The Project Proposal for

A Study on
Remittance Management Through
Commercial Banks for Economic Development

MS – 100

Submitted By:-
Name : Bhaskar Prasad Dahal
Enrolment No. : ID1365337
Course Code : MS-100
Program Code : MP
Partner Institution: ICA, PI - 9602

Submitted To: -
The coordinator (project),
School of Management Studies,
Indira Gandhi National Open University (IGNOU),
Maidan Garhi, New Delhi – 110068
INDIA.
 Table of Contents:

I) Project Title 1
II) Background 1
III) Introduction 1-2
IV) Statement of problems 3
V) Objectives of the study 4
VI) Research methodology to be used 4
VII) Research design 4-5
VIII) Limitations of the study 5
IX) Significance of the study 5-6
X) Bibliography 6
XI) Abbreviations used 6

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I) Project Title:
The title of project is: a study on Remittance management through commercial banks
for economic development

II) Background:
Migrant remittances have important contribution on present context of Nepalese
economy. Most of commercial banks have agency function like remittance. Remittance
management is crucial job in commercial bank for economic and financial development
in Nepal. Remittance contributes nearly 15% of annual profit of commercial banks and
according to research report by Nepal Rastra Bank, banking and financial institution are
contributing around 10% to its national GDP.

According to the Third Nepal Living Standard Survey 2010-11, 55.8 percent of
households receive remittance with each household receiving an average Rs 80,436 per
year. There is a growing concern that remittance is being used heavily for consumption
purposes, instead of invested for capital formation. It is not certain that the growing
trends will remain constant or even grow. Further, some implications of constant or
declining growth in remittance have been seen in economic horizon. Therefore this is an
attempt to assess the role of remittances management in financial development by serving
commercial banks through their products and services. The objectives of the study are to
assess the remittance management through commercial bank for development of
Nepalese economy and also to identify possible opportunities associated with remittance
mobilization by commercial bank.

III) Introduction:
In general, remittance is a transfer of money by a foreign worker to an individual in his or
her home country. As per the international organization for Migration (IOM) "the migrant
remittances are defined broadly as monetary transfers that a migrant make to the county
of origin". In another, remittance is financial flows of monetary value to home country by
migrant worker.

There are thirty “A” class licensed commercial banks, in operation. However all of these
banks provide remittance related banking services, most of them are performing agency
function by receiving and paying the inward remittance amount to gain commission.
There are some leading banks which have their own product and system to
manage/perform remittance business. They have not only their own web base networking
but also have established their representative offices in different places at major
remittance markets like Malaysia UAE, Saudi Arabia, Oman, Qatar, etc. To facilitate
instant payment of remittance fund they have also established the channel of payment
network throughout the country.

Out of thirty commercial banks three banks i.e. Himalayan Bank Limited, Nabil Bank
Limited and GlobalIME Bank Limited have been taken here as a sample for the study. At
present scenario these three banks are major player in remittance business. These banks
have their own remittance product with own payment network throughout the country.
HimalRemit, NABILREMIT and Global Remit are web base money transfer system of
Himalayan Bank, Nabil Bank and Global IME Bank respectively. Further all three banks
perform agency function by paying others remittance product, however Himalayan Bank,
Nabil Bank and GlobalIME Bank are also principal agent for MoneyGram, Western
Union Money Transfer and IME Remit respectively.

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Since the study focused on inward remittance management by commercial banks and
their contribution on national development through different banking product collide with
remittance product, these three banks are thought to be a perfect sample for the study.

Brief introduction of sample three commercial banks:

Himalayan Bank Limited is one of the leading joint venture banks of Nepal. It is a
pioneer in the field of retail money transfer business with almost two decades long
customized service delivery experience in the field. HimalRemit, is a premium online
customer focused and technology oriented Money Transfer product by Himalayan Bank.

As per Bank, “HimalRemit has the largest payment network covering all cities, towns
and villages of the country and is capable of paying at more than two thousand locations
across Nepal which is in ever growing trend as per the demand of local customers and
service providers”

Nabil Bank Ltd is the first joint venture commercial bank of Nepal. To attract the
remittance focused customers it has own web-based online money transfer system named
as NABILREMIT. to ease the fund transfer from one place of the country to the other.
NABILREMIT has network of more than 1300 locations across the nation to render
domestic remittance services to their customers. They are also increasing the numbers of
the locations as per customers demand & geographical coverage to expand their
coverage.

Global IME Bank Limited is one of the largest commercial bank in terms of paid up
capital and customer base in the country. It has established remittance business
relationship with various foreign banks and foreign exchange companies. Nepalese
staying abroad can visit any of these banks and exchange companies and send money
through "Global Remit". The bank urges that it is the safest and reliable money transfer
system of Global IME Bank Limited, which takes low charges and pay with high
exchange rates through more than 2500 remittance payment outlets across Nepal.

All of these three commercial banks are very consistent and renowned in the industry.
Among them Nabil Bank is the old, however in terms of remittance business Himalayan
Bank is the leader in industry as it’s pioneer to start online remittance business in the
country and receiving highest remittance amount gradually. GlobalIME bank is growing
very rapidly with merging five financial institutions including a commercial bank with it.

