© SaMi / Helvetas

Promoting financial literacy to secure the benefits of labour migration

Pascal Fendrich and Sanat Sapkota
© SaMi / Helvetas

The Safer Migration Project (SaMi) in Nepal provides financial literacy training to  the  families  of migrants – in particular, to the   women left  behind.  Thanks to  better financial   management,  migrants’ families   are now  in  control of  their budget and   able  to  save (more) money. Some use these  additional resources to start  income-generating activities. This changed behaviour also  improves family relations.

In Nepal, many households turn to foreign employment  for their livelihoods (see Box). From July 2016  to June 2017,  more  than  415 000  labour  permits  were  issued to Nepali citizens – mainly young men – willing to work in the United Arab Emirates, Saudi Arabia, Qatar or Malaysia. During this time, remittances  to Nepal totalled 695 billion Nepali Rupees (NPR) (US$ 6.2 billion), about  30 percent  of the country’s GDP.

Nearly half of Nepali households receive remittances, but many remain ill-equipped to make  considered  use of this money.  Remittance  management is often  poorly discussed prior to migration and can cause tensions  within the family.

The Safer Migration  Project (SaMi) is a bilateral initiative of the  Governments of Nepal and Switzerland,  implemented jointly by the Nepali Ministry of Labour, Employment  and Social Security and Helvetas. Its goal is to promote safer and more beneficial migration,  by supporting  migrants  in taking informed  decisions on foreign employment  and linking them  to support  services throughout the migration experience.  Together with the Nepal Federation of Savings and Credit Cooperative Unions  Ltd. (NEFSCUN),  SaMi developed  a  training  course  on  financial literacy. The course targets  remittance-receiving households, especially the women  left behind. Its 28 modules  are conducted in the  villages and  help participants  to apply the principles of financial management. They practise making family budgets and planning  expenditure and savings. They also learn about  services of financial institutions,  entrepreneurship and how to draft a business plan.

Between  2014  and  2018  SaMi supported nearly 4 800  persons,  of which 97 percent were women.  Activities covered the districts of Khotang  and Ramechap  (Hill region), and Sunsari, Sarlahi, Nawalparasi and Kailali (Tarai lowlands).
 

© SaMi / Helvetas
A small village shop, started by a participant of the financial literacy classes © SaMi / Helvetas

An assessment of project activities undertaken in October  2017  found:

  • Changed behaviour  on financial management: About 83 percent  of the participants now keep household records and 67 percent  prepare  a household budget.
  • Substantial  increases  in  savings:  Before  the  training,  only  13  percent   of  the households reported  saving;  after  training,  67  percent   did.  Monthly  savings per household increased  by 25 percent  on average,  from NPR 637  (US$ 6.0) to NPR 810 (US$ 7.6). The increase was stable 12 months  after the training.
  • Initiation of income-generating activities: Increased savings led several participants to invest in new activities such as farming (for subsistence  or sale of products).
  • Use of (semi-)formal financial institutions: Most participants  opened accounts  in banks,  microfinance  institutions  (MFIs) and  cooperatives.  The use of MFIs rose from 12 to 57 percent  among  participants.
  • Women’s empowerment: Increased capacity in financial management strengthened women’s position in taking household decisions on spending, reducing the need  to “ask for permission”  for every expenditure.
  • Improved family relationships: Regular in-house discussions on the best use of money improved mutual trust between family members  at home and migrants abroad.

Adequate capacities  to  manage remittances  are  a  prerequisite  for securing  the financial benefits of foreign employment, for their productive use and for ensuring that  migration  contributes to development. SaMi will now test the modalities for the institutionalization  of this successful approach.
 

© SaMi / Helvetas
A piggy bank – a way of saving © SaMi / Helvetas

Migration  dynamics  in  Nepal

Migration – both internal and  international – has increased over  the  past decades in Nepal. Internal migration increased sixfold from  445 128 migrants in
1971 to  2 654 047 in 2011, and  mostly  takes place from  the  Hills to  the  Tarai lowlands and  from  rural to  urban areas, mainly  as a result of regional imbalances in the  distribution of resources, access to  services, poverty, unemployment and difficult livelihoods. The  proportion of the  population living in the  Mountain and  Hill districts has declined from  62 percent in 1971 to  50 percent in 2011 and  is expected to  fall to  47 percent by 2031. From 2001  until 2011, eight Mountain and 19 Hill districts showed a negative growth rate.  In parallel, international labour migration has long  been a key characteristic of Nepal, with India the  main  destination until the  end  of the  20th century. In the  last  two decades, overseas migration to  the  Gulf and  Malaysia has gained enormous momentum.  While  the  majority of the  415 000 Nepali  citizens going  abroad for  employment last  year  came from  the  densely populated Tarai, international migration from  the  Hill and  Mountain districts is increasing. Today, most international women migrants come from  the  Hills. Foreign remittances  per  head are higher in the  Hill districts (NPR  34 283 [US$  315] per  month) than in the
Tarai  districts (NPR  24 102 [US$  221]).

Lessons learned

  • Long-term training for lasting results:

28 modules are conducted  over five to seven months, giving participants time to learn, digest and apply the new knowledge.

  • Involve the head of household / man:

This will increase  the likelihood that the women have a say on the use of the remittances and can make use of the acquired tools.

  • Adapt methodology to local context:

Literacy rates in the Hill districts  are higher than in the Tarai, giving women a stronger position in the household and thus a more central role in remittances management.

  • Link with other  support  services:

The capacities developed through the training may lead participants to request other types of support, e.g. to initiate income-generating activities.