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MIGRATION INNOVATION, PARTNERSHIPS, AND SYSTEMS STRENGTHENING

International migration is recognized as one of the most significant effects of globalization. The UN Department of Economic and Social Affairs (DESA), in its first major update since the onset of Covid-19 pandemic, has estimated that there are now 281 million international migrants worldwide—which is 4 out of every 100 people. While the total number of international migrants has increased since the last report in 2019, the growth rate of international migrants has slowed by 27% by mid-2020, resulting in an estimated two million fewer international migrants than predicted. A combination of transportation constraints and economic repercussions have left hundreds of thousands of people stranded. Out of 258 million international migrants worldwide, 41% (106 million) are born in Asia. According to the latest Migration and Development Brief, officially documented remittance flows to low- and middle-income countries totaled USD 540 billion in 2020, just 1.6% less than the amount of USD 548 billion in 2019. Fiscal stimulus resulting in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical swings in oil prices and currency exchange rates are the key drivers of a steady influx.

Inward remittances to South Asia increased by 5.2% to USD 147 billion in 2020, mostly to an increase in flows to Bangladesh and Pakistan. Remittances to India, by far the region's largest recipient country, declined by 0.2% in 2020, owing in part to a 17% drop in remittances from the United Arab Emirates, which was compensated by resilient flows from the United States and other host nations. Remittances to Pakistan increased by nearly 17%, with Saudi Arabia leading the way, followed by European Union countries and the UAE. In Bangladesh, remittances increased by 18.4% in 2020, while in Sri Lanka, remittances increased by 5.8%. India was the largest migrant sending-country with an estimated 17 million migrants, followed by Bangladesh with 7.4 million, Pakistan 6.3 million, and Nepal with 3.5 million (World Bank, Migration and Development Brief 34).

NATIONAL CONTEXT

Global experience shows that return migration or brain gain and channeling migrants and diasporas financial capitals to productive investments and income generation opportunities contributes to socioeconomic development of the migrant origin countries. Migration has a far reaching impact on the Nepali economy too. Besides promoting financial security and safety nets for the families back home, migration has contributed to the development of human capital. The importance of labour migration and remittance has been emphasised in the 2030 Sustainable Development Goals (SDGs) with targets on safe, orderly, and regular migration through well-managed migration policies (SDG 10.7) and reducing the transaction costs of remittances to less than 3% including eliminating corridors with higher costs than 5% (SDG 10.c). These targets are vital in realizing the development potential of foreign labour migration for Nepal. The National Review of Sustainable Development Goals report by Nepal's National Planning Commission has also clearly highlighted the vital role played by remittances in reducing poverty, enhancing human development and entrepreneurship, and helping increase foreign exchange reserves in the country.

Every year, about 450,000 Nepali youth enter the labour market, most of them lacking marketable skills. A large proportion of them seek employment in India, Malaysia, or the Middle Eastern countries, mostly in low-skilled jobs. In Nepal, exponential growth of both remittances and international labour migration began in 2000. Between 2008 - 2017, over 4 million foreign labour permits were issued by the Department of Foreign Employment (DoFE). The growth rate of international migrants slowed by 27% globally in mid-2020 due to the novel coronavirus pandemic. Estimated 3.2 million Nepali migrants are residing across 125 countries for employment and Covid-19 Crisis Management Centre (CCMC) recorded a total of 468,953 people returning from 35 countries in 2020-21 and approximately half a million seasonal migrants returning via cross border through India in different time intervals during the lockdown imposed due to the pandemic. Numbers of returnees due to job loss are likely to be up as high as 618,700. Remittance inflow of 875.03 billion in FY 2020/21 marked a huge reduction compared to the pre-Covid estimates of NPR 922.4 billion (NPC, 2021). Remittance inflow is expected to reduce further in FY 2020/21 with many migrants losing jobs and returning home as a result of the pandemic. GoN has set a targeted remittance inflow at 700.2 billion for FY 2020/21.

In this context, SDG targets of reducing migration and remittance transaction costs including loans covering time periods of remittances foregone due to the pandemic--as well as opening new and better skilling and upskilling opportunities, alongside livelihood-creating services for both aspiring and returnee migrants--have become more relevant than ever. Mainly as the migrant households grapple with a decrease in disposable income, unemployment, illness, and falling wages, it has become more imperative than ever to rethink the dynamics of migration to support structural empowerment, human dignity, and the physical integrity of migrant households.

RECOGNIZING THE PROBLEM

There is abundant evidence indicating that the majority of Nepali migrant workers are unskilled with a poor education background. As a result, they are largely working in semi- or unskilled jobs, in what is often termed as the 3D: Dirty, Difficult, and Dangerous jobs. Exploitation of the gullible migrants starts from the very inception of their migration process due to lack of adequate information on costs and other social and economic aspects of migration. Additionally, the hard-earned income of the migrants is spent largely on consumption and due to lack of adequate financial literacy and viable financial solutions, their savings is not being optimally channelled into productive investments to the longer term benefit of the migrants and the country as well. Though several benefits are associated with labour migration, including improvements in human, social and financial capital, migration comes at a cost such as exploitation, human trafficking, bonded labour and human rights abuses.

