MoF says labour bank can be operated under BAFIA

KATHMANDU:

Ministry of Finance (MoF) has expressed its reservations regarding the need for a separate Act to establish labour bank, as proposed by Ministry of Labour and Employment (MoLE). MoF has said such an institution can be operated under the existing Bank and Financial Institutions Act (BAFIA) and does not require a separate law to govern it.

“We see no reason why the proposed bank cannot be established under BAFIA,” said an official at MoF. The official also said that multiple functions of the proposed bank, including financing services and carrying out worker welfare schemes were ambiguous and not very convincing.

In response to MoLE’s proposal, MoF has suggested welfare activities be carried out through a separate entity or fund. As per MoLE, welfare schemes planned to be introduced through bank include insurance of workers and pension provision for migrant workers contributing in the bank over a specific period.

With this MoF decision, MoLE’s plan to open a specialised bank targeting to provide financial services to workers and channelise remittance money to national productivity has run into a hiccup.

In July last year, the government through the budget had announced of conducting a study to open a labour bank with investment from employers’ organisations, workers and the government. A study committee headed by Ramesh Koirala, advisor of MoLE, had concluded of a possibility of operating the bank under a separate law.

Raghu Raj Kafle, executive director of the Foreign Employment Promotion Board and member of the study committee, said that operating the bank as per BAFIA law would make it difficult for the institution to meet its major objectives, like making available easy lending for workers at subsidised interest rates.

“Hence, the committee has decided to hold discussions with Nepal Rastra Bank (NRB) in this regard to explore possibilities in achieving the targets of the planned bank,” he added.

As per the study report, the bank will enable workers requiring financial support for foreign employment to take loans, while returnee migrant workers will be able to borrow money from the bank to start businesses at subsidised interest rates. Similarly, the bank will make investment in large physical infrastructure development projects.

The committee, which also comprises officials from NRB, Department of Labour and president of Nepal Association of Foreign Employment Agencies, had prepared the concept of labour bank, and business and strategic plans after discussions with stakeholders and studying practices of operating such banks in Japan and Bangladesh. Kafle said labour bank in Japan and Bangladesh are operated under a separate law.

Source: THT