| May 19, 2019

Diaspora bonds fail to lure migrant workers

Diaspora bonds fail to lure migrant workers

KATHMANDU, June 4: Lack of awareness blamed
Despite higher returns, there has not been much attraction of the migrant workers toward the bonds targeted at people involved in foreign employment.

Nepal Rastra Bank (NRB) has been offering an attractive interest rate of 9 percent in the foreign employment bond, higher than the current average of 5.68 percent that the bank and financial institutions (BFIs) in Nepal offer on fixed deposits. 

Efforts of the central bank to sell the foreign employment bonds have largely gone into vain as major chunk of the bonds still remain unsubscribed. 

Nepal Rastra Bank (NRB) has called for application for Foreign Employment Bond worth Rs 337.92 million after only Rs 162 million worth of bonds out of Rs 500 million were subscribed. The central bank had earlier called for application for Rs 500 million worth of Foreign Employment Bonds on May 11. The central bank has set the deadline of June 8 to subscribe the bonds.

The central bank, on behalf of the government, issued the bond to utilize remittances sent by migrant workers for development works while also providing an opportunity to migrant workers to pour their hard-earned saving in government instruments. 
The bonds have a maturity period of 5 years.

The investors, however, will get interest payment every six months, according to NRB. The bonds can be sold to the market maker at any time and can also be pledged as collateral to borrow money from bank and financial institutions (BFIs).

The central bank was able to sell a meager 0.4 percent of bonds in 2010, while only 20 percent of the offered Rs 250 million was subscribed in April 2014. The central bank had floated the diaspora bond for the first time in 2010, to raise Rs 1 billion.

The central bank officials admit that there has not been much awareness among migrant workers and their families about the advantage of the investment in diaspora bonds. They also say that the low salary that most of the migrant workers draw in Gulf countries and Malaysia has also made it difficult for them and their family to invest on bonds. 

“The average earning of the migrant workers is Rs 15,000 to Rs 16,000 which barely meets their household expenses. Even those who have higher earning do not know about the availability of the central bank instruments for the migrant workers,” said Min Bahadur Shrestha, executive director of the NRB. He also said that less attraction is also due to the lack of capacity to link the bonds with the patriotism. “Other countries have been found proposing a mega pride project and sell bonds to the migrant workers linking it with patriotism. However, we have been telling the migrant workers in general that this is for development works,” added Shrestha. 
Bhuvan Dahal, CEO of Sanima Bank Ltd, says that the migrant workers might not have found any compelling incentives to make investment in the bonds. “While the laborers are getting 15 to 20 percent of returns in their village through cooperatives, they find it less attractive to invest in bonds and locking the money for five years,” he added. 

Many experts also attribute the lack of idea regarding saving and financial planning and money management to the under-subscription of diaspora bonds. “As bond is a relatively new concept for migrant workers and their family, they should be given an orientation on how to make saving and investment before they head abroad to take up foreign employment,” an NRB official said.

NRB is planning to organize various awareness programs like interaction with families of migrant workers and other events in labor destination countries for encouraging migrant workers to invest in such saving instrument.

Sagar Ghimire

Ghimire is associated with Republica, English National Daily, since November 2013. He reports and writes on banking, financial, cooperatives, labor and foreign employment issues.


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