SOCIO ECONOMIC IMPACT OF REMITTANCE: A CASE OF

SYUCHATAR VDC
A Research Proposal

Submitted to:
School Of Management
As Part of the Internal Project on Business Research Methodology

Submitted by:
Supriya Budhathoki
Roll no: 32

January, 2016

1. Background
Remittance most commonly refers to the funds an expatriate sends to their country of origin via
wire, mail, or online transfer. The International Organization for Migration (IOM, 2006) defines
remittances as follows: Migrant remittances are defined broadly as monetary transfers that a
migrant makes to the country of origin. In other words, financial flows associated with migration
. The grandness of remittances has increased in recent years, from economic and social vista.
According to a World Bank report workers remittance furnish valuable financial resources to
developing countries, particularly the poorest (World Development Finance, 2005). Remittance
provides disposable funds to the families of migrants, valuable inflow of funds into the
developing countries and also provides foreign currency and access to new potential customers
for banks.
With the increased globalization, the labour movements around the labour markets in the world
have increased. The total remittance income of the developing countries reached US$ 404 billion
in 2013 which is expected to rise to US$516 billion by 2016. Apart from the monetary gains
from remittance, it is associated to the socio-economic dimension of the society with respect to
human developments. The contribution of migration in the form of remittance contributes both in
individual level as well as in society. Remittances can form a safety net for households
vulnerable to the risks of climate variability and change like in case of Gorkha Earthquake 2072.
The capacity of people and groups to adapt to change depends on many factors, including their
access to financial resources, information, education, healthcare, social resources, infrastructure,
and technology and remittance contributes to improve these aspects. In macro level it contributes
to improve infrastructures, decreases poverty and leads to economical growth.
Nepal has a long tradition of overseas employment. According to the report of World Bank,
Nepal was third among the countries receiving the highest proportion of remittance in terms of
gross domestic product (GDP) with the country receiving remittance worth 25 percent of GDP in
2012/13 which increased to 28 percent of GDP in 2013/14. During the first ten months of fiscal
year 2014/15, total inflow of remittance stood at Rs 489.07 billion which is less in comparison to
previous years remittance of Rs 543.3 billion as per latest Macroeconomic Report of Nepal
Rastra Bank. But average per day remittance inflow went up to Rs 2.10 billion in the one-month
period i.e. 10 percent increase in between April 14 to May 14, as Nepalese working abroad sent

home additional money in the wake of the disaster. This is expected to increase the countrys
dependence on remittance, meanwhile also changing the pattern of how remittances are used.
2. Statement of Problems
Nepal has been migrating to diverse part of world voluntarily or due to some compulsions and
after the Gorkha earthquake the trend is increasing more and more. The remittances from the gulf
countries and other have increased highly during and after the earthquake to form safety net for
households vulnerable to the risks. The impact of remittance can be seen in various areas like
housing, transportation, education, and lifestyle and on other facilities.
This study attempts to critically analyze the socio economic impact of remittance from foreign
countries on Kathmandu district taking Syuchatar VDC as a case. The VDC has recently been
included in Nagarjun municipality ward no 13. Syuchatar has around 3,379 houses with 1,606
families residing. According to census 2011, population of Syuchatar is around 13,412 out of
which 46 percent of population is in abroad. The study seems to determine the impact of
remittance in socio-economic welfare of households in terms of health, education and life style.
Along with it, the study also attempts to determine the reason for sending remittance and the uses
of remittance by the people of Syuchatar VDC before and after Gorkha earthquake 2072.
Most of the previous studies were oriented towards the impact of foreign remittance on socioeconomic welfare of recipient households before and after receiving remittance so this study is
more concerned in making comparative study of foreign remittance receiving households and
non receiving households. Most of the previous studies used secondary data for research so this
study attempts to use the primary data to dig into the topic.
The major research questions that are aimed to be resolved through this study are as follows:

What are the reasons for sending remittance before and after the earthquake?

How remittances are invested before and after earthquake?

