regarding the feasibility of the loan.
Without a doubt, more thought and discussion is required to convert our suggestions into implementable strategies; we hope that individuals on the ground will comment on the feasibility of these options. With adversity usually comes opportunity. This is a chance for us to break the inertia of lethargy that has defined us as a nation for way too long, and start afresh. There will be opportunities to innovate while we rebuild, perhaps to recreate cultural heritages that can withstand natural disasters, or to develop the next big economic model for rehabilitating the displaced. But we need to be mindful that our approaches are durable and sustainable. We shouldn't just aim to recover, but to revivify our nation into resilience.
The authors are US-based researchers. Shrestha specializes in development economics and Giri specializes in energy and infrastructure
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