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Remittance and its Effect on Entrepreneurial Activities: A Case Study
from Kandebas Village Development Committee, Nepal
Bharat Chalise, PhD(Marketing) Student, Anadolu University, Eskisehir, Turkey
Abstract
The main stimulus of this study is to examine the people’s behavior over their capital management,
obtained through remittances. Both quantitative and qualitative methods of research are adopted for
analysis. Data were collected from 77 households of two different villages of Baglung district, Nepal by
means of questionnaire and structured interview based on their priority investment activities on March
2013. The finding shows that the people are less motivated to establish new business from the remittances.
This indicates that still remittance is not a strong base for future economy because of its less contribution
to increase in entrepreneurial activities.
Key Words: Remittance, Entrepreneurship, Motivation, Economic Development,
Investment Priorities
1. Introduction and Background of the Study
Remittances are largely personal transactions from migrants to their friends and families.
They tend to be well targeted to the needs of their recipients. Remittance is the important
contributor in GDP of every developing country. At the macro-economic level, the
relationship between economic growth and remittance receipts has come under renewed
scrutiny. Although the empirical evidence on the impact of remittances on economic
growth appears to be mixed, it is nonetheless recognized that, since remittance flows are
used either to increase consumption or investment, they have the potential to become an
important tool for economic development (United Nation Development Program, UNDP,
2006). More recently, it has been noted that “a significant portion of remittance flows are
used to service debt, and increase foreign exchange reserves” ( (Das & Serieux, 2010)).
In other words, such flows can also be used to cushion the impact of external economic
shocks.
Remittances are largely personal transactions from migrants to their friends and families.
They tend to be well targeted to the needs of their recipients. Remittance is the important
contributor in GDP of every developing country. Nepal is continuously benefitted from
the increasing rate of remittance from 2000. Now remittance occupies 23.5% of the GDP
contribution in Nepal (New Business Age, 2012). In Nepal’s modern history, the
phenomenon of labor migration dates back to the Rana regime where people migrated
predominantly in search of employment. Long before the recruitment to British and
Indian armies, Nepalese have been found to migrate to neighboring countries to evade
excessive taxation and exploitation from state agencies (International Labour
Organization, 2004). For instance, household survey data show that remittances have
reduced the poverty headcount ratio significantly in several LICs: by 11 percent in
Uganda, 6 percent in Bangladesh and 5 percent in Ghana. In Nepal, remittances may
explain a quarter to a half of the 11 percent reduction in the poverty head count ratio
(Ratha, Dilip; Mohapatra, Sanket, 2007).
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Economic growth of any country depends upon its production of its goods and services.
As per economic principle earning/saving is no worthy until the proper investment is
done. Proper investment refers to investment on productive sector that creates
employment opportunities. Entrepreneurship is the act of being an entrepreneur "one
who undertakes innovations, finance and business acumen in an effort to transform
innovations into economic goods” (Hessels, Gelderen, & Thurik, 2007). Finance is a
major constraint for entrepreneurs. Here, we are talking about remittance as a source of
finance for the small entrepreneur. Study will show the patterns and priorities of use of
remittance in Kandebas VDC Nepal.
Remittance in Nepal
The growth rate of remittance to Nepal may have slowed from double digits to single
digit in recent years, but the country ranks among the top five in terms of the share of
Remittance of the Gross Domestic Product. The World Bank’s new report ‘Migration
and Remittance Fact book 2011’ says Nepal is among the top five countries with
remittance amounting to 23 percent of the GDP. Tajikistan, Tonga, Lesotho and
Moldova are ranked ahead of Nepal. Among the least developed countries, Nepal is
placed second behind Bangladesh. Along with agriculture which contributes more than
30 percent of the GDP, remittance and the service sector have emerged as major
contributors to GDP. Remittance has contributed significantly to the reduction of poverty
in the last 15 years. The Second Living Standard Survey had sighted remittance as the
major contributor behind the decline in people living below the poverty line from
42percent to31 percent. According to UNDP’s ‘Human Development Report 2010’,
remittance was one of the factors behind Nepal’s remarkable success in human
development in the last 40 years. Nepal emerged one of the world’s fastest movers in
Human Development Index (HDI) since 1970, coming in third among 135 countries
studied. According to the report, remittance inflow to Nepal is estimated to reach US$
3.5 billion in 2010. Nepal received payments worth US$ 2.98 billion in 2009. The World
Bank’s latest report says remittance flows are expected to reach US$ 440 billion by the
end of 2010 (World Bank, 2011).
