Remittance Realities

Nepal’s remittance economy has undergone a profound transformation since the mid-1990s. What began as a modest transfer from labor migrants in India has grown into a major economic lifeline, with remittances now reaching more than one in three households across the country. While remittances remain a cornerstone of household well-being in Nepal, persistent regional and gender disparities, along with rising consumption-focused spending, call for stronger financial inclusion strategies, improved skills development for migrants and policies that promote more productive use of remitted funds.

A notable trend is the growing contribution of women to both labor migration and remittance flows. Although wage gaps and occupational segregation persist, women now account for nearly 20% of all remitters.

One of the more encouraging developments has been the sharp decline in the use of informal remittance channels. Today, just 7% of remittances are sent through unregulated means, a significant improvement driven by policy interventions and enhancements to financial infrastructure.

Despite the scale of remittance inflows, their primary use remains household consumption. While this underscores their crucial role in meeting daily needs, the relatively low share allocated to savings or investments raises questions about long-term economic impact of remittances.

A recent study by the Centre for the Study of Labor and Mobility (CESLAM), titled Status of Remittances in Nepal, analyzes the trends and scale of remittance inflows into the country. It offers a comprehensive overview of remittances, remitter profiles, and transfer channels. The study also examines the characteristics of recipient households and the factors that shape how remittances are ultimately used.

Remittance Costs Vary By Country

While the cost of remitting money to Nepal from major destination countries has declined, it still exceeds the Sustainable Development Goal (SDG) target of below 3% in several cases, according to a recent study by the Centre for the Study of Labor and Mobility (CESLAM).

The study, titled ‘Status of Remittances in Nepal’, analyzes the trends and scale of remittance inflows into the country. It also offers a comprehensive overview of remitter profiles, transfer channels and the characteristics of recipient households, along with actors influencing how remittances are ultimately used.

While transfer costs have declined from certain countries such as Oman and Qatar, they have risen from others, especially India. In 2016, the cost of sending $200 and $500 from India was 1.19% and 0.52%, respectively. These figures climbed to 3.17% and 1.74%, respectively, in 2024. A similar trend has been observed in remittances from Saudi Arabia, where costs have increased steadily since 2016.

On a more positive note, the cost of sending money from Malaysia and Oman remains within the SDG target of less than 3% for both $200 and $500 transactions. The transfer cost to send $500 from all countries, except the United States, is below the 3% threshold. Oman charges the lowest rate at just 1.27%, while costs are under $2 for transfers from India, the UAE and Qatar .

Transfer costs vary significantly across the seven destination countries studied by CESLAM. No single country consistently offers the lowest remittance costs. Saudi Arabia exhibits relatively high transfer costs across all six remittance-receiving countries analyzed for the study.

Nonetheless, these corridors compare favorably on a global scale. The global average cost of transferring $200 stands at 6.3% which is substantially higher than the corridors reviewed by CESLAM. Compared to other major labor-sending countries in Asia, transfer costs to Nepal are generally lower compared to Bangladesh but slightly higher than India’s, depending on the source country.

“The cost of sending remittance has decreased in the past five years, but it is still relatively high for smaller amounts,” said Rojesh Shrestha, a researcher specializing in remittance issues. he explains. “In 2018, sending $200 to Nepal used to cost 4.7%. It came down to about 3.8% in 2023. But corridor-specific costs still vary widely. From the US, it costs nearly 4.8%, while the same transfer from Saudi Arabia will cost just 3.5%.”

Many migrants have adapted by pooling money and taking turns sending remittances to reduce transfer costs. But this is a temporary workaround rather than a sustainable solution.

Majority of Remittances Spent on Consumption

Households in Nepal use remittances for a range of purposes, including daily consumption, loan repayment, children’s education, investment and savings. The most common first-priority use has consistently been daily consumption, accounting for 69.3% in 2011 and rising to 72.3 percent in 2023. Loan repayment followed, decreasing from 15.9% in 2011 to 13.5% in 2023), likely to service debts incurred during the migration process.

The dominance of daily consumption is unsurprising, as many Nepali households rely on foreign employment to meet basic needs. Remittances have played a key role in reducing hunger and poverty. High loan repayment rates also reflect the steep costs of migration, with many workers borrowing at high interest rates to cover recruitment and travel expenses.

Between 2011 and 2023, the share of remittances used for investment declined, while there was a modest growth in savings. The drop in investment may be linked to

post-COVID economic uncertainty which discouraged spending in volatile sectors.

Even when combining the top two uses of remittances, daily consumption remained the dominant category in 2023. However, changes were observed in loan repayment and education. Altogether, 30.6% of remittances were used for loan repayment and nearly 25% percent for education, as either a first or second priority.

Both men and women primarily remit for household consumption. However, secondary uses vary. In 2023, 33.5% of men’s remittances were used for loan repayment, compared to 15.7% of women’s. Only a small share of remittances from either gender was saved or invested.

Loan Repayment Dominates

Following consumption, a significant share of remittances from Malaysia, Qatar, Saudi Arabia and the UAE, and newer destinations like Romania went to loan repayment in 2023. The majority of migrants to these destinations incur high recruitment costs and thus rely on loans.

Loan repayment is also a major remittance use in Japan where the number of both Nepali workers and students is growing. In contrast, a smaller proportion of remittances from India—a low-cost migration destination, was used for debt repayment.

In countries like the UK and the USA, where migrants often come from middle or upper-middle-class backgrounds, loan repayment features less prominently in terms of remittances use. Households receiving remittances from the USA have reported a relatively higher share of savings, while those receiving from Romania and South Korea use the highest share of remittances for investment.

