Rama Subedi

May 4: The trend of Nepali nationals providing consultancy and various other services to their compatriots living abroad has been increasing in recent years. It has been found that the service providers mostly get paid through informal channels such as hundi, which is an illegal business in Nepal.

People involved in such business number around 10,000, says Anuj Agrawal, vice president of the Confederation of Nepalese Industries (CNI).

He says that Nepali citizens providing services like translation, consultation, online teaching and IT service receive payment through informal channels. He made such remark during a recent programme organized by the CNI in the capital.

“Ten thousand Nepalis are involved in outsourcing work of foreign companies from Nepal. They are paid through informal channels,” said Agrawal, adding, “If such money is brought through formal channels, it would contribute to Nepal’s foreign exchange reserves.”

According to Agrawal, the Nepali’s involved in such work get paid between Rs 20,000 to Rs 300,000 per month. They receive Nepali currency in their bank account through informal channels instead of getting paid in foreign currency such as dollars, pound, yen, yuan etc, argued Agrawal.

The reason for people opting to send money through informal channel is because they have to pay high fee in the source country to send remittance. Western Union, a leading remittance company, charges 2.5 percent of the amount sent.  Other companies charge as much as 5 percent. Likewise, the recipients also have to let go a certain amount as commission. Therefore, most of the people prefer informal channels to send money.

Stakeholders say that the inflow of remittance will rise if the government reduces the charges incurred in remittance.

Some of the recipients say that even if they are ready to pay a certain amount as commission, the sender might not be willing to do so.

The government can improve the foreign exchange reserves if it regulates those working in the informal sector. However, the government does not have any date regarding the number of workers involved in the informal sector and how much tax they pay.

Economist Som Luitel says that the transaction of money through illegal channels can be curbed to some extent if the government encourages the tax payers and introduces a provision for self declaration of income.

“This problem will not exist if the government  adopts a policy to encourage tax payers by providing them concessions,” said Luitel.

Some people are wary about the loss that the state has to incur while receiving money from informal channels. However, such trend continues unabated because there is no compulsion to pay taxes and also due to the mentality that there is problem in opening bank accounts in foreign currency.

However, bankers say that there is no problem in opening bank accounts in foreign currency.

“All that is required is a proof that one earns income in dollars,” said a banker.