Nepal’s remittance growth remained at 10.5 percent in the fiscal year 2009-10, down
from 47 percent in the previous year. Remittance growth has not kept pace with the
rising number of migrant workers leaving for foreign employment (Dhungel, 2010).
According to the latest macroeconomic situation report released by Nepal Rastra Bank,
remittance flow rose 9.7 percent in the second month of the current fiscal year. The NRB
report shows that Nepal received remittance amounting to Rs 38 billon in the first two
months compared to Rs 34 billion of 2010. The slowdown in the remittance growth since
last year, has affected the economy, especially in the foreign exchange. Earlier, even
when there was a trade deficit, high inflow of remittance would cover it. However, with
remittance growth slacking and import rising, the country witnessed record balance of
payment deficit last year. The country has not been able to turn around the negative
balance of payments situation that is in the red by Rs 4.36 billion as of the second month
of this year (The Kathmandu Post, 2010).
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Entrepreneurship in Nepal
Being one of a least developed country, more than 24.7 percent of population lie below
the poverty line and the annual per capita income is not more than U.S.$600 (ICIMOD,
2012). The pace of industrialization in Nepal has remained very slow. The industrial
sector contributes around 8 percent to GDP and provides employment to about 2 percent
of economically active population. Nepal has been experiencing unemployment and
acute under-unemployment problem. In a case study conducted by Nepal Rastra Bank,
the percentage of unemployed in the total labor force was estimated at 3.1 percent.
Similarly the under-employment rate worked out to 46.4 percent and 33.6 percent in
rural and urban Nepal respectively (KC, 1997). As a result, unemployment and poverty
is prevalent, forcing Nepalese young people to look overseas for employment. Empirical
evidence in many countries has shown that the development of industrial enterprises can
directly contribute to job creation, the use of local resources, and import substitution,
thus increasing the gross national product. Therefore, to accelerate the pace of industrial
development, the government of Nepal has given high priority to the promotion of
SMEs.
Therefore, entrepreneurs have important role to play in the process of industrialization.
They could assist to generate employment opportunities, to raise income and to break the
vicious circle of poverty. If we peek in history, we can see historical decline of self-
employment in Nepal. Across different stage of development, a shift from agriculture to
manufacturing and economies of scale in production by larger enterprises in many
sectors offered better opportunities. Additionally rising real wages increase the
opportunity cost of self-employment relative to the return, inducing marginal
entrepreneurs to become employees. Also, due to globalization and opportunities
available in developed nation the trend of migration and brain drain has increased. With
these drift only fewer individuals are willing to run the risk associated with becoming an
entrepreneur.
1.1 Statement of the Problem
The growth rate of remittance to Nepal is slowed from double digits to single digit in the
data of 2009, but the country ranks among the top five in terms of the share of remittance
of the Gross Domestic Product. The World Bank’s new report ‘Migration and
Remittance Fact book 2011’ says Nepal is among the top five countries with remittance
amounting to 23 percent of the GDP. Tajikistan, Tonga, Lesotho and Moldova are
ranked ahead of Nepal. Among the least developed countries, Nepal is placed second
behind Bangladesh. Along with agriculture which contributes more than 30 percent of
the GDP, remittance and the service sector have emerged as major contributors to GDP.
Remittance has contributed significantly to the reduction of poverty in the last 15 years.
The Second Living Standard Survey had sighted remittance as the major contributor
behind the decline in people living below the poverty line from 42 percent to 31 percent.
Recent data demonstrate that remittance rate is growing by 10.7% yearly (World Bank,
2011).
The industrial sector contributes around 8 percent to GDP and provides employment to
about 2 percent of economically active population. Nepal has been experiencing
unemployment and acute under-unemployment problem. In a case study conducted by
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Nepal Rastra Bank, the percentage of unemployed in the total labor force was estimated
at 3.1 percent. Similarly the under-employment rate worked out to 46.4 percent and 33.6
percent in rural and urban Nepal respectively (Nepal Rastra Bank, 1988). Therefore,
entrepreneurs have important role to play in the process of industrial as well as economic
development. They could assist to generate employment opportunities, to raise income
and to break the vicious circle of poverty. There is no clear evidence that the increase in
remittance led to a systematic increase in private sector formal employment or
entrepreneurial activities.
