D P Bhattachan
Chairman, Prabhu Group
& President, Nepal Remitters’ Association

D P Bhattachan is the Chairman of Prabhu Group and President of Nepal Remitter’s Association. The group is currently working with a focus on the financial sector and has also invested in hydropower and Dish Home, a Direct-to- Home technology digital satellite television broadcasting service company. Prabhu Money Transfer and Prabhu Finance Company are among the leading companies in the remittance and finance company market. The group provides money transfer services to almost half a dozen countries including Nepal. In an interview with Gaurav Aryal of New Business Age, Bhattachan talked about the remittance business in general and the Prabhu Group in particular. Excerpts:

 
Prabhu Group now has presence in more than half a dozen countries. How was the development so far?

We started the remittance business in 2002. Prabhu Money Transfer received Letter of Intent from Nepal Rastra Bank (NRB) for expanding its operation to Qatar and the USA. But receiving operation license from the central banks of these two countries was not easy. So, we concentrated on expanding our agents’ network in Nepal. Meanwhile, we applied for license in Malaysia in 2006. There, we luckily got license for both inward and outward remittance services. We gradually increased the number of branches there. In 2010, we acquired Janata Express, a money transfer company in New York that was operating with a focus on Bangladesh. Buying out a company is comparatively easier than getting the operation license in the US. Now, this company is operating under our direct ownership. We have representative offices in Bangladesh, Pakistan, Qatar, Saudi Arabia and India.

Remittance is one of the key sectors for your group. How do you see the future of this business?

There are 49 private money transfer companies operating in Nepal at this moment. Some companies have even closed down after operating for a short period. Apart from these remittance companies, the commercial and development banks and finance companies, too, are in this business. In spite of some challenges, we have constantly grown right from our establishment in 2002 to 2012. The future depends on the political stability and trend of seeking overseas employment. As of now, the trend has not shown any sign of decline. Once we have enough employment opportunities within the country, it may slow down. But people will always have aspirations to work abroad. We only remit the money earned by the workers; those Nepalis who are working as professionals in other countries that provide permanent residence (PR) usually do not send money back home. Almost 99 per cent of Nepal’s remittance comes from the migrant Nepali workers. This business will be affected only when there are fewer Nepalis going abroad for employment. I don’t see that happening in the foreseeable future.
 
Banks and financial institutions, too, are in the remittance business. How is this affecting the remittance companies?

Remittance companies give foreign exchange to the commercial banks. When the commercial banks have entered the remittance business themselves, they directly get and sell the foreign exchange. This affects the spread rate as they have a higher margin. So, there is stiff competition in the exchange rate. This competition has made the market more competitive. However, you cannot exclude the banks from the remittance business, which is an area of operation for the banks as well.

It’s the private sector that started instant money transfer in Nepal. Western Union is one of the pioneers in this area in Nepal. Sending or receiving money to or from abroad through banks takes around 24 hours to three days. A decade and a half back, it used to take around four months to receive money sent from abroad. Nepal has adopted very liberal policies today. Even some private networks are under the network of banks and they are working together for providing remittance service. In this front, there are some challenges.

Your company remits money to other countries too. How well is this segment doing compared to remitting money to Nepal?

We are the first Nepali company with presence in Malaysia that provides both inward and outward remittance services. We are one of the leading companies in Nepal in terms of annual turnover. However, we have a higher turnover in Bangladesh than in Nepal.


As of now, migrant labourers have been going to the Gulf countries for employment. What are the bottlenecks in sending Nepali workers to the developed countries?

Most of the Nepalis going abroad for employment are unskilled labourers. Malaysia, Qatar, Saudi Arabia, UAE, Kuwait and Bahrain are some of the major destinations for unskilled Nepali manpower. India and few other countries are destinations for comparatively skilled manpower. The developed countries in the Americas and Europe do not demand labourers from Nepal. These countries give first priority to their own citizens. So, there is a lower demand of workers from the developed countries.


Remittance companies like yours are directly connected to those going abroad for foreign employment and their families back home. How can the remittance companies encourage and provide guidance to them to invest their hard earned money in productive areas?

