Socio - Economic Impact of Remittance

On

People living at………………..

A Research Project Proposal Submitted to

Department of Sociology

Nepal Commerce Campus

Minbhawan, Kathmandu

In the Partial Fulfillment of the Requirements for the Course of

Research Report Writing of BBA in Sociology

By:

Bhuwan Sharma

Ankur Poudel

Bikalpa Baral

Aayush Upadhyay

2017
 ACKNOWLEDGEMENT

We would like to take this opportunity to express our profound gratitude and deep

regard to Mr. Udhbodh Bhandari, for his exemplary guidance, valuable feedback and

constant encouragement throughout the duration of the research. His valuable

suggestions were of immense help throughout our research work. His perceptive

criticism kept us working to make this project in a much better way. Working under his

guidance was an extremely knowledgeable experience for us.

Additionally, we are fully grateful for the contribution made by all those respondents who gave their
time to participate in this study and thankful for their willingness to be involved in this research.

Furthermore we would also like to acknowledge with much appreciation the crucial role of the staff of
Nepal Commerce Campus, who gave the permission to use all required  equipment and the necessary
materials to complete the  our research.

We would also like to give our sincere gratitude to all the friends and colleagues who

filled in the survey, without which this research would be incomplete.

 LETTER OF APPROVAL
It is to certify that the proposal entitled, “Socio-economic Impact of Remittance on People living at ……..”
submitted by the group of Bhuwan Sharma is approved for the conduction of research on this title

Udbodh Bhandari
 Table of Contents
CHAPTER ONE: INTRODUCTION..........................................................................................................1
1.1 Background of the Study...................................................................................................................1
1.2 Statement of the Problem...................................................................................................................2
1.3 Objectives of the Study......................................................................................................................2
1.4 Rationale of the Study.......................................................................................................................3
1.5 Limitations of the Study....................................................................................................................3
CHAPTER TWO: LITERATURE REVIEW..............................................................................................4
CHAPTER THREE: RESEARCH METHODOLOGY...............................................................................7
3.1 Research design.................................................................................................................................7
3.2 Justification of site selection..............................................................................................................7
3.3 Sources of data..................................................................................................................................7
3.3.1 Primary Data Sources.................................................................................................................7
3.3.2 Secondary data sources...............................................................................................................7
3.4 Research methods..............................................................................................................................7
3.4.1 Observation.................................................................................................................................7
3.4.2 Questionnaire..............................................................................................................................8
3.4.3 Interview.....................................................................................................................................8
3.5 Data Analysis and Interpretation.......................................................................................................8
3.6 Data Presentation...............................................................................................................................8
REFERENCES............................................................................................................................................9
 CHAPTER ONE: INTRODUCTION

1.1 Background of the study

Migration for less economic developed to developed countries has increased dramatically in recent years,
including the South Asian countries, a trend which is predicted to gain strength in the foreseeable future.
About 61.64 percent of Nepal’s population constitutes the labor force aged between 15-64 years. According
to CBS, 2011 at least one member in every fourth household in Nepal is absent in their birth place. Out of
every two (56%) households in Nepal has a grace of receiving remittance. Due to the decline in employment
opportunities in the country, there is an increasing trend towards the migration of Nepalese workers abroad.
Privatization of state owned industries, collapse of industrial enterprises, violent conflicts and lack of
opportunities in Nepal have been propelling the workers to migrate abroad for livelihood security.

Remittances are commonly defined as that portion of a migrant’s earnings sent from the migration
destination to the place of origin. The term usually refers to monetary transfer only, although remittances can
also be sent in-kind. In most of the literature the term is further limited to transfers sent by migrant workers,
but it is worth noting that refugees and other migrants who do not benefit from the legal status of migrant
workers also send remittances. Workers’ remittances are an important source of income and poverty
alleviation for migrants, their households and their communities of origin in many parts of the developing
world. The “new economics of labor migration”, a theoretical perspective, views remittance transfers as part
of a household decision-making strategy to reduce risk and increase investment opportunities in areas where
credit, insurance and capital markets are absent or imperfect. Remittances are increasingly the most direct
immediate and significant contribution to the livelihoods of the people. The benefits of remittance are not
limited or recipient households but have a wider impact on the receiving society as remittance are spent,
generating consumer demand and jobs for local workers. Remittances improve living conditions; education,
health in the communities of assign and provide insurance against income shocks. Remittances have been
studied to ascertain to what degree these flows serve to develop the migrant sending societies, including the
increasing of consumption levels providing for housing promoting business investments and increasing the
availability of health and education services for family member.