Is there any difference in socio-economic welfare among remittance receiving and nonreceiving household?

What is the health status of foreign remittance receiving and non- receiving households?

Is there any difference in lifestyle of foreign remittance receiving and non receiving
households?

What is the education status of foreign remittance receiving and non receiving
households?

3. Objectives
The main objective of the study is to compare the socio economic status of households receiving
and not receiving foreign remittance in three aspects i.e. education, health and lifestyle. Along
with it, the objective of the study is to identify the differences in remittance sending and
investing patterns before and after earthquake.
General

To evaluate the impact of remittance on the socio economic status of households

receiving and not receiving remittance.

Specific

To compare the educational status of foreign remittance receiving and non receiving
households.

To evaluate the health status of foreign remittance receiving and non receiving
households.

To examine the difference in lifestyle of foreign remittance receiving and non receiving
households.

To identify the reasons for sending remittance before and after the earthquake.

To analyze the pattern of use of remittance by remittance receiving households before and
after earthquake.

4. Review of literature
This section reviews studies done by various scholars and theories that address the socio
economic impact of remittance.
In most of the literature remittances are defined in terms of cash or financial transfers sent by
migrants who left their home country excluding those sent in kind. The term is also confined to
migrant worker cash transfer transmitted to their families and their communities back home
excluding transfers from refugees and other migrants who do not benefit from legal status of
migrant workers. (Van Doorn, 2001 and Soreensen, 2004).
Previously, dependency theorists were of the view that remittance never contributes to the
development of underdeveloped countries mainly for the reason that international migration
encourages brain drain from the developing countries depriving them of the human capital that
they desperately need to meet their development goals. Prior to the dependency and structural
views, however, the developmentalist and neoclassical thinkers during 1960s and 1970s had
maintained optimistic views on remittances believing that capital and knowledge transfers by
migrants would help achieve development needs of least developed countries in the world. The
same views have taken incarnation at the start of this century bringing back the debate about
remittances on the floor once again. (NRB, 2012)
G.M. Arif (2009) further states in his report Economic and Social Impacts of Remittances on
Households: The Case of Pakistani Migrants that Foreign remittances have made a substantial
contribution towards enhancing the well-being of the migrant households. Remittances help
particularly in escaping poverty and increasing the overall economic status of the migrants and
their households, and improving the ability of the households to increase expenditures. The
social contribution of migration is even more encouraging in terms of improving childrens
education, enhancing housing conditions, and eliminating child labour, empowering women and
enhancing the overall social status of households.
The effects have been either positive or negative when observing the impacts in multidimensional social and psychological aspects. Siddiqui (2005) found that in some instances
remittance afforded children better educational opportunities whereas in others childrens

education suffered because of the absence of their parents. Likewise, most women reported
greater confidence following migration but some felt guilty for the misfortunes that struck their
families in their absence.
For the case of Nepal, the studies carried out so far have been very limited, despite the fact that
Nepal stands as one of the major remittance-recipient countries in the world. Bhadra (2007)
observed the mixed impacts on the children of migrant mothers in Nepal: positive impacts were
seen on the opportunities for education, health care and lifestyle but worsening psychology of
their children as their mothers apart for a long time. By being able to earn an income, support the
family financially and have the freedom of financial decision-making, traveling to foreign
countries with new experiences, seeing new places, and meeting with people from different parts
of the world and interacting with them brings the feeling of independence and confidence for the
migrants and this effect impart to their immediate family as well.
Fabian Arter (2009) on his research report Remittances to the Kathmandu Valley And Their
Economical Impacts

stated that 10% increase in remittances can reduce poverty by 2.3% in

worldwide basis and in Kathmandu valley of Nepal the most people receive remittances from
USA, UAE, Qatar, Malaysia and UK. Further an average schooling time in Kathmandu valley is
of 10.7 years of the remittance recipient with average schooling years for women of 9.5 years
and 11.0 years for men. The remittance is mainly transferred due to pure altruism, for better
lifestyle, schooling, loan payments and others and are invested in food, education, saving, loan
payments, health, housing, communication and for own business. Japan survey and UNDP data
further show that an increase of 1% in GDP p.c. in the sender country, increases remittances by
0.59%.
All these previous studies help to explain the socio economic impact of remittance on different
population and samples before and after receiving remittance where as this report is focused on
comparative study of the socio economic impact of remittance in between households receiving
remittance and not receiving remittance. Further the research is conducted on Syuchatar where
no previous research has been conducted. The report also analyses the changes in the reason for
sending remittance and change in the pattern of use of remittance before and after the Gorkha
Earthquake 2072.

