Impact of remittances on poverty reduction in Nepal : a case study of Katahari, Hatiya, and Changunarayan VDCs

Abstract

This research work is the analysis of impact of remittances on poverty reduction in Nepal. The study assesses how remittance income is contributing GDP for poverty reduction. Remittance is considered as the major component which has direct and indirect impact on macroeconomic indicators: the GDP, BoP, Consumption and Investment, Foreign Exchange. The study also tried to explore the possibilities of utilizing remittances in the economic development of the country. At micro level, this study analyzed the impact of remittance on poverty reduction in terms of difference in socio-economic status of the Remittances Receiving Households (RRHH) and the Remittance Non-receiving Households (RNRHH) of three selected Village Development Committees (VDCs): Katahari of Morang district, Hatiya of Baglung district and, Changunarayan of Bhaktapur district based on their topography. The difference in socio-economic conditions between the RRHH and RNRHH has been analyzed into following three broad indicative categories: i) Economic security; ii) Human Development; and iii) Empowerment and Social Inclusion. The study assumed that family size, types of house and its ownership, accessibility to household facilities are the visible factors which reflects the socio-economic differences. Similarly, Land ownership, occupations incomes and expenditures are determinants for economic wellbeing. Health related activities, educational status and sanitation are taken as human development indicator for the study. Similarly, the study considered information acquiring capacity, increase in awareness about the basic rights and participation in human development programmes as the basic indicators for empowerment and social inclusion. Besides, the study also compared the present poverty status of the RRHH and the RNRHH in terms of poverty head count, poverty gap, square poverty and inequality to identify the impact of remittance. ix Productive utilization of remittances would be necessary for reducing poverty. Most research carried out discussed only poverty alleviation in relation to the economic growth. There is no doubt that remittance provides reliable source of foreign exchange. It could lead to stable macro-economic indicators and enhances living standard at the household level. Only addressing poverty relating remittances with standard of living would not satisfy the sustainability and economic growth. But study on the sustainability aspect at both national level and households level is very scanty. Similarly, social impact of migration, both positive and negative (costs and benefits both at national and household levels) are lacking. There is lack of micro level studies ascertaining the impact of remittances on poverty and inequality in rural and urban sector. Thus, because of poor understanding of the impact of remittances in Nepal's economy and national development, remittances are poorly managed. Nepal does not put remittance of migrant workers to their best use.