A study based on survey of households living at………… gives an idea of expenditure and effects of
remittances. In this consideration it is important to know how households use remittance and how they may
impact the economy of Kosovo. It was suggested that remittance not only affect positively the level of
income, but also the ability to access health care and education. Most of remittances received are used for
consumption.
The major foreign income source to both the households and the government is remittance. It is generally
perceived that international migration attributes mostly to home country and countries of destination.
Aspects like economic, social and to some extent, political get highly flourished in home countries.
Economically, the home countries could reap enormous benefits such as foreign exchange remittance,
investment, technology transfer and training for its labor force. Socially, emigration to a developed country
brings the cultures of the two relevant societies in greater contact, and the ideas, attitudes, policies and
practices that help to foster economic and social development in a tighter bondage. The trend of remittance
has had an important implication for the economies seen both in micro and macro perspective. The
remittance not only affects positively level of income, but also the ability to access healthcare and education.
In microeconomic prospective remittances directly affect household income and consumption, whereas in
macroeconomic perspective remittances influence poverty reduction, economic growth entrepreneurship and
financial development. But why do Nepali migrants get a very low salary in foreign countries? The
households who have high remittance are not utilizing it in creative and productive areas. They only invest it
for purchasing luxuries.
Remittance, therefore, becomes a relatively more attractive source of foreign earning for developing
countries in general and Nepal in particular. It has been widely believed that remittances help to improve
health outcome by the means of purchasing better care and nutrition and by increasing health knowledge of
the family member. While negative impact is expected as smaller amount of time spent by the parents with
their children, which is only a short term effect. In the long-run, remittances bring significant improvement
in the child health. However, little attention has been paid to analyze the social and economic impact of
these financial transactions, especially on economic growth and poverty alleviation. This study is, therefore,
carried out to explore the socio-economic impact of remittance on households.
1.2 Statement of the problem
Remittance is one of the major income sources of earning foreign currency in Nepal. It really affects the
income level of the households as well as society. This study analyzes the socioeconomic impact of
remittance on household expenditure. Overall finding suggests that remittance helps particularly in escaping
poverty and increasing overall economic status of the migrants and their households, and improving the
ability of the households to increase expenditure. The sampling procedure was purposive because of the
unavailability of the list of remittance receiving households in the study area. The primary tool of data
collection was direct interview with migrant people’s household using questionnaire schedule. In this study
descriptive and inferential statistics were used for presenting and analyzing the collected data. Paired t-test
was applied to analyze the significance difference between average expenditure in different headings before
and after migration.
Different researchers and economists have addressed the impact of development on national economy but
what about its impact on daily life, that too in case of both urban and rural life. Few researches have been
there exploring the social changes brought by development
1.2.1 Social Impact of Remittance
Several variables were included in the survey in order to examine the social impact of remittance on the
labour sending households. The focus was on participation in community activities, children's education, and
use of health services.
1.2.2 Community participation
Community participation is one of the social capitals for a person to know the society. In this study,
organization was counted as mother’s group, school management committee members, community forest
management committee members, youth club members and cooperatives members
1.2.3 Economic Impact of Remittance on Receiving Households
Households with their family members working overseas were to improved their economic status and social
status through the flow of remittances. In addition to the analysis on investments provided in the previous
section, this improvement can be examined in several ways. This section focuses on three dimensions:
household amenities before and after migrant household uses; food sufficiency and use of new technology;
and expenditure in households.
1.3 Objectives of the Study
 To know the current situation of remittance in ………
 To explore the influence of remittance on the life of people living at ……..
 To know the social changes brought by development in remittance services ……..
 To find out major challenges in foreign employment and Remittance in………
1.4 Rationale of the Study
This study analyzes the socioeconomic impact of remittance on household expenditure. Overall
finding suggests that remittance helps particularly in escaping poverty and increasing overall
economic status of the migrants and their households, and improving the ability of the households to
increase expenditure. One could argue, however, that such an increase in expenditure cerates
dependency because the migrants have to continue living abroad in order to maintain their livelihood.
There are many success stories of investment made from remittances having lasting effects on the
economic status of the households. The social contribution of migration is even more encouraging in
terms of improving children’s education and enhancing the overall social status of the households.
The importance of infrastructural development is universally recognized because the infrastructures
are the foundation for nation building. Most of all researches have been focused on infrastructures and
its development and its impact on a country’s overall economy. Foreign remittances, today, is a major
concern among the policy makers of the world because of the accelerated development, improvement
of world economics and maintaining the continuity and trend of development.
So, we have explained about the foreign employment and way of receiving such income as
remittances in a particular village community regarding different aspects of life in order to analyse the
changing pattern of social behaviour and status of Nepali society in present context.
1.5 Limitations of the Study
In the way of conduction of this research our team will have come across many problems. Shortage of
time to collect all data from all people and participating all people will be difficult. There will be lack
of organized and adequate data on certain changes brought by development such as change in family
structure, cultural practices, etc. Similarly, the research would be limited to a certain locality only and
particular number of individuals that might not be able to represent the whole picture existing in other
parts of the country.
In order to come up the limitation above the research team will use the following methods such as:
 Sampling method which is used in the research method and which is used to identify and represent
the whole peoples of the study area.
 Questionnaire method which is a set of questions related to the area of study where respondents need
to choose the answer from the listed answers.
 CHAPTER TWO: LITERATURE REVIEW