5. Theoretical framework
The theoretical framework and the relationship between the dependent and independent variables
in the study have been depicted in the figure below. The independent variable is the income of
the household. The dependent variables are the health, education and lifestyle that are most likely
to be influenced by the income of households. The type of employment is used as moderating
variables and the patterns of investing income is the intervening variable.
Semantic diagram

The independent variable of the study is income which implies the sum of all the wages, salaries,
profits, interest payments, rent and other forms of earning received. Income of household is
expended on various aspects and the pattern of expenditure of income affects on the education,
health and lifestyle of the people. The moderating variable of the study is the type of
employment that is domestic employment or foreign employment. Foreign employment provides
household with remittance. Studies done by many scholars in different parts of world, shows the
direct impact of remittance on health, education and lifestyle in the home country. Studies are
divided over whether the foreign remittances have positive or negative impact on the selected
dependent variables. These are the most used variables to determine the socio-economic impact
of remittance on household of home country.

Health is termed as the absence of physical pain, physical disability or a condition that is likely
to cause death. It is the emotional well-being and satisfactory social functioning. In case of
health status, studies have shown that foreign remittance enhances the overall health status by
increasing the health expenditure, but some studies are skeptical about the women health
including the study done by Nepal Rastra Bank (2012).
Education in its general sense is a form of learning in which the knowledge, skills, and habits of
people are transferred from one generation to the next through teaching, training or research.
Foreign remittance has increased the school enrolment and reduces the chances of drop due to
the lack of financial resources.
Life style is the way of living of individuals, families and societies, which they manifest in
coping with their physical, psychological, social and economic environments on day to day basis.
It is expressed in both work and leisure behavior patterns and in activities, attitudes, interests,
opinions, values and allocation of income. Remittance has changed the spending patterns of the
households but not necessarily the overall lifestyle of households.
Pattern of spending refers to the amount of income segregated under different expense heads.
Fabian Arter (2009) states that remittance are invested in food, education, saving, loan payments,
health, housing, communication and for own business and according to the degree of spending
done on various expenditure heads the education, health and lifestyle status of household
changes in the home country.
This shows the mixed evidence regarding the impact of foreign remittance in different fact of
socio-economic life. Therefore, this study is devoted to discover the actual impact of remittance
on socio economic aspect of households of Syuchatar VDC.

6. Hypotheses
The following hypotheses were formulated:
Education
H1a- There is significant difference between the type of school attended by children of foreign
remittance receiving and non receiving households.
H1b- There is significant difference between the portion of income employed for children
education by foreign remittance receiving and non receiving households.

Health status
H2a- There is significant difference between the medical centre preferred for health treatments
of foreign remittance receiving and non receiving households.
H2b- There is significant difference between the portions of income spend for health treatment
of foreign remittance receiving and non receiving households.

Lifestyle
H3a- There is significant difference between the portion of income spent for day to day
consumption by foreign remittance receiving and non receiving households.
H3b- There is significant differences between the frequency of consumption of luxurious goods
by foreign remittance receiving and non receiving households.
H3c- There is significant differences between the frequency of restaurants and cinema hall visits
by foreign remittance receiving and non receiving households.
H3d- There is significant differences between the pattern of spending remittance by foreign
remittance receiving households before and after the earthquake

