Unsecured loans for migrant workers soon

Kathmandu, October 29 — Workers seeking foreign employment will soon be able to obtain unsecured loans through banks. The Ministry of Labor, Employment, and Social Security is in the process of drafting guidelines for this initiative.

The ministry has prepared a draft guideline for providing unsecured loans to individuals going for overseas employment and has initiated discussions with stakeholders.

The aim is to eliminate the burden of high-interest loans required for foreign employment by arranging for unsecured loans through banks. Minister Sharatsingh Bhandari announced during a press conference on October 25 that an agreement will be made with banks to facilitate these loans for workers. He stated that arrangements are being made for banks to cover the expenses incurred when going abroad.

The loans will be directly sent to manpower agencies rather than being deposited into the workers' accounts. The ministry has already established a policy framework for this purpose. Spokesperson Danduraj Ghimire confirmed that the final draft of the guidelines is ready.

Many individuals in rural areas are currently forced to take loans from moneylenders at high-interest rates, particularly among the underprivileged youth. Minister Bhandari emphasized that this initiative aims to address such challenges.

After the Tihar festival, the ministry plans to hold further discussions on the draft guidelines. Workers who receive unsecured loans from banks will be able to send money back to their families through the same bank, which will also facilitate loan repayments. The government believes this will reduce the trend of illegal remittances through hundi (an informal money transfer system).

The ministry has engaged in discussions with several banks, including Global IME Bank and Citizens Bank, all of which are positive about providing unsecured loans for overseas workers.

Minister Bhandari stated that insurance taken by the workers will serve as collateral, and the government could also act as a guarantor. This arrangement is expected to resolve issues related to high fees charged by manpower agencies.

The ministry aims to finalize the guidelines as soon as possible. Once workers are abroad, they will need to send money through banks, which will also facilitate loan repayments and monthly contributions to the social security fund.

Currently, workers are required to make mandatory contributions to the social security fund, making an initial contribution of one month when they first leave Nepal. However, the number of individuals who continue to contribute after the first month is low. With the provision of unsecured loans, the ministry plans to ensure that monthly deductions for the fund can be automated.

The draft has been prepared after discussions with the Bankers' Association, the social security fund, and the Foreign Employment Board. The ministry's intention is to reduce the necessity for high-interest loans abroad if unsecured loans can be provided to workers.

Furthermore, the ministry expects that if remittances are sent through formal banking channels, it will lead to an increase in remittances. The ministry is committed to preparing the guidelines for implementation as quickly as possible.