This study will mainly cover remittance management by commercial bank through
mobilization of remittance fund, cross sells of bank products and services with value
addition and opportunity for commercial bank at micro finance sector by the remittance.
At present situation, remittance is the major source of foreign currency income for the
country. The remittance money in the bank is one of low cost fund for them which
provide array of opportunity in lending and investment. Until and unless the nation is
capable to extend its level of export to substitute amount of remittance send by migrant
labour, the situation of remittance based economy will not be changed. Therefore the role
of commercial bank is crucial on development of the country. The challenge for them, is
to generate employment through effective management of remittance fund with collide it
to their different banking products. The effective and efficient management of remittance
helps to enhance development of nation and also the development of financial market.
This is only possible form effective management of resources and/or funds through banks
with their products and services by creating product chain and cross sells of products.

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IV) Statement of Problems
In current time, Nepalese economy is totally depending upon remittance. According to
Nepal Rastra Bank (NRB), “Nepal received remittance worth Rs 434 billion in the fiscal
year 2012-13,”. Central Bank further added that, Remittance sent by around 3.38 million
Nepali staying abroad is expected to reach Rs 533 billion in the fiscal year 2070/71 even
as the ceiling for the next fiscal year’s budget is Rs 596 billion. Remittance amounting to
Rs 444 billion has already entered Nepal in the 10 months of the current fiscal year.

As per latest report published by Government of Nepal Ministry of Labour and

Employment Department of Foreign Employment on Labour Migration for
Employment, total 521,878 person have been acquired labour permit to labor abroad
only in year 2013/2014. The report depicted that “Remittances have become a major
contributing factor to increasing household income as well as to the country’s gross
domestic product (GDP). The annual remittance contribution to GDP has been increasing
since 2011. It represented a 25.7 per cent share in 2012/013 and a 29.1 per cent share
during the first eight months of 2013/014”

From a household budget survey it conducted in 2008, the Nepal Rastra Bank found that
remittances were used largely to buy land and a house (at 49 per cent of respondents),
followed by repayment of the debt (25 per cent), savings in a bank (11 per cent),
education, health and other (9 per cent), social work (3 per cent) and other investment (2
per cent). The survey also explored that the large portion of remittances were being
transferred through money transfer and banking system, but there is remarkable fund is
being transfer through Hundi and personal sources. The survey findings also indicated
that the inflow of remittances through official channels does not seem to be good enough
as of expectation and required to formalize. Based on the findings, Nepal Rastra Bank
(Central bank of Nepal) initiated a campaign to encourage all labour migrants to send
remittances through normal/official channels. After it the remittance amount transferring
through banking system is increasing gradually.

Thus it is accepted by government level that the remittance amount received by the
country is not being utilized properly. Most of banks are generating income as
commission and foreign exchange gain with opportunity to mobilize the low cost fund
received through remittance but the fund is not being utilized toward the benefits of the
migrant workers or benefits of their family. In other words the banks are not being able to
acknowledge the contribution of migrant workers who are working in foreign country and
sending their earnings to home country. The proper utilization of remittance resources
should be utilization of funds on employment generation within the country and to make
the migrant return to home, which is not happening in present scenario.

This study will focus on following problem statements:

 What is the trend of inflow of remittance to Nepal through commercial banks?
 How the inflow of remittance is contributing towards economic development of Nepal?
 What is contribution of remittance in annual profit of commercial bank and economic
development of Nepal?
 What is the synergy effect, product chain, cross sales of bank products and services in
commercial bank and its relationship?
 What are the possible suggestions and recommendations that we may be able to derive
from this study?

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V) Objectives of the study
The objectives of the study are to assess the remittance management through commercial
bank for development of Nepalese economy and also to identify possible opportunities
associated with mobilization of remittance fund by commercial bank. The study is focus
in the remittance management and use of remittance fund to create employment in the
country with value addition to bank product and services. The effort is also to identify the
contribution of remittance on profitability of commercial banks by establishing product
chain with the help of remittance fund.

The Main Objectives of the Study are as follows:

 To analyze the remittance inflow in Nepal through the commercial bank and its
management for economic development by commercial bank.
 To assess the contribution of remittance in annual profit of commercial bank and
contribution of remittance for economic development through remittance management.
 To examine the possible synergy effect, product chain, cross sales of bank products and
services in commercial bank as well as find out the relationship between them caused
remittance.
 To give the possible suggestions and recommendations based on analysis to broaden
scope of remittance in core banking products and services.

VI) Research Methodology to be used

This study deals with remittance management through commercial banks for economic
development of country. There will be use of the evaluation research method which
includes research design, population and sample, nature and sources of data, data
collection etc. The study will specially followed by systematic Secondary Information
Collection and analysis approach (SSICA). List of information and studies done in the
past will prepared and analyzed then, the information will be contained in a systematic
and scientific manner. Available secondary information, policy documents, articles,
studies and efforts in past related to foreign employment and remittance will reviewed to
obtain information through stakeholder’s consultation and studies as well. Collected data
will be tabulated to simplify for the presentation and to facilitate comparison between
related information and will be presented in the form of geometrical figures like points,
lines, bar, pie etc.