Use of Formal Channels Growing

The formalization of remittance transfers to Nepal has improved significantly in the past two decades. In 2023, only 7% of total remittances entered the country through informal channels such as personal networks and hundi, down from 30% in 2011.

Today, nearly 93% of remittances are channeled through formal financial institutions, including banks and licensed remittance service providers (RSPs). The use of hundi dropped to less than 2% in 2023, and personal networks declined from 23.8% in 2011 to 8.3% in 2023.

Although informal channels are more common among migrants in India, overall trends suggest a growing shift toward formal mechanisms. Government incentives, such as higher interest rate on remittance deposits and preferential IPO allotments, along with the proliferation of mobile payment apps have encouraged this transition.

According to Govinda Gurung, a longtime expert on labor migration, informal channels like hundi are thriving because they offer better value. “When you send money through formal platforms like IME, they charge a fee. But through hundi, you often get a higher exchange rate, especially when global prices, like those for gold, fuel and the US dollar, fluctuate,” said Gurung.

To attract more remitters to formal channels, Gurung suggests offering meaningful rewards, such as priority passport renewals, free SIM cards at airports, or enrollment in national lotteries with attractive prizes.

Tripling in Reach, Sevenfold in Value

Between 1996 and 2023, the proportion of Nepali households receiving remittances has tripled, growing from 10.8% to 35.6%. The average remittance amount has also risen significantly, from Rs 18,215 in 1996 to over Rs 300,000 in 2023, marking a seventeen-fold increase over 27 years. However, when adjusted for the depreciation of the Nepali rupee vis-a-vis the US dollar, the average remittance size growth is about seven fold only.

Similarly, average remittance per sender has grown from Rs 16,227 in 1996 to Rs 224,744—a 14-fold increase. In US dollar terms, the figure rose only six-fold from $294 to $1,720.

The sharpest growth occurred between 1996 and 2004, following large-scale migration to higher-income GCC countries. In 1996, nearly all remitters (91.8%) were based in India where the income used to be low. By 2004, that figure had dropped to 64.4%. Over the next two decades, the share of India-based remitters continued to decline, falling to 44.3% in 2011 and 40.6% in 2023. The sustained rise in average remittance amounts after 2004 reflects a shift in labor migration toward higher-income destinations, including Europe, North America and wealthier Asian nations. Additionally, the past two decades have seen a growing number of education migrants in high-income countries sending money home.

The distribution of remittance sizes has also changed significantly. Over the last three decades, the share of remitters sending less than Rs 10,000 has plummeted, while those in higher brackets have expanded substantially. In 2023, the largest proportion of remitters (37.5%) sent between Rs 100,001 and 500,000, and 11% sent more than Rs 500,000.

New Destinations, New Demographics

Migration patterns have seen significant changes in recent years. While India, the Gulf, and Malaysia remain major hubs for labor migration, student migration and new labor corridors, such as Japan, South Korea and Eastern Europe, have grown.

India remains the most common country of residence for Nepali remitters. However, its share has dropped sharply, from 91.8% in 1996 to a still-substantial 40.4% in 2023. However, the contribution of remitters in India to total remittance volume is disproportionately low, reflecting the relatively modest incomes there.

The Gulf Cooperation Council (GCC) countries and Malaysia have maintained stable proportions, while new destinations, particularly Australia, Japan and South Korea, have gained prominence. The 2010s saw the rise in labor migration to Japan and South Korea, alongside emerging flows to Central and Eastern European nations like Croatia, Cyprus, Malta and Romania. Labor shortages in Eastern Europe, driven by westward migration within the EU, have created new opportunities for Nepali workers.

Older Migrants Send More

The 19–30 age group consistently comprises the largest share of remitters and remittance volume, according to the CESLAM study. However, older migrants are sending higher average amounts. The 31–40 age group has consistently topped average remittance across all three survey years (2004, 2011, and 2023), sending Rs 37,553, Rs 107,737 and Rs 373,982 respectively.

While men continue to dominate Nepal's remittance flows, women have made significant gains, with their share among total remitters growing by over 15 percentage points between 1996 and 2023. This increase mirrors the gradual rise in female migration from Nepal during the period.

However, male migrants still account for the overwhelming majority of remittance volume, accounting for 90% in both 2011 and 2023. On average, men remit at least twice as much as women. One notable exception was in 2011 when women's average transfer slightly exceeded men's. Between 2011 and 2023, the average remittance transferred by male remitters increased by over 2.5 times, while women’s increased by only 21% (or about Rs 20,000).

One striking finding is, nearly 30% of women sending money home in 2023 were officially "not working" abroad, compared to just 2% of men. These women, likely accompanying family members as dependent migrants, still sent an average of Rs 13,085 despite their unemployed status. While women have made inroads into high-income countries across Asia, Europe and North America, their remittance levels lag behind men across all regions, highlighting structural inequalities.

Transfer Frequency on the Rise

The formalization of remittance channels and the digitization of transfer methods have significantly increased the frequency of remittance transfer over the past decade. Until 2011, nearly two-thirds of remitters sent money just once or twice a year. Today, most remit funds more than three times annually.

This new norm of frequent transfers shows remarkable consistency across genders, with both men and women now remitting multiple times a year. Over half of all migrants send money more than twice annually.

However, a gender gap emerges in the highest frequency levels. Men are significantly more likely than women to remit quarterly or monthly and to use digital platforms for repeat transactions.

These findings suggest that while technology has democratized access to remittance services, persistent disparities in employment stability and disposable income may explain men’s higher transfer frequency.

(This report was originally publihsed in August 2025 issue of New Business Age Magazine.)