7. Research Methodology
7.1 Research Design
The descriptive survey design would be used for collecting and analyzing data in order to
describe the problems in its current status. The methodology of this study is designed on the
basis of the available literature and practices. The descriptive survey is appropriate method due
to its capacity to establish how remittance and its socio-economic impact in reality are consistent
with the existing theories of remittances.
7.2 Population and Sample
The population for this study is the total households of Syuchatar VDC of Kathmandu District.
Syuchatar VDC is selected because the researcher belongs to that area, so, exposure to that area
is broad. Also, the VDC has been affected by recent earthquake and this study focuses on
analyzing its impact on remittance investing pattern that ultimately affects the socio economic
aspects of households. A sample of households would be chosen using convenient sampling
technique where at least one member of household needs to be engaged on foreign employment
for at least three years. The minimum year of foreign employment is considered three years as it
would be sufficient to improve the social and economic welfare of the families residing on home
country.
7.3 Instruments
With the help of literatures and theories, a standard structured questionnaire is prepared to use as
an instrument for the study of socio economic impact of foreign remittance in Syuchatar VDC.
The questionnaire includes all the relevant variables for the study and is incorporated into two
sections. The first is to enquire respondents background information and second part is to collect
the information regarding investing pattern of remittance, reason for sending remittance,
education, health and lifestyle status of households.

7.4 Source and Method of Data Collection

Primary data collection technique is used from the administration and distribution of standard
structured questionnaire to the relevant persons for collection of responses. Questionnaire is
directly administered to increase the validity and reliability of the study as well as to minimize
the probable error. Around 20 days would be needed for conducting structured questionnaire
based survey.
7.5 Data Analysis
The data collected through questionnaire will be analyzed using descriptive statistical tools such
as frequency analysis, cross tabulation, bar diagrams. Hypothesis will be tested using inferential
techniques such as chi-square test, t-test and regressions. The data obtained will be analyzed
using SPSS software and MS word shall be used for presentation and interpretation of analyzed
data.
8. Study Limitation
The major limitations of this study are as follows:

The sample size is small and may not be the actual representation of the population as

convenient sampling method is used.

The study only includes foreign remittance and excludes domestic remittance.
The study excludes the migrants working abroad for less than three years so, the data may

not represent the overall behavior of people of Syuchatar VDC.

Only few socio economic variables have been considered for the study of socio economic

impact of remittance. The broader coverage of other impact areas has been missed.
The households were believed to be capable of remembering their household status
before the earthquake, which may not be accurate for all household involved in the
survey.

9. Study Timeline

Month
Planning
Data
Collection
Data
Analysis
Report
Writing

January

February

March

April

References
Bhadra, C., (2006) The Political Economy Of The Remittance Of Migrant Women Workers
(MWWS) Of Nepal,
Fabian Arter (2009) Remittance To The Kathmandu Valley And Their Economical Impacts
G.M. Arif (2009) Economic and Social Impacts of Remittances On Households: The Case Of
Pakistani Migrants, International Organization For Migration.
Government of Nepal Ministry of Finance (2015) Economic Survey
KC Shekhar (2012) Effect Of Remittance In Economy Of Nepal.
Nair. P.R. (2009) The Impact of Gender And Remittances On Household Expenditure Patterns
In Nepal.
Nepal Rastra Bank (2002), Foreign Employment and Nepals Remittance Economy, Nepal
Rastra Bank
Nepal Rastra Bank (2007) Remittance from India, Nepal Rastra Bank
Nepal Rastra Bank (2012) Impact Evaluation of Remittance; A Case Study Of Dhanusha
District, Nepal Rastra Bank
Siddiqui, T. And Abrar, C.R. (2001) Migrant Workers Remittances and Micro-Finance
Institutions, International Labor Organization (Mimeo), Geneva, 2001.
The Himalayan Times (2015) Daily Remittance Inflow at Rs 2.10 Bn.
Van Doorn, J., (2001). Migration, Remittances and Small Enterprise Development. Geneva:
International Labour Organization.
World Development Finance (2005). Two Current Issues Facing Developing Countries:
Workers Remittances and Economic Development.