It is true that our business depends in the migrant workers and their families. Most of these workers belong to the age group of 20 to 35. Some of them get married after returning from foreign job or they are already married when they go abroad. In both cases, they work hard and send their income back home. This has made the lives of their near and dear ones back home better and easier. The migrant Nepali workers have realised that they had to go abroad to work as a labourer because they were uneducated. So, they have started investing in the education of their children back home. Thus, Nepal will have a much better literacy level in the next few years to come. Similarly, the remittance has helped the workers and their families back home acquire properties like land and houses, besides improving their health and hygiene. People who live in their luxurious bungalows in the cities do not have the right to say that the migrant workers cannot buy even humble houses.

The government has been saying that the migrants must invest in productive sectors such as hydropower or other similar economic activities. This is something that even the rich of the country have not been able to do. How can the poor migrant workers do that? Their income goes to paying back the loan and maintaining household expenses.


What would they do if they invest their money in hydropower and what if the project does not start?

Even if the project starts, investors have to wait for at least seven years to get back the returns.


 If the project does not begin, will the government guarantee the return of their investment?

So, we asked the migrant workers to open bank accounts so that they could send their income directly to their accounts and could withdraw as and when needed. This would help make more productive use of remittance. Deposits in banking sector are increasing because of the remittance. This has also developed the saving habit among Nepalis.


Though there are some good players in the market, remittance through ‘Hundi’ (the informal channel) still has a strong foothold. Why do you think the ‘Hundi’ could not be discouraged?

Hundi is something which we have not been able to control youths who go for foreign employment are not getting free visa. Around US $ 350 must be paid as visa charge. Sometimes, the agents involved in providing visa ask for money in advance. Hundi has been used to pay that amount. Similarly, the returning workers usually bring cash with them. Should it be called Hundi? If remittance companies are allowed to work for outward remittance as well, such changes could help bring Hundi under control.


It is feared that the outward remittance will result in capital flight. What do you say?

Well, we have been demanding permission to remit to other countries only to serve the manpower companies in the country. These transactions would be transparent. So, there is no chance of capital flight. On the other hand, it would help control the illegal business of hundi.




It is alleged that some of the remittance companies themselves are involved in the hundi business. What do you think?

I am unaware if there is any illegal gang involved in it but none of the established companies is involved in such activities. Nepal has started to put in place stronger anti money laundering (AML) measures. In other countries, companies involved in such activities are penalised and even their licenses are scrapped. Nepali companies definitely don’t want to take such risks.


What are the problems faced by the remittance business currently?

The remittance business is not recognised by the Nepal government, or the central bank for that matter, as an industry. Though remittance is said to be the backbone of Nepal’s economy, the government hasn’t done enough to facilitate this sector.


Nepal apparently faces the risk of being blacklisted for its poor performance in terms of enforcing AML laws. Does the remittance business face any sort of pressure from anywhere because of this?

If a country is blacklisted, it will not receive even a single penny as remittance. As of now, we have not felt any sort of difficulties within and outside the country though we hear such threats from time to time that Nepal could be blacklisted for its poor AML regime.


Prabhu Group already has presence in countries like the USA, Malaysia, Qatar and others. What are the expansion plans of the group?

Expansion is a tough job. The probable countries for expansion are Saudi Arabia, Qatar, Kuwait, Bahrain Oman and the UAE. These countries do not give licenses to foreigners. In Nepal, we are the first company to bring Indian currency to Nepal through the formal channel. We have been doing this for around seven years now. For Nepal- India trade, dollar should be purchased to pay for imports from India in the Indian currency. With the initiative of both the governments, we started the remittance services there. SBI bank is one of our major partners in this. But we also have other banks such as ICICI, HDFC and Punjab National Bank as our partners. Money can be sent to Nepal through any of these banks from India.

With an objective to do something new, we have implemented a system to transfer money domestically through cooperatives. We have also acquired the license for this. Similarly, inward remittance can also be sent through cooperatives where people can receive the money in their own villages and can also make deposits. We have started this service and will keep on expanding it.


Prabhu Group has a sister company named Prabhu Energy. Do you have any power projects in the pipeline?

We had carried out feasibility studies of a few projects initially in Mustang and Baglung and applied for license. But, in the absence of transmission lines, we have dropped the idea of developing hydropower projects for now. As we had to build a long transmission line, the project was not feasible. If the area is connected by road and transmission lines, we will consider developing power projects in the future.