This study will help to illustrate their nature of expenditure. Entrepreneurship is a side by
side issue of the investment trend. Only those entrepreneurs can contribute the economy
of nation who invests in business to create new employment. This study will focus on the
trend of investment of their capital in rural areas of Nepal under the assumption major
source of capital is remittance.
1.2 Objective of the Study
The main stimulus of this study is to examine the people’s behavior over their capital
management, obtained through remittances. The study mainly focuses to investigate the
economies of remittance and its effect in entrepreneurship. This study also tried to find
out their investment priorities as the income level increase.
1.3 Research Questions
The primary rationale behind this purpose was to explore whether the economic
development of any country is affected by the capital management of people or not. So
that the study aim to find out the trend of capital expenditure of people obtain from
remittance. In other words this is exploring the rate of enterprise development as per the
increase in income of people due to foreign employment. It also explored the factors
affecting on the entrepreneurial activities of the people. There are basic research
questions the study attempts to answer.
How increase in remittance effect entrepreneurship development?
What are the investment priorities of people?
What are the factors affecting enterprise development?
Is remittance helping for the sustainable development of the country?
1.4 Limitations of the Study
The major limitations of the study are:
The study include sample of two village with 72 households only
Only few selected investment option were used while collection of data although
there were other options are also available.
Official national information on the entrepreneurial activities is hard to find for
compare
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2. Litrature Review
There are several studies done on remittance and its impact on economy. Major study
center are Government bodies like Nepal Rastra bank, Ministry of Finance, International
Organization for Migration (IOM), World Bank (WB), Asian Development Bank (ADB),
World Trade Organization (WTO), Ministry of Foreign Employment and some NGOs
and INGOs.
Nepal received around USD 2.9 billion remittances in 2009, up from USD 0.8 billion in
2004, an increase of 262 percent in just 5 years. In 2009, the total remittance was four
times greater than export earnings, 81 times greater than FDI, eight times greater than the
earnings from tourism and nine times greater than grants. Remittance contributed 18
percent to the total GNP of Nepal in 2006, the highest in South Asia. This figure has
been constantly heading north while in 2012 it become almost 25% of the GDP. In 2004,
remittances constituted 14.2 percent of GDP and jumped to 41.1 percent in 2009, an
increase of 189 percent than 20% in 2010. This data reveals that the dependence of
Nepal’s economy on remittances has been increasing over the years and this trend looks
set to continue for some time to come. Tourism is a promising sector in Nepal but
income from tourism seems to fluctuate, indicating fluctuation in employment
opportunities. Export and tourism earnings as a percentage of GDP were 11 percent and
5 percent respectively in 2009. This indicates that the growth of domestic sectors that
earn foreign exchange is not as pronounced and encouraging as remittance.
Figure 2- 1: History of Remittance Inflow in Nepal
Source: Calculated using data from World Bank, Migration and Remittances Fact Book 2011
Over 1100 Nepalese leave the country every day in search for greener pastures. The
country could be in trouble if there is a mass return of foreign workers. The bulk of
inflow of remittance in Nepal has been increasing over the years. The expenditure trend
of the remittance received indicates that it may have significant role in reducing poverty.
Out of total remittances, 78.9 percent is spent on daily consumption followed by loan
repayment (7.1 %), household property (4.5 %) and education (3.5 %). This pattern
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1990 1995 2000 2005 2010 2015
Migrant remittance Inflows
(US$ million)
Year
6
indicates that there is a considerable implication on the livelihood of people as a major
portion of remittances is spent on consumption. Merely 2.4 percent is spent on capital
formation. Lack of employment generation due to the unproductive use of remittance
will definitely hit the economy in the long run as the country is now caught in a
‘remittance trap’ (Dhungel, 2010).
Most economists today agree that entrepreneurship is a necessary ingredient for
stimulating economic growth and employment opportunities in all societies. In the
developing world, successful small businesses are the primary engines of job creation,
income growth, and poverty reduction. Therefore, government support for
entrepreneurship is a crucial strategy for economic development. As the Business and
Industry Advisory Committee to the Organization for Economic Cooperation and
Development (OECD) said in 2003, “Policies to foster entrepreneurship are essential to
job creation and economic growth.” Government officials can provide incentives that
encourage entrepreneurs to risk attempting new ventures. Among these are laws to
enforce property rights and to encourage a competitive market system.
