Migration is a natural human instinct it follows opportunity. Across the globe, people migrate for better education, healthcare, jobs, and quality of life. But in Nepal, internal migration has grown into a powerful force that’s not only reshaping the population landscape but also quietly destabilising the rural economy and financial system.
On a recent visit to the remote villages of Kaski, I witnessed something deeply unsettling. The once vibrant hill villages had gone quiet. Homes were shuttered, farmlands abandoned, and the only people left were elderly residents holding on to ancestral land. The younger generation the economic engine of rural Nepal had already migrated to Pokhara, Butwal, or Kathmandu, chasing dreams that their villages could no longer support.
Why are people leaving?
The causes of internal migration in Nepal are well-known, but their effects are often underappreciated. The primary drivers include: poverty, underemployment and unemployment, lack of quality education and healthcare, poor infrastructure and food insecurity.
For many, internal migration is not just a choice it’s a necessity. But this urban pull and rural push are creating wide disparities, straining city infrastructure, inflating urban real estate, and depopulating villages to the point of economic collapse.
Internal migration could accelerate external migration, as those unable to survive in cities eventually seek opportunities abroad, draining the nation of both human capital and financial productivity.
How internal migration impacts the financial system
While the social impacts of migration are visible, the financial consequences are creeping in quietly and dangerously. With the outflow of working-age populations, credit demand in rural Nepal has steadily declined.
Those left behind are often elderly, dependent, or underemployed, with limited capacity to service loans. Banks are facing difficulties in recovering rural loans. Many villages are turning into non-financial transaction zones, where even basic banking services have disappeared. Land that was once considered valuable collateral has lost market demand.
Roads are not enough anymore
Road connectivity in rural areas has improved, but instead of encouraging people to stay, it has made it easier to leave. People now choose to live in nearby urban centers where an added budget gives them access to healthcare, education, and markets. Even with road access, real estate prices in villages have dropped because migration is not just about connectivity it is about services, opportunity, and security.
Today’s youth are not emotionally bound to ancestral land like previous generations. Their priorities have shifted: health, career, children’s education, and quality of life take precedence. As a result, even well-connected villages are seeing minimal to no real estate transactions.
A real-life story: When collateral becomes worthless
Consider the case of Swagat Acharya, a poultry farmer from rural Kaski. A few years ago, he took a loan of Rs 25 lakhs to expand his business, mortgaging 10 ropani of land valued at Rs 35 lakhs. Soon after, his children moved to Pokhara and Kathmandu for education. Swagat followed them.
The poultry business closed. The land was left idle. When the bank attempted to recover the loan by auctioning the land, there were no buyers not even when the price dropped to Rs 15 lakhs. Ironically, the government tax valuation of the land remained high, but the market simply did not exist.
This is not an isolated story. It is a systemic problem banks now face when lending in depopulating regions.
Real estate imbalance: Urban boom, rural brust
Meanwhile, urban land prices have skyrocketed, driven in part by high demand from foreign-employed Nepalis with strong purchasing power. Those working in-country, even earning more than Rs 100,000 monthly, struggle to compete with inflation and secure real estate in the city.
So, what we are seeing is a growing imbalance in urban land prices are unaffordable, pushing even well-paid locals out as well as rural land is unwanted, despite roads and infrastructure. This dynamic is creating ghost villages in the hills and crowded, overheated cities in the plains.
What can be done?
To restore balance and prevent further collapse of rural economies, Nepal needs a multi-pronged response social, economic, and financial. Here’s a list of things that should be done:
- Launch a revitalised “Back to Village” campaign, with modern incentives (not just slogans).
- Redirect real estate investments by offering tax breaks and infrastructure grants to those investing in rural or semi-urban zones.
- Support BFIs with credit risk-sharing frameworks so they can lend in rural areas without facing unrecoverable losses.
- Reform land valuation policies to reflect real market demand and prevent artificial pricing gaps.
- Encourage domestic employment creation to help local income stay local—boosting purchasing power in villages.
- Provide special benefit packages for foreign-employed Nepali who invest outside urban centers.
Conclusion: A wake-up call for Nepal
Internal migration in Nepal is more than a demographic shift it is a financial and developmental warning sign. Left unmanaged, it risks turning large parts of rural Nepal into collateral graveyards: land that is legally valuable but economically lifeless.
Cities are bursting, villages are bleeding, and the balance is tipping dangerously. Now is the time for coordinated, courageous action from government, financial institutions, and development partners.
Let’s not wait until the land itself tells a story of dreams that were never allowed to grow.