UKAID सीप’s APPROACH

UKaid सीप adopts a market-led approach that addresses these market constraints in partnership with the relevant market actors including banks and financial institutions. Followed by rigorous study of demand and supply gaps and identification of key market constraints in the migration processincluding after the return of the migrantsसीप is facilitating private sector investment to mitigate key constraints. Fair/ethical recruitment aligned with skills required during foreign employment requirements have been explored as well. 

Experience of engagements with the recruitment agencies reveals that there are a number of challenges with regard to the absolute adoption of fair recruitment practices. The concept is still evolving and needs wider buy-in from private sector partners and host country governments. Ideally,  vertical integrated models where a single private recruitment company controls the recruitment value chain in its entiretyfrom the candidates’ mobilization to deploymentleads to a considerable cost reduction for the migrant. In practice, there are multiple intermediaries brokering foreign employment deals with the migrants. Government to Government (G2G) arrangements with direct involvement of the host country counterparts have found to work well in the case of South Korea, Japan and more recently Israel, and is increasingly being adopted as the recommended route by the Government of Nepal too Policies and oversight mechanisms to transfer roles to the locally vetted recruitment agencies to ensure fair recruitment practices have not fully developed. 

In this regard, सीप is working closely with the Government of Nepal to advance the skilled migration and ethical recruitment agenda focusing on new and emerging corridors and job roles, including potential deployment of nurses to the U.K., and as well as to support gradual transition to responsible recruitment practices through engagement of pre qualified and locally vetted recruitment agencies. Apart from policies governing the better regulation of the foreign employment service providers, access to formal financial servicessuch as those already introduced by सीप’s bank and cooperative partnerscan support minimization of migration costs and maximization of returns through investments in skilling and safe and informed migration for aspirants and self-employment/enterprises set-up for returnees. 

The foreign employment loan should be a standard product made available to the poorest migrants since it can reduce the cost of borrowing by 20% per annum. UKaid सीप’s partnerships with banks such as Laxmi Bank, Prabhu Bank, Nepal SBI Bank as well as Microfinance Financial Institution (MFI) Sana Kisan Bikas Laghubitta Bittyasanstha Sansthan Limited (SKBBL) are built on these prerequisites. These partnerships have uniquely demonstrated solutions to reduce cost of remittances, and cost of migration, powered by digital solutions. To optimize saving and investment potential of remittances, these partnerships have innovated and applied financial products, alongside tailored vocational/entrepreneurial skilling, that work in the best interest of migrant returnees and their households especially led by women.

PROGESS SO FAR

UKaid सीप’s efforts have focused on bringing a broad spectrum of key actors with innovative and tech-based solutions to address the financial and livelihood needs of migrants and other disadvantaged groups. UKaid सीप’s partnerships are geared to accelerate the country’s shift towards digital finance to better harness the benefits of migration.  The programme is enabling expansion of technology-driven financial products and forging of stronger collaborations with and between key institutions in the national and international migration system to directly and better reach and service target Nepalis. These initiatives are being undertaken to build a skilled workforce for increased employment generation and business productivity; augment migrants’ skills; lower financing and other costs of temporary migration abroad; and increase savings and investment of remittances. 

To make loan against remittance and other financial services more accessible and affordable, सीप partners are building bankability of migrants and migrant households by promoting use of a transparent mode of banking channel and improving the financial literacy of target groups for better utilization of savings and remittances sent from abroad. Loans coupled with capacity building training in agri-business and market linkages support for sustainable business and income for the migrants along with the protection of migrants through insurance schemes covering any loss of income are some of the major highlights of our partnership projects. 

Other impacts of our partnership include productive utilization of remittances by making the credit access and disbursement process easier for migrant households through a range of new-age digital platforms; and training-based micro-credits, decreased cost of migration through affordable pre-migration loans that give the target group increased access to credible skilling and certification-based recruitment services and reduced cost of remittances; and 24/7 access of remittance with the network arrangement (using wallet companies, remittance companies, remittance pay-outs). Further, microfinance sector partners have expanded the scope of the borrowers of their financial products and services; earlier,  access was limited to existing members of cooperatives only.

In addition, impacts are also anticipated on the market driven skilling and ethical recruitment front, via skilling in demand job occupations/roles aligned to the requirements of the host countries. सीप is fostering dialogues among the national authorities and host country stakeholders, to advance skilling and fair recruitment practices in new and emerging corridors focused on skilled and semi-skilled sectors. 

Learn more about the partnerships forged by UKaid सीप here. To download a two-page factsheet on UKaid सीप, click here. You can follow the progress, impacts, and insights -- updated regularly -- on this Insights and Impact page.