The culture of a community also may influence how much entrepreneurship there is
within it. Different levels of entrepreneurship may stem from cultural differences that
make entrepreneurship more or less rewarding personally. A community that accords the
highest status to those at the top of hierarchical organizations or those with professional
expertise may discourage entrepreneurship. A culture or policy that accords high status
to the “self-made” individual is more likely to encourage entrepreneurship. Several
studies have analyzed different aspects of entrepreneurship defined as the level of self-
employment. They include (Stephena, Urbanob, & Hemmenb, 2005), who analyze the
effect of entrepreneurship on economic growth and find that the former’s influence on
the latter depends on the level of income. Thurik find that non-economic factors such as
culture are important determinants of entrepreneurship (Hessels, Gelderen, & Thurik,
2007). Entrepreneurship is about more than just starting new companies. It is about
creating jobs; helping move the self-employed to those who can employ others also. It is
about growing the economy in a sustainable way. It is about bringing new technologies
and ideas to emerging markets. Importantly, entrepreneurship is also about empowering
people and equipping them with dignity and self-confidence. For all these reasons and
more, approaching development in Nepal through the lens of entrepreneurship makes
sense.
Understanding the relationship between income per capita and entrepreneurship is
relevant for industrial policy. In South Asia for example, it is useful to explore how the
steady increase in income per capita observed over the last ten years, if it persists, will
likely change the dynamic in the private sector with implications for employment
creation.4 Such analysis could help in crafting development policies that seek to
transform developing economies into 'entrepreneurial economies.
This description of entrepreneurship does not fully capture the reality of many low-
income countries where two types of entrepreneurship coexist. While people with high
incomes may become opportunity entrepreneurs, those with low incomes might be
forced to embrace entrepreneurship out of necessity or survival. These “necessity
entrepreneurs” (Acs, 2007) are more common in economies where employment
opportunities are limited and social safety nets catering for the basic needs of people on
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very low incomes are weak or lacking. These entrepreneurs are “reluctant entrepreneurs”
(J.Charman & Petersen, 2009) given that it is their inability to find paid employment that
pushes them into business. The implication is that one would expect to find a large
number of "necessity entrepreneurs" in poor countries and more "opportunity
entrepreneurs" in rich countries. In other words, as incomes increase and people are able
to satisfy their basic needs, more people may engage in opportunity entrepreneurship in
line with Maslow's Hierarchy of Needs Theory. This process suggests a convex
relationship between entrepreneurship and income with high levels of entrepreneurship
at both low and high income levels.
3. Methodology
To start with the study, first the concept was built. Then relevant literatures on the topic
were reviewed and theoretical framework was constructed with the help of literature
review. After that data were collected from the site visit. Collected data were analyzed
and finally presented and interpreted.
Description of the Sample
As the study focus on capital expenditure behavior of people from rural area of Nepal,
where remittance is the major source of income. Before describing the sample, the
population of the study has to be known. Population is defined as a collection of data
whose properties are to be analyzed. The population is the complete collection to be
studied; it contains all subjects of interest. In this study nos. of households in whole
Kandebas VDC is taken as population which is 539 ( (National Beuro of Stastistics,
2011). These 539 no of households are taken as total population. 77 respondents or 2
villages out of 9 are taken as participant of the research. Approximately 15 % of the
population is used as sample size. The study aims to interpret the result to the whole
VDC. The selected VDC is assumed as the pilot study for the remaining 58 VDC of
Baglung district. Baglung is selected as a participant because of highest remittance
receiver among 75 district of Nepal according to Nepal Rastra Bank. The research is
limited to one group, often with a similar characteristic or of small size. So that this is the
case study and participants and respondents are choose as judgmental method. Non
probabilistic sampling method has been adopted for this study.
Nature of Data
Data used in this research study were primary and secondary in nature. Primary data
were collected from structured questionnaire whereas secondary data were collected
from published reports and from various websites related to the remittance and economic
development.
Data Collection Procedure
The data for this case study was collected using “multiple sources and techniques” (Pant,
2010). For this case study the research was carried out through a process of document
analysis, structured interviews and questionnaires, and participant observation.
Researcher visited the selected VDC for data collection. To collect the data standard data
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sheet format was used. Since the study is to find the people’s investment preference and
to find out the increment in microenterprises according to increment in their income. An
assumption is made that major factor of increase in income of people is remittance and
Family Size, No. of migrants, Current average income per month, Average income
before remittance; Occupation of other members other than migrants (Job, Business and
Other) information has been collected.
