Budget Constraints Stall Implementation of Foreign Employment Procedures for Interest-Free Loans
May 2, Kathmandu – The government has announced in the upcoming fiscal year 2083/84 budget provisions to provide interest-free loans to workers going abroad for foreign employment. Emphasizing arrangements for workers to gain skills before going abroad, the budget statement highlights the provision of interest-free loans. It specifically mentions that repayments of these loans will be arranged through installments deducted by employers. The budget statement declares, “With arrangements for interest-free loans and installment repayments through employers, we aim to make foreign employment dignified, transparent, and automated.”
The Ministry of Youth, Labour and Employment (formerly the Ministry of Labour, Employment and Social Security) had for the first time included the concept of interest-free loans in the budget of 2081/82. In the subsequent fiscal year 2082/83, the topic was included with less direct language. Although the idea of providing interest-free loans for migrant workers has been mentioned in several past budgets, the provision has not yet been enforced. The ministry had even conducted studies and drafted procedures, but progress stalled due to uncertainties during implementation.
The government has again incorporated the plan to provide interest-free loans and send workers abroad in the next fiscal year’s budget. The recruitment cost—which has yet to be definitively fixed—has been a major hurdle in enacting the relevant operational procedures. According to ministry spokesperson Pitambar Ghimire, despite multiple discussions and drafting necessary procedures, final approval has not been obtained. He explained, “Banks were supposed to provide loans based on the total estimated cost a worker incurs when going abroad, but these costs vary widely by destination country (Gulf countries, Japan, etc.) and recruitment conditions. Owing to the inability to fix a uniform cost, there has been no standard to determine how much loan banks should provide, preventing procedural approval.”
The budget includes provisions to grant concessional loans to those traveling for foreign employment, with installment repayments deducted directly from workers’ salaries by employers. However, uncertainty remains about how foreign employers will make these installment payments to Nepalese banks. The ministry needs to establish clear procedures for this. Previously drafted procedures did not specify employer repayment responsibilities, indicating that further groundwork is needed before implementation, said spokesperson Ghimire.
Similar initiatives have been attempted before. During Rajendra Singh Bhandari’s tenure as Minister of Labour, a task force led by this same spokesperson, Ghimire, was formed to study service fee determinations, but the process was left incomplete after elections and government changes. Although relevant documents exist within the ministry, further deliberations by a high-level team including the Ministry of Finance, experts, and stakeholders are deemed necessary to reach clear conclusions.
The Nepal Foreign Employment Association and manpower agencies have demanded service fees equivalent to one to two months’ salary depending on the destination country. The ministry is holding regular discussions to develop a comprehensive model representing all parties, said Ghimire. The government plans to provide interest-free loans to migrant workers only after reaching consensus on these costs.
Disputes over service fees have long been contentious. The previous government, on April 6, 2003, had set fixed service fees of NPR 70,000 for Gulf countries and NPR 80,000 for Malaysia. On June 9, 2015, then State Minister for Labour Tek Bahadur Gurung announced a “free visa, free ticket” policy, limiting service fees to merely NPR 10,000. Manpower agencies protested, stating such a rate was unsustainable for sending workers abroad. They have opposed the NPR 10,000 cap since 2015, demanding removal and a realistic fee structure.
Hari Bahadur Pandey, president of the Nepal Foreign Employment Operators Unity Committee, advocates scrapping the NPR 10,000 fee and setting a minimum service fee equal to two months’ wages. He also suggests that if employers do not provide air tickets, workers should be allowed to purchase them independently. Pandey argues that a transparent service fee system will protect workers from exploitation, eliminate middlemen, and substantially increase government revenues. He claims that inadequate fees have forced agencies to charge exorbitant rates unofficially. “We have protested since 2015, demanding a revision because we cannot send workers at the NPR 10,000 fee. When the government did not listen, we challenged the decision,” he stated.
Former president of the Nepal Foreign Employment Association, Rajendra Singh Bhandari, says problems will not be resolved until policy reforms are introduced. He asserts that with an appropriate fee and policy reforms accompanied by a bank payment system, accusations of fraud against agencies could also be addressed effectively.