The majority of remittance and migration literature available focus on the transnational population
movements. The economic and social impacts on the area of origin and destination due to flow of human
resource is less understood and studied as compared to goods and capital flows among the countries in the
era of globalization. The detailed studies on remittances are encountered by controversies. First, whether or
not migration and remittances decisions are separable or not is not clear. When a migrant does not send any
money in the form of remittances, the economic effect of remittance to the place of origin becomes non-
measurable. Second, whether or not the remittance income is different to any other source of income or not
is subject to debate. If remittance income is different to other sources of income for the household, how and
why it is different but it is different to the financial or capital flows in the international level as the
remittance income receipts are the households and the capital flow receipts are the businesses or the
government. So, remittances will have direct impact on the household level. Although there is paucity of
literature regarding remittances, this chapter will review research on four broad aspects including reasons of
migration, reasons for remittance transfers, the economic impact of remittance on economic variables and
the migration-remittance studies in Nepal. The rationale to split the existing literature into sub- groups is that
without migration there is no possibility of remittance income.
The main motives of migration are survival and mobility. Survival migrants are persons pushed abroad by
the paucity of alternatives at home; mobility migrants are pulled abroad to better themselves (Papademetriou
& Martin 1991). There are pull, push and mix theories of migration. The traditional Harris-Todaro model
(Harris & Todaro 1970), is based on the pull factors for occurring migration. According to these theories,
migration proceeds in response to urban rural differences in expected income. If the expected income from
the urban area is higher than the rural area, there will be migration from rural to urban areas even though
there is widespread unemployment in urban areas. The only motive for migration is to maximize the
expected utility (EU) at the end of the relevant time period.
2.2.1. Why are remittances important?
Migration can take many forms. Essentially, the forms are divided into two broad groups, temporary and
permanent. The migrant who completely leaves the place of origin is permanent migrant whereas the
temporary migrant leaves the place of origin for some definite time period and returns to the place of origin
(Dustmann & Weiss 2007). Some individuals, especially the temporary migrants, migrate to accumulate
financial assets to make specific investments. They are not likely to invest in host community, are more
frugal on current expenditure but remit the maximum amount of their income. Their main motive is to save
as much as they can. Future consumption is preferred to the current consumption. So, the intention to return
positively affects financial transfers from immigrants to their home country (Glytsos 1997; Sinning 2011).
The main aim of a permanent migrant is to integrate themselves into host-country circumstances.
Remittances for family support is of minor importance since the family members join the migrant abroad
sooner or later (Glytsos 1997). In the new economics of labor migration, the household determines the
decision to migrate. In this respect, the family manages the transaction cost required to migrate at the first
instance and expects some reciprocal behavior from the immigrants later. Even though a selfish migrant can
violate the family contracts, which are never in written form, the migrant would have to cut the ties with the
family. However, an implicit family contract can be enforced because of mutual altruism and social
connectedness with the origin community (Stark & Lucas 1988). The family or household left behind
expects transfers of fund by the migrant. The expectation of remittances by the family depends on various
motives such as altruism, self-interest, Family loan and insurance arrangements, social status and prestige in
the origin community etc.
Migrants send back remittances for mainly three purely self- interest purposes which are:

*The migrant supports the left household members for inheritance. Particularly this payment is made to the
parents so that they will provide more of their property to the migrant.

*The family members are the most trustworthy agent for the migrant to invest and to maintain the asset. The
migrant saves in the destination country. If the migrant is temporary, virtually all the savings are converted
into investment in the origin country.