Table 2.1: Peoples Expense Priority
Current investment of capital Future investment plan
Business (enterprise setup)
Child education
Purchase of traditional asset
Other
Business (enterprise setup)
Child education
Purchase of traditional asset
Other
4. Results and Discussion
Let us begin by presenting the data obtain from the selected respondents. General
economic principal gives the positive relation between the income and enterprise
development in normal sociopolitical environment. After second people revolution
(2062/2063), Nepal is crawling for political stability. Business environment is going
more favorable in some extent in Nepal. Following data are obtained during the study.
This data gives the real situation about entrepreneurship development in the rural area of
Nepal. Now the result is discussed in systematic order with segregated issues.
Table 4.1 Descriptive Statistics
No of Respondents (Families) 77
Total Population 465
Total no of Migrants 75
Increase in income due to remittance
342%
No of enterprise before migration 20
Increase in no of enterprise from remittance 1
Increase in enterprises 5%
9
Total respondents of the research are 77 HHs with the population of 465 with average
family size 6. Among them 75 number of people are abroad for work and 20 are doing
business in the study area. Only 1 enterprise was setup from the remittance. There is only
5 percent of increment in business due to remittance.
Figure 3-1 shows the income wise demography of the respondents HHs. Migrants are the
leader in number with 16.3 percent and Job is the second largest occupation with 12
percent and Business is followed by only 4.3 percent of people.
Figure 4.1 Demography of Respondents according to Income Source
Migration
There are 16.3 percent people are out of country in search of work and money. In other
word, 34 percent of the families are receiving remittance at the time of study. One social
issue was seen over there during the study. Almost all of the youth are out of village
either for work or study. Migration of people to the urban area is like a fashion over
there. Whatever will be the income of parents, every child wants to go urban area either
for their higher study or to go abroad. Rate of migration of youth is very high from the
rural village. Almost all youth of these villages are out of home. This trend is terribly
increasing recent days because people are taking as a social prestige to be a migrant.
Well educated people except teachers are also highly motivate to migrate in foreign
countries.
Income and remittance
According to the collected data average income of the family is increased by the 342%
and the remittance is the only contributor for this increment. This figure shows the
importance of remittance to lift the per capita income in Nepal. Change in income help to
increase the GDP of Nepal as discussed in previous chapter. This wonderful truth
suggests that there must be increase in enterprise due to increase in income.
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Total nos of
Migrants
No of people
doing Job
No of people
doing Business
Percentage 16.13% 12.04% 4.30%
Percentage People
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Entrepreneurship
Selected district is the number one ranked district as per the volume of remittance among
the 75 districts in Nepal. Kandebas VDC is one of the highest remittance receivers
among 58 VDCs of the district. In this study it is found that 56 percent of selected
households are receiving remittance which helps to increase their income by 342 percent.
The evidence showed that only one person started business as major source of
investment is remittance. Figure 3.4 shows the slope of two different line showing
income and enterprise setup. Slope of income line is much higher than the slope of first
one. This figure suggests that, there is no linear relationship between income and
entrepreneurship. Certain intercept may be there and this intercept is known as threshold
point from which the relationship becomes linear. This study doesn’t find the threshold
point but data gave the phenomenon like this. Here, findings regarding the people
priority upon their investment are separated into two categories as; Current Investment
Scenario and Future Investment Scenario for the purpose of comparison. Detail of the
result is discussed under following individual heading.
Figure 4.2 Increments in Income and Enterprise Setup
Current Investment Scenario
Following chart gives the people’s current capital management trends and their priorities.
Most of the people are spending their income for general expenses with 72%. Education
is the first priority of people as a concrete investment. After general expense 14% people
are spending in education for their children. 9 % people said that they are spending their
balance money to purchase land, home, and gold, for their betterment in life. Remaining
5% people only said that they are establishing some enterprises from their saving. This
data suggest that very few no of people are interested to invest for business. Generally
those people are less motivated towards business. Most of the people are from farming
background but they are working in field only for survival. Many NGOs are working in
the village but they are failed to motivate people for enterprises setup.
