Difficulty for operation of remittance companies there blamed
KATHMANDU, June 11: With remittance companies finding it difficult to expand their operation, Nepali living in the countries like Hong Kong, South Korea, Australia and Israel are using Hundi system to send their hard-earned money back home.
According to stakeholders, the difficult process for remittance companies to expand presence in these countries where a large number of Nepali are currently living and working to start their operation is helping to flourish informal remitting system like Hundi.
Lack of domestic companies in the destination countries, particularly South Korea and Israel, leaves Nepalis there with no option but to use Hundi system.
"In South Korea, there are only banks and their service level is a bit inconvenient for Nepali workers there. They find Hundi more convenient and beneficial,” Suman Pokharel, secretary of Nepal Remitters Association, said.
NRB officials say that Nepal received a total of Rs 2 billion from South Korea in Fiscal Year 2015/16 out of the total remittance inflow of Rs 617 billion.
"Our estimate is that Nepal should have got remittance of around Rs 43.5 billion from South Korea where Nepali workers are going for foreign employment under government to government agreement," Chintamani Shiwakoti, deputy governor of Nepal Rastra Bank (NRB), told Republica.
He says that the provision to encourage the use of banking channel should be included in the government to government agreement.
Pokharel, who is also the CEO of IME -- a remittance company, said that the government should also take necessary initiatives for promoting the use of formal channel while sending money to Nepal with those countries where the government itself is sending workers. "Israel and South Korea are among the top destinations for Nepali workers. Since the workers are sent there as per the government to government agreement, there should also be a provision that encourages them to use formal banking channel to remit money home," added Pokharel.
Though there is no exact data on how much money is sent through Hundi, central bank officials estimate that nearly 40 percent of the remittance is sent using informal channels.
Officials say that the use of informal system like Hundi can also be easily exploited in laundering illicit money apart from the foreign exchange losses to the country. The use of informal system to remit money can also put the senders in the risk of losing money that they sent as they do not have any evidence of sending money.
Meanwhile, the government has also announced a plan to encourage overseas workers to embrace formal channel while sending their hard-earned money back to Nepal. The budget for Fiscal Year 2016/17 states that the government will provide 25 percent discount on registration of house and land to workers and their family who use banking channel to send money to Nepal.