Impact of remittances on financial asset accumulation and business investment in Nepal

Remittances from abroad play an important role in shaping the economic landscape of developing countries such as Nepal, contributing significantly to poverty reduction, household income, and economic resilience. They are an important source of foreign exchange and financial support, often surpassing foreign aid and investment. Despite their growing volume, the use of remittances in productive areas such as financial assets, consumption, and investment remains under-researched. This study addresses the research question: To what extent do remittances influence financial asset accumulation, consumption, and investment in the Nepali context? We employed a quasi-experimental research design using secondary data from the World Bank’s household survey, applying the propensity score matching method. Remittances had a positive and significant impact on financial asset accumulation, food and non-food consumption, and durable goods inventory. However, no significant effect on education and health expenditures or business investment was observed, indicating challenges to long-term sustainability in the health and education sectors. Our findings suggest that while remittances are vital for immediate consumption and asset acquisition, their contribution to long-term development remains limited. Policymakers should therefore design strategies to redirect remittance flows toward more productive sectors.