19.4
19.6
19.8
20
20.2
20.4
20.6
20.8
21
21.2
Number of
People doing
Business before
Remittance
Number of
People started
business after
Remittance
Number of People
0
1000
2000
3000
4000
5000
6000
7000
8000
Average Per Capita
Income Before
Migration
Average Per Capita
Income After
Migration
Amount in NRs
11
Figure 4.3 Current Investment Scenario of Respondents
Future Investment Scenario
People are also asked about their future plan on their capital management. As per the
data, income is increasing rapidly almost 336% due to remittance. Study assumed that
major determinant of entrepreneurship in rural area is income. Major stimulus of this
survey is to find their motivation towards business. Study shows that people are not
interested to set up enterprises even after rise in their income. This method of forecasting
may not be a scientific way of research but social science suggests that every decision of
people is followed by their future plan. Following chart shows the response of the
people over their future investment plan. People are equally planning their investment on
their child education and to purchase traditional assets with 41% each. Only 10% people
are said they will still not hopeful on their future saving and choose for general expense.
Like their present preference only 8% people are planning their saving to invest in
business.
Figure 4.4 Future Investment Plan of Respondents
14%
9%
5%
72%
Education
Traditional Assets
Business
General Expense
41%
41%
8%
10%
Education
Traditional Assets
Business
General Expense
12
This shows that there will be only 3% increase in enterprise at same time income of
people is increasing by about 335%. This will affect the future economy of Nepal.
Employment and the prosperity of economy of any nation depend upon the growth rate
of production or service business. Following chart illustrates more about the future
capital planning of people from study area.
Effects on Education and Health
Despite the existence of contrary views, the remittances do impact educational
attainment and healthcare in Nepal. Study find the positive impact on school attendance
and approach to private run educational institution for better education than government
school. Consumption of health facilities are the proportional of income of the people.
With increasing in the availability of money people are able to get health facilities. We
shouldn’t forget about the dropout ratio while talking about the school attendance of the
children. Study found that there is a huge problem of dropout after completing higher
secondary education. Most of the youth from village are out of home either for the higher
education or in search of employment. To conclude what we can say is remittance not
only beneficial for health and education sector but it also increasing the educational
dropouts which will be potentially harmful for the long run.
Effect of Remittance in Entrepreneurship Development
People’s excess towards money is increasing than before. Living standard of people has
been changing. As per the collected data average income per household per month was
NRs. 9181.00. It is increased to NRs.40603.00 after receiving remittance. This is the 342
percent increase. This data suggest people are largely benefitted by the remittance. At the
same time people are able to invest to startup new venture but they are not motivated at
all. Result shows that very few nos. of people (In this case only one) are going to start
new business. Following figure shows the non-geometric relationship with the remittance
and entrepreneurship.
As we see in the result only 5 percent of total respondents are doing business before they
got the remittance but after remittance percentage is increased to reach 8 percent while
income is increased by the 342 percent. This result shows that people are not motivated
to startup new venture instead that, most of the youths are encouraging to go abroad for
work.
Priority in Investment
Of course, people are earning more and able to afford basic education and health
facilities due to the remittance. The major purpose of this research is to study upon their
saved money. How, where and why people are investing is one of the fundamental
questions to be answered. Study shows that immediate receipt was spending on the loan
repayment and general expenses. After breakeven (Loan Repayment) people are
interested to invest in different sector. General expenses are the mandatory but they are
becoming the leading investment title for remittance holder at present scenario. This
shows people going to live their live more sophistically.
Following figure shows the comparative trace of responses regarding their investment
before and after receiving remittance. We can see general expense is very high before
13
remittance. This is because of low income and most of the portion has been expending in
general household consumption. Another important trend we can find out here is people
are likely not to give-up quality education for their children. They are planning to invest
the money saved after education to purchase traditional assets like ornaments, land,
house etc. People are less likely to establish new business from their saving.
Figure 4.5 People priority before and after remittance
Factors affecting Enterprise Development
The study is carried out in a rural area, where people are less likely to carry financial
risk. Capital management is taken as the challenging task to setup new business. Even
though there are other factor associated with this one are found while observing the
people behavior in the study area. Education, experience, availability of facilities and
political stability are the factors behind capital. Beside these social structure and trend
are other major factors for enterprise development. Many people are receiving the
remittance to overcome the problem of capital management but they are unable to start
their own business. Trend of society is strong determinant for the entrepreneurship.
There is trend to be a “Lahure”, a person works in foreign land especially in Lahore,
previous India for to earn money. Now people are working in India, Golf countries,
Japan, Europe, Korea and America to be traditional Lahure. These trends never motivate
people to be entrepreneur in their region. There are lots of possibilities in agriculture,
herb and tourism business but nobody is going to initiate. Social trend to be a remittance
receiver family, Unemployment problem, Family tradition, Youth psychology, Amount
of income in foreign countries and no encouragement/motivation affecting in
development of entrepreneurship in rural area of Nepal.
