KATHMANDU, July 31: Nepal Rastra Bank (NRB) started issuing foreign employment saving bonds (FESB) 13 years ago aiming to channelize the remittance amount in productive uses. However, it has failed to attract the migrant workers till date.

A study report unveiled by the NRB on Monday shows that only 4.9 percent of the released FESB sold out in over a decade of inception of the bond. During the review period, the central bank called for the application on saving certificates under the category for 25 times worth Rs 15.56 billion. However, only the bonds worth Rs 762.3 million were sold out.

The foreign employment bonds are exclusively sold to Nepalis working abroad, non-resident Nepalis or those who return to Nepal from foreign employment within four months of their return. The money raised from sales of bonds will be used for the government's deficit financing and to fund various development projects in the country.

The NRB on behalf of the government has been floating foreign employment savings bonds since July 2010. The NRB report shows that the performance of the FESB had been pathetic from the very first year of the issuance.

When these bonds were first introduced, only 0.40 percent of the floated securities of Rs 1 billion were sold. The result was even worse in the next fiscal year, when only 0.07 percent of floated securities worth Rs 5 billion were subscribed. In almost every consecutive year, the subscription stood at less than Rs 500 million.

To facilitate migrant workers to invest in the FESB, the central bank usually offers rates of returns that are 0.01-2.42 percentage points greater than the interest rates of fixed deposit offered by the banks. Likewise, the return on the FESB is one percentage point more than the yield offered in other ordinary types of development bonds.

Despite forwarding lucrative offers, the authorities have failed to attract migrant workers to invest in the FESB. The NRB report has identified lack of information to the concerned individuals mainly for the poorly performing bonds in this category.

In the NRB survey, 39.5 percent of the respondents expressed lack of appropriate information as the reason. Likewise, 27 percent blamed the cumbersome process to purchase, 21 percent blamed the lengthy process to receive loans and 12.5 percent expressed having insufficient money for subscription.

The report recommended implementing measures for policy and procedural reforms, increase in publicity and a paperless system to float the FESB. Similarly, providing access to withdraw the principal and interest amounts from foreign banks abroad could also help attract more migrant workers to invest in the foreign employment bond, states the report.

Published on: 31 July 2024 | My Republica