The Experience of Himalayan Bank: Breaking into the Remittances Market and the Advantages for Migrants

1. The Experience of Himalayan Bank: Breaking into the Remittances Market and the Advantages for Migrants

2. Himalayan Bank Ltd. • Remittance history- since 1850 when Nepalese Gurkha’s joined the British and Indian armies. • The political situation and the global demand for laborers has increased migrant flows abroad. • Presently remittances accounts for about 20% of Nepal’s GDP.

3. Himalayan Bank Ltd. • 3 issues to discuss • Background on Nepal’s situation with respect to migrants and remittances • Share some relevant experiences of HBL • Offer some suggestions that may be of relevance to you regarding what countries can do to better prepare their migrants for remitting monies home. I should add that when I speak of the Himalayan Bank I do so because I am intimately familiar with it, not because I am promoting it as a panacea. I will keep my remarks limited; those that may wish further detail may consult the printed copies of my paper, which I believe will also be posted on the World Bank’s Small States website.

4. Himalayan Bank Ltd. • In the last 5 years over 500,000 migrant workers have left for employment abroad. • Out of these • 75% were unskilled • 20% were semi-skilled • 5% were skilled

5. Himalayan Bank Ltd • The volume has grown over the last five years from Rs.36.81 billion ($497m) to Rs.65.54 billion ($886m) in 2005/2006 • Earlier, people were comfortable dealing/sending money through hundi - an informal money transfer syndicate- rather than through formal banking channels • Now formal channels are available: • Bank to Bank- Bank account a must, delay in payment and high cost of transfer • Transfer though online companies- Effective delivery services, Large network. High rate of commission. Low rate of exchange

6. Himalayan Bank Ltd. • Himalayan Bank’s experience • In Nepal, the majority of migrant laborers are from remote, rural ,or sub-urban places, and hence have usually have a very limited knowledge in sending money through formal banking channels. Himalayan Bank has worked diligently to make migrant laborers comfortable when dealing with banks to remit money back home. The activities undertaken by Himalayan Bank to educate and facilitate remittance services include the following: • Joint alliance with manpower companies on educating people on how to remit money. • Basic orientation to people going abroad for employment. • Allowing migrant workers to open account with us through special offers like waiving minimum balance requirements. • Distribution of brochures, leaflets, teasers, etc. at the local level prior to their departure. • Setting up dedicated channels for routing payments.

7. Himalayan Bank Ltd. • Develop our own online money transfer software. The main rationale behind developing the project was to offer payment services on real-time basis at an affordable price to customers. • Penetrating the remittance market in same level field at par with international service providers was difficult job for us. Unless a product or service is best suited to meet the high expectation of customers, it will not gain acceptance • Offering best FX exchange • Cutting down transaction cost • In this case, we adopted following strategies: • Offered card rate to customer, which in case of international money transfer companies will be discounted @ 1.5-2.0% on card rate. • Introduced face-value payment concept, in which customer is required to pay charges at one end only, overcoming conventional practice of dual charges; as a result, the transactional charges to the customer was reduced by 100%.

8. Himalayan Bank Ltd. • In the conventional setup, the money transfer process was very tedious and time consuming; at best it would take a minimum of 36-48 hours to execute and deliver payments. For a developing country like Nepal, with rudimentary telecommunication infrastructure, even this timeframe was considered very optimistic. • For the success of effective money transfer services, network, pricing and people play a decisive role. Understanding the business dynamics, we focused on delivering the service within close proximity to the requirements of the people. The success is also highly dependent upon quick payment time, at a minimum within 10 minutes.

9. Himalayan Bank Ltd. • Since the introduction of HimalRemit, Himalayan Bank has worked at: • Improving the financial infrastructure to increase volume of remittance • Providing better access to the financial infrastructure to migrant workers and their families • Creating opportunities for investment and savings mobilization • Developing incentive schemes to attract remittance volume.