These are the important factors affecting entrepreneurship explored during study. Beside
these there may be other factors like political environment, availability of funding,
availability of market and technology also affects the business environment.
0
10
20
30
40
50
60
Education Traditional Assets Business General Expense
Before Remittance After Remittance
14
Discussion
Almost one fourth of the GDP is contributed by the remittance in Nepal. Recent year’s
balance of payment is also positive due to this money but the issue is the use of this
money in unproductive sector. Study shows the economic panic in productive investment
of those countries despite the rise in income of people through the remittance. Finding
shows almost equal percentage of people (41%), want to invest their money in their child
education and to purchase traditional assets for the searching of better living standard
area in comparison to 8 % who are interested in business. People are about to prefer
foreign institution for their education where the fee structure is relatively high which is
helping in capital flight. Both kinds of investment activities don’t support the
government to achieve national economic goals. The result that poorer countries like
Nepal, fails to benefit from entrepreneurial activity even after the rise in income level of
people. This indicates that still the remittance is not a strong base for future economy
simply because of its less contribution to increase in entrepreneurial activities. While
reviewing the results of previous studies around the world, there is positive relationship
between the income level and entrepreneur. But this study doesn’t support the past
results of the study (Nkurunziza, 2012). One important thing is found on this study that is
there must be a threshold point from which the relation becomes positive. There must be
a certain income level from which people will motivate to set up their new business.
Further study required to find out this threshold point. Here is the summary of findings
from the research presented in bullets.
-
There is no strong evidence of increase in enterprise even after increase in
income due to remittance
-
People are expending their major portion of the remittance in general purpose and
motivated to purchase traditional asset but not interested in business
-
People like to live sophisticated life than before
5. Conclusion and Recommendation
From the finding of the study and the review of available literature shows, in general,
remittances are found to be driven by the need to support migrant worker’s families,
rather than by investment considerations alone. Therefore, efforts should be made to
watch the stages the remitters go through from the perspective of designing remittance-
friendly policy and motivating the savers for sustainable development. During the first
phase, the workers put up efforts to recover the cost of migration. In the second phase,
they intend to compensate the household expenses (general expenses) and if possible,
remaining amount to the education expenditure and the final phase is preparing for
returning home with savings in a mind to reinvest back home. The micro-level analysis
of individual behavior of these returnees may be needed to address the possibility of
reinvesting their savings. Enterprise/small businesses play a vital role in poverty
reduction in both rural and urban areas, and reinforce urban-rural linkages for economic
and social development in Nepal. These businesses are essential not only for utilization
of local resources but also in acting as agents for the flow of goods and services between
urban and rural areas. Their roles are important since they possess the features like self-
employment generation, employment to poor and women, use of local resource, meeting
15
basic needs of poor and income distribution to the poor people. Beside this one major
importance is development of enterprise help to reduce labor drain and lifelong
settlement of people from the country. But this result discouraging the Nepalese
entrepreneurs and there seems need of a huge motivation from concern authorities.
Hence, directing remittances to productive investments is a challenge for the
government. Families of migrant workers should be encouraged and trained so that they
are able to undertake small businesses. This will generate jobs and help improve the
domestic economy. In the long run, migrant workers can come back and be reintegrated
in the country, bringing in better skills and technology. In the countries like Nepal, there
is large opportunity to invest in production or service base business because of its space
to grow. Many multinational countries are willing to invest in Nepal likewise people can
take benefit from them if people retain in the country
Implication for future research
There are few recommendations for investigators who want to conduct further research
on entrepreneurship. As discussed in literature review entrepreneurship is affected by
numbers of factors. This research is to find the relationship between entrepreneurship
and people’s investment behavior while there income is increasing due to remittance.
Following objectives can be used in future research proposal since limited researches
have been conducted in the field of entrepreneurship.
i.
Major determinants of the Nepalese entrepreneurial activities, Effect of current
government policies on entrepreneurs.
ii.
What is being taught on entrepreneurship at higher education? Types of
programs, a comparison among summaries of similar courses. To what extent are
they effective for developing true entrepreneurs?
iii.
Significance of government as a public venture capitalist to enhance
entrepreneurship; case study from youth self-employment fund program, Nepal.
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