*The household members left behind can administer the saving or investment during the emigration period.
-If the migrant is temporary, s/he does not want to lose the existing relationship with the family members,
want to make the investments in fixed assets and social assets to increase his own prestige.(Lucas & Stark
1985)

The new economics of labor migration argues that the decision to migrate is taken by the household
regarding who, when and for what time period (Stark & Taylor 1991a). The household decision making on
migration depends upon the family loan situation, the household decision of portfolio management and the
insurance scheme the household wants to make. So, the household expects that the loan or the expenditure
incurred during the migration process to be repaid by the immigrant.
Moreover, the remittance is thought to be the insurance against shocks. The portfolio management by the
household diversifies the income sources and if the internal sources are not sufficient to deal with the
expected shocks, remittances serve as insurance for the household. So, “the remittances flow are negatively
correlated with the home country economic shocks” (Lucas & Stark 1985). Moral hazard may be the
problem on insurance motive to remit.

It is estimated that about 15 % of the total economically active male population (older than 15 years of age)
in Nepal were involved in international migration in 2003-04 but for the females, its merely just above 2
percent (NLFS 2008). So, the Nepalese migration is male dominant keeping the females in the origin.
Maharjan et al (2012) examines the impact of male out migration on the workload and status of women left
behind in rural Nepal. The study using the survey data concludes that the expansion of workload due to out-
migration of male household members have broadened their involvement in household decision making;
access and utilization of resources; and involvement in social activities (Maharjan et al.).
 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research design

The study will utilize descriptive research type; the justification for using this research type is that, the
research tries to explain various aspects related to socio-economic impact of remittance in rural area.
The research will be explaining about how foreign remittance has affected people living at…….. and
how people living at……. have contributed to the socio-economic developmet. The study would be
describing the various positive and negative impacts of development on people, their way of living
and on the society as a whole. The research will be discussing on people and their perspectives on
existing foreign employment in ………. The study will be expressing the suggestions and advices of
local people of ………
3.2 Justification of site selection
The research will be conducted in……….. This site is appropriate for the study because the site is
feasible on economic and time basis. Moreover there are people of different ages in ……. that would
help us to collect their different perspectives on socio-economic impacts.
3.3 Sources of data
3.3.1 Primary Data Sources
The primary data will be obtained from the direct observation, administered questionnaires, in depth
interview conducted with purposively selected local people and well known elder people of the
locality.
3.3.2 Secondary data sources
Secondary data will be obtained from relevant books, working papers, previous researches reports,
unpublished materials and other related documents.
3.4 Research methods
3.4.1 Observation
Observation is a systematic data collection approach where researchers examine people in natural
settings or naturally occurring situations. Field observation will be used in the research in which the
research team will note the conditions of foreign remittance in……. and how local people are facing
the impact of foreign employment on socio-economic aspect in their society.
3.4.2 Questionnaire
The structured questionnaires will used to gather information about the impacts of remittance from
foreign employment/profession on individual. The questionnaire will be prepared in English and
 translated to Nepali. Further for the collection of information one member of research team will fill up
the questionnaire after the reply from respondents.

3.4.3 Interview
To execute this study the research team will conduct unstructured face to face interview with the well
known elders from ……. because they will give for the research the real information about the
impacts of foreign remittances on local society and what changes it has brought in socio-cultural and
economic aspects.
3.5 Data Analysis and Interpretation
The data that are collected by both primary and secondary data collection will be analyzed and
interpreted using figures, tables, percentages and averages, bar graph, photos and pie chart.
3.6 Data Presentation
The finding of the study will be presented by using tables, paragraph, photos and pie charts
 REFERENCES

Adams, Jr. R. (2006). WB: Remittances, household expenditure and investment in Guatemala. Policy
Research Working Paper No. 3532. Washington DC.

Alishani, A. and Nushi, A. (2012). Migration and development: The effects of remittance on education and
health of family member left behind for the case of Kosovo. Analytical Journal, 5(1), 42-57.

Arif, G., M. (2009). Economic and social impacts of remittances on households: The case of Pakistani
migrants working in Saudi Arabia. Islamabad: Pakistan Institute of Development Economics.
CBS. (2011). Statistical Pocket Book. Kathmandu: Center Bureau of Statistics
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Dahal, M. K. (Ed.). (2004). Nepalese economy: Towards building a strong economic nation state.
Kathmandu: New Hira Books Enterprises.

Nair, R. P. (2009). The impacts of gender and remittance on household’s expenditure pattern in Nepal.
Unpublished Graduate Thesis, Graduate school of arts and science, Washington, DC.

Taylor, E. (1999). The new economics of labour migration and the role of remittance in the migration process.
International migration quarterly Review, 37(1), 63-88.