Comprehensive Analysis of Remittances in Nepal

Key Points

- Remittances are a vital part of Nepal´s economy, contributing around 25-26% to GDP in recent years.

- In 2024, Nepal received approximately $10.86 billion in remittances, mainly from countries

like Saudi Arabia, Malaysia, India, Qatar, and the USA.

- Major remittance companies include Western Union, MoneyGram, IME, and Prabhu Money

Transfer, with costs averaging 4-5% of the amount sent.

- Senders are mostly Nepalese migrant workers, using remittances for family support,

education, healthcare, and housing.

- Challenges include high costs, low financial inclusion, and reliance on informal channels, but AIand new technologies could improve efficiency and access.

Overview

Remittances play a crucial role in Nepal economy, supporting millions of families and

contributing significantly to the nation GDP. Here is a breakdown of the key aspects based on the latest available data for 2024.

Total Remittance and GDP Contribution

Research suggests that in the fiscal year 2023/24 (July 2023 to June 2024), Nepal received

about $10.86 billion in remittances, accounting for roughly 25-26% of the GDP. This figure

highlights the economy heavy reliance on inflows from abroad, with estimates varying slightly due to exchange rate fluctuations and economic growth rates.

Major Companies and Costs

Several companies facilitate remittances to Nepal, including international giants like Western

Union and MoneyGram, and local leaders like IME and Prabhu Money Transfer. The cost of

sending money typically ranges from 4-5% of the amount, though digital methods can lower

this to around 1.5%, making it more affordable for senders.

Source Countries and Senders

The evidence leans toward Saudi Arabia, Malaysia, India, Qatar, and the USA as the top

countries sending remittances, driven by large communities of Nepalese migrant workers.

These workers, often in low-skilled jobs, send money back home to support their families,

making them the primary senders.

Purpose and Challenges

Remittances are mainly used for family support, including daily expenses, education,

healthcare, and housing improvements. However, challenges persist, such as high transaction costs, limited financial inclusion (especially in rural areas), and a gender gap in access toservices. The reliance on informal channels also poses risks, and low digital literacy can hinderformal system adoption.

Potential of AI and Technology

It seems likely that new technologies, including AI, could transform Nepal's remittance sector by reducing costs, enhancing security, and improving financial inclusion through digital wallets and blockchain. This could help more people access formal channels, especially in underserved areas.

Unexpected Detail: AI Role

An interesting aspect is how AI could not only lower costs but also educate users through

chatbots, potentially increasing trust in formal financial systems and reducing reliance on

informal methods, which is a significant issue in Nepal.

Survey Note: Comprehensive Analysis of Remittances in Nepal

Remittances are a cornerstone of Nepal´s economic landscape, providing a lifeline for many households and contributing significantly to national development. This detailed analysis, based on data up to April 2025, covers all aspects of the users query, offering a thorough understanding of the remittance sector in Nepal for the year 2024.

Remittance Companies and Services

The remittance ecosystem in Nepal includes both domestic and international companies,

regulated by the Nepal Rastra Bank (NRB). Major players include:

- Western Union: A global leader, offering extensive network coverage.

- MoneyGram: Known for competitive rates and wide accessibility.

- IME (International Money Express): A prominent local player, trusted by many Nepalese for its long history and extensive domestic network.

- Prabhu Money Transfer: Another local giant, often partnered with banks for cash payouts.

- Himalayan Bank Remit and Nepal SBI Bank: Providing banking-integrated remittance services.

These companies operate through agents, digital platforms, and bank partnerships, ensuring

accessibility across urban and rural areas. The NRB lists licensed companies on its website, with updates reflecting the dynamic nature of the sector (Nepal Rastra Bank - Remittance

Companies).

Cost of Sending Remittances

The cost of sending remittances to Nepal varies by provider and method. According to the

World Bank’s Remittance Prices Worldwide database, the average transaction cost for sending $200 to Nepal was around 4.54% in 2020, with recent trends suggesting a range of 4-5% for traditional methods. Digital options, such as mobile wallets, can reduce costs to as low as 1.5%, particularly for transfers from countries like India. For example, SBI Nepal Express Remit charges additional fees for non-account holders, such as NPR 100 per transaction (Nepal Bank |Remittance Service Charge). This cost variation is crucial, as high fees can discourage formalchannel use, especially for small amounts.

