KATHMANDU, Aug 4: The government is preparing to implement a non-collateral loan system to protect migrant workers from high-interest rates. Following the recent monetary policy announcement by the Nepal Rastra Bank (NRB), which includes provisions for non-collateral loans, the Ministry of Labor, Employment, and Social Security (MoLESS) is set to initiate the implementation process.

This measure is expected to protect young people seeking foreign employment from having to seek high-interest loans. The government plans to provide no-collateral loans to remove the burden of high-interest rates for workers aiming to go to various countries for foreign employment. Currently, a significant portion of their earnings goes towards paying off these expensive loans.

"Providing non-collateral loans to workers going abroad for employment, who have had to be burdened with high-interest loans, will soon be implemented," MoLESS Spokesperson Govinda Rijal told Republica. According to the monetary policy and as mentioned in the Nepal government's 2024/25 budget statement, arrangements will be made to provide no-collateral loans to individuals who have received labor approval for foreign employment, based on the assurance of remittance sent to their bank accounts.

The budget statement also mentions that arrangements will be made to facilitate easy access to loans against agricultural produce as collateral. Additionally, loans provided by banks and financial institutions will be encouraged to flow into innovation. The monetary policy also outlines efforts to facilitate easy and straightforward access to loans to promote entrepreneurship among the youth.

According to Spokesperson Rijal, the process of providing non-collateral loans is nearly finalized. Only a few details and suggestions remain to be addressed before finalizing it. This is a matter of national interest. MoLESS is preparing to implement it as soon as possible after further discussions. Rijal mentioned that if this is implemented, the number of workers going abroad with high-interest loans would significantly decrease. "A task force consisting of members from various committees has been formed to implement this," he said. "Workers will receive unsecured loans based on the cost of going abroad. Regardless of the country of foreign employment, workers will be eligible for these loans."

Arrangements will be made to provide unsecured loans for expenses related to foreign employment, including visa fees, social security fund fees, workers' insurance, health check-ups, workers' welfare fund, air tickets, and other necessary costs. Spokesperson Rijal says that the Nepal Rastra Bank will provide loans equivalent to the cost of going abroad.

"There is a fixed cost for going abroad depending on the country. Workers should not receive funds for foreign travel through hidden or illegal channels," he said. "According to government regulations, only a fee of Rs 10,000 is allowed for manpower agencies. Any amount charged beyond this by manpower agencies is illegal." He clarified that the government will not cover loans for workers traveling abroad illegally. Workers will receive non-collateral loans through the NRB for expenses such as making passports and other costs. However, he added, the government will not provide loans for transactions involving agents, brokers, manpower agents, or any illegal dealings between victims.

“The NRB will know which company the workers are going to and how much they will earn,” Rijal said. “The bank will provide loans based on the cost of going abroad. Additionally, the bank will deduct a certain percentage of interest according to the income earned abroad. The interest on the loan will decrease over time, and the worker's household expenses will be managed. If there are no household expenses, the money will remain deposited in the bank,” he added.

He said that the NRB will provide unsecured loans to workers going abroad at very low interest rates. "The bank that provides the loan will also handle the remittances once the worker goes abroad. This will formalize the remittances that currently come through informal channels like hundi. It will also address the problem of high fees charged by agents," he added.

According to him, if the process of providing unsecured loans is effectively implemented, it will be highly beneficial. Workers going abroad will not have to search extensively for loans or pay interest rates higher than those prescribed. This will ensure that workers benefit from the scheme.

"Workers will receive loans at low interest rates. Now, those without assets will also not face the problem of needing collateral," he said. "Remittances coming from abroad through banks will also be highly beneficial for the country and the workers. There is no chance that workers won't be attracted to this scheme." He mentioned that the MoLESS is particularly focused on introducing the non-collateral loan system for workers heading to Gulf countries.

Published on: 5 August 2024 | My Republica