Since the study is based on theoretical concept, not much complicated calculation are
needed, so the simple calculation like change in percentage, Standard deviation, trend
analysis, regression Analysis and Multiple Correlation, Coefficient of Determination and
Standard Error etc will be used with the help of ordinary calculator and MS Excel.

VII) Research Design

This study will be designed in a historical analysis in descriptive manner. Research and
investigation in past focusing on the remittance field, its effects on national economy and
BOP position caused by inward remittance for trade development will be try to explore.
Based on availability of relevant study applicable for this study will be reviewed and
summarized conclusion will be presented on literature review.

Past data and financial reports from sample commercial banks (HBL, Global IME and
Nabil Bank Limited), Central Bank, some books of remittance, different journals and
articles with arguments for and against remittance mobilization for national development
by commercial banks will be the main sources of data for this study.

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 Similarly, use of past and present data of remittance will be used and analyzed for the
study of remittance managed by sample commercial banks and its effect on national
development.

VIII) Limitation of the Study

This study is subject to some constraints. The study is focus to point out the remittance
management for economic development instead of agency function and its management
through commercial bank. Since the study will be based on the available secondary data
and their perception, there will be some chances of risk on accuracy. However such risk
will be tried to mitigate during the study there will be still some limitations on it

The major limitations of study are listed below:

 The research design and analysis used on this study will mainly base on the secondary
data which covers the periods of last 5 years.
 The primary data, as interview schedule will be designed in view of the requirement. The
interview schedules will be administered to the head of remittance department only and
will focus the contribution of remittance for economic development through their
respective bank instead of agency functions.
 The questionnaire and pattern of question will be based on requirement of data for the
study however it will be discarded with the view of respondent.
(Chances remain constrain to not to disclose financial data personally on written form)
 If the required/expected information could not obtained officially or not disclosed by
concern to maintain secrecy of organizational information, only the available information
with remittance variable will be considered accordingly.
 The sample and confidentiality of pure data may constraint the area covered by the study.
 Out of 30 commercial banks; Himalayan bank (Himal Remit), GlobalIME bank (Global
Remit) and Nabil Bank (Nabil Remit) will included on the study and the financial data
will be examined to cover the period of 2010 to 2014.
 The accuracy of the study will be dependent on the data provided by the concerned banks
and financial institutions.
 The major sources of the secondary data are limited to the official web site and the
financial statements of the concerned banks which are extracted from the progress report
of related banks, Nepal Stock Exchange (NEPSE), Central Bureau of Statistics, NRB and
other published and unpublished articles at different news papers and online pages.
 Only selected statistical tools will be used for the presentation and analysis of data.
 The study will deal only with remittance inflow to the country and data for comparative
analysis remain constrain as available from (sample) three commercial banks.

IX) Significance of the Study

Banking industry is an important institution for accelerating the process of development
through lending and investment. In Nepal, banking industry has been playing significant
role for the overall financial and economic development of the country. Since the country
consists of many rural areas, expansion of the banking services to rural areas is very
limited due to the lack of proper infrastructure and sound policies of the regulatory
authority. However banks have established different payment network for payment of
remittance amount and to facilitate their customer to receive the remittance fund at their
doorstep, the access to other financial services from same bank is far to them. Hence this
study on Remittance management through commercial banks for economic
development is very significant in present context.

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 Other significances of the study are as follows:
 This study will very much important for the potential managers of commercial bank,
financial analyst, investors, customers, personnel of the bank, economist and policy
maker to make various decisions regarding remittance and to develop plans and policies
as per the findings and recommendations of the study.
 This study may be extended in future by adding the sampling framework and research
tools application.
 This study will be helpful to remittance department, R&DD and PPDD of concern bank
and other commercial banks and remittance policy maker in the industry for their study,
to develop new product and product chain in the commercial banks.
 It will be useful for the students and researcher of similar subject matter.

X) Bibliography

 Labour Migration for Employment "A Status Report for Nepal: 2013/2014" by,
Government of Nepal Ministry of Labour and Employment, Department of Foreign
Employment
 http://www.nrb.org.np
 http://www.dofe.gov.np/new/
 http://nra.org.np/remittance-in-nepal/http://www.karobardaily.com/news/2014/06/
remittance-equal-to-annual-budget
 http://nra.org.np/nra_news/remittance-keeping-economy-afloat
 http://nra.org.np/nra_news/challenge-of-managing-rising-remittance
 www.himalayanbank.com
 www.globalimebank.com
 www.nabilbank.com
 https://www.google.com.np

XI) Abbreviations used

HBL – Himalayan Bank Limited

NRB – Nepal Rastra Bank
UAE _ United Arab Emirates
IME _ International Money Express
GDP _ Gross Domestic Product
BOP _ Balance of Payment
NEPSE _ Nepal Stock Exchange
MS _ Microsoft
R&DD _ Research and Development Department
PPDD _ Planning and Product Development Department

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