Source Countries and Remittance Inflows

Nepal’s remittance inflows are predominantly from countries with significant Nepalese migrant worker populations. Data from Statista indicates that in 2021, the top sources were:

- Saudi Arabia

- Malaysia

- India

- Qatar

- United States

These countries reflect the global migration patterns of Nepalese workers, often employed inconstruction, manufacturing, and service sectors. The total remittance inflow for fiscal year

2023/24 (July 2023 to June 2024) was reported at $10.86 billion by the NRB, marking a 14.5%

increase in USD terms from the previous year (Sharesansar - NRB Annual Report). This figure

aligns with Nepal’s position as one of the top remittance-receiving countries relative to GDP.

Purpose of Remittances

Remittances serve multiple purposes, primarily supporting household needs. According to the IMF and World Bank, they are used for:

- Family support: Covering daily expenses like food and clothing.

- Education: Funding school fees and higher education for children.

- Healthcare: Paying for medical treatments and insurance.

- Housing: Building or improving homes, especially in rural areas.

- Small businesses: In wealthier households, remittances may finance entrepreneurial activities.

A study by the IMF notes that in poorer households, remittances often finance basic

consumption, while in richer ones, they may support investments (IMF - Remittances: Funds for the Folks Back Home). This dual role underscores their importance for both survival and

development.

Senders: Profile and Demographics

The senders are predominantly Nepalese migrant workers, estimated at over 3.5 million,

working abroad in low-skilled or semi-skilled jobs. These workers are often in Gulf countries

(Saudi Arabia, Qatar), Southeast Asia (Malaysia), and developed nations (USA, UK). Their

remittances are a critical income source for families back home, with many sending money

regularly to support dependents (Remittances to Nepal - Wikipedia).

Challenges in the Remittance Sector

Despite their benefits, remittances face several challenges:

- High Transaction Costs: Especially for small amounts, with costs discouraging formal channel use, as noted by the IOM, where 10.4% of Nepalese adults rely on informal methods (IOM -Cost-effective Remittance in Nepal).

- Low Financial Inclusion: Rural areas have only 50% financial inclusion compared to 60% in

urban areas, limiting access to formal services.

- Gender Gap: Women face barriers in accessing financial services, narrowing their ability to

manage remittances.

- Informal Channels: A significant portion of remittances bypass formal systems, posing risks for transparency and regulation.

- Limited Digital Literacy: This leads to distrust in banks and lower retention of funds, hinderingfinancial inclusion efforts.

Additionally, the economy’s dependency on remittances, contributing over 25% to GDP, raises concerns about vulnerability to global economic downturns or migration policy changes, potentially leading to Dutch disease effects.

Potential of AI and New Technologies

The integration of AI and new technologies could revolutionize Nepal’s remittance sector. AI

can:

- Reduce Costs: By optimizing transaction processes and minimizing fees through automated

systems.

- Enhance Security: Using AI for fraud detection and secure transaction verification.

- Improve Financial Inclusion: Developing user-friendly digital wallets and mobile banking

solutions, particularly for rural areas, leveraging platforms like mobile apps for remittances.

- Promote Formal Channels: AI-driven chatbots can educate users about formal services,

increasing trust and adoption.

- Blockchain Technology: Offers faster, cheaper, and more transparent cross-border

transactions, potentially reducing reliance on traditional banking networks.

These advancements could address current challenges, making remittances more accessible

and cost-effective, especially for low-income senders and recipients (General knowledge of AI applications in finance).

Total Remittance Amount for 2024 and GDP Contribution

For fiscal year 2023/24, Nepal received $10.86 billion in remittances, as reported by the NRB in its annual macroeconomic report (Sharesansar - NRB Annual Report). Estimating GDP for the same period, based on World Bank data and growth rates, suggests a GDP of approximately $42.5 billion, with remittances contributing around 25.5%. This is slightly lower than the 26.6% in 2023, reflecting economic growth and exchange rate dynamics (World Bank - Nepal Development Update).

Conclusion

Remittances are a vital economic pillar for Nepal, with significant inflows supporting household needs and national development. However, challenges like high costs and low inclusion highlight the need for technological interventions, such as AI, to enhance efficiency and accessibility. This comprehensive overview ensures all aspects of the query are addressed, providing a detailed picture for stakeholders and researchers.