Vedanta Integrated Social Studies Book 10 Final

Positive Impacts or Importance of Foreign Employment

Foreign Employment has remained the backbone of the national economy since
long. Currently, the remittance of foreign workers occupies a significant portion of
Nepal's Gross Domestic Product (GDP). According to the reports of the Fifteenth
Plan, approximately 1,000 young people leave Nepal every day for foreign
employment, and the remittance inflow amounts to 25.4 per cent of the GDP, which
is among the highest in the world. The importance of foreign employment in Nepal
are:

(1) Earnings or remittance generated from foreign employment help alleviate
poverty.

(2) Foreign employment can help to earn foreign currency, raise funds for foreign
trade and maintain the balance of payments.

(3) It helps to increase the country's income and raise people's living standard.

(4) Modern and foreign knowledge, skills and experience gained in foreign
countries can be beneficial for the development of the native country.

(5) It can contribute to the exchange of culture and traditions and the expansion
of international relations.

(6) It contributes to the country's reduction in unemployment.

(7) It helps to create a pool of technologically able and skilled people who can
contribute to a great deal even after they return to Nepal for the socio-economic
transformation of the country.

(8) It provides opportunities for people to visit foreign nations and learn a new
language, culture and traditions.

Negative Impacts of Foreign Employment

(1) As the efficient human resource of the country migrate abroad for foreign
employment, there may be a shortage of skilled human resource in the country.

(2) Development work gets delayed due to a lack of workers. Remittance can lead
to brain drain in labour supplying country like Nepal.

(3) Various communicable diseases can spread from foreign workers to other
people.

(4) When a country depends so much on outside sources to sustain its economy, it
causes a culture of dependency, and the economy becomes unstable.

(5) The majority of migrant workers are forced to work in hazardous environments
with little or no legal protection, leading to workplace exploitation. There have
been cases of female workers being sexually exploited, especially in the Middle
East, resulting in a number of mental and psychological disorders.

(6) Foreign workers' children lack parental care; the elderly lack the support of
their sons and daughters; and couples are forced to live apart. This has broken
family relations and shattered Nepali culture's values, which calls for strong
family ties.

(7) The migrant workers may be cheated by the broker or employment agencies
resulting in a risky job, lack of a decent job and salary, and so on.

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Malaysia and Saudi Arabia top the list of destination countries for migrant workers
from Nepal. These countries require unskilled labour, which does not help to improve
the knowledge base of the migrant workers. Thus, there is no skill development that
can be used after returning to the home country.

Therefore, we need to conduct a careful study of both positive and negative effects
so that we can make good ones count and play down the bad ones.

Pre-preparation for Foreign Employment

No step should be taken without some pre-preparation before going for foreign
employment. If someone tries to go abroad without proper planning, he or she has
to suffer. Going abroad should not be taken as a fashion, imitation, or matter for
show-off.

(1) Contact the Ministry of Labour and Employment and the Department of
Foreign Employment under it, the Foreign Employment Promotion Board, etc.
to get detailed information about the employment.

(2) Get physically and mentally prepared, and find out if he or she is physically fit.

(3) Learn certain skills and technology related to the job.

(4) Obtain a passport after making citizenship and submitting the passport
application form to the district administration office

(5) Go to a reliable and registered human resources company with an educational
qualification certificate, skill certificate (if any) and experience letter.

(6) Be aware of agents or brokers.

(7) Find out about the nature of work, cost, income and other facilities.

(8) Undergo a health examination from an institution approved by the Government
of Nepal.

(9) Maintain his or her insurance compulsorily.

(10) Take orientation training before going for foreign employment compulsorily
to get information on foreign employment laws, essential documents, and the
departure process. The training also provides useful information on culture,
general laws, traffic rules, prohibited activities of foreign nations.

(11) Go for foreign employment only after getting labour approval from the
department.

(12) Stay in regular contact with Nepalese diplomatic missions abroad.

Nepali citizens can go to some 110 countries of the world for foreign employment.
Men who want to go abroad for employment should be 18 years old, and women
should be 24 years old. They should make the necessary preparations and take
precautions before going for foreign employment. Sometimes some workers may
have to suffer due to lack of proper facilities, become victims in foreign lands, have
difficulty returning home, and in some cases may even face imprisonment and even
lose their lives due to their negligence and carelessness. If there is any problem
while living abroad, they can solve it through the embassy of the concerned country.

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Activities

(1) Read the given news story and answer the following questions.

Foreign returnee finds hotel
business lucrative

Rastriya Samachar Samiti “I opened an agricultural and
Chitwan, January 07 livestock farm right after I returned
A returnee from abroad has found from foreign employment. Along
his niche in hotel entrepreneurship with it, I started a hotel,” he said.
back home. Now his hard work is paying off. “I
Guru Poudel of Ramgram have earned Rs 2 million a year.”
Municipality in Nawalparasi (East) Encouraged by the positive results
has utilised the six years of skills from his hotel business, he has also
he gained in the United Kingdom opened a Guru Greenery Food
in pursuit of a career as a hotelier. Park on the banks of the Narayani
Now he has opened a hotel river in Gaidakot.
named Guru Greenery Restaurant He has leased the land and invested
and Lodge at Ramgram with an Rs 4.5 million in the project. His
investment of more than Rs 20 food park offers local food items
million. as well. His wife and brother are
The project spans two kattha land. helping him. He has offered job
He studied hotel management opportunities to 16 people. He is
at Dhawalagiri Technical School now planning to open another hotel
in Mustang district and did his in Hetauda. “Hard work, sincerity,
internship at Gokarnathali Resort discipline and perseverance open
in 2009 before heading for a the way to success,” he said.
foreign job.
Source: The Himalayan Times

Questions:
(a) Which country had Guru gone for foreign employment?
(b) What skills and experience did he gain there?
(c) What does he do these days in Nepal?
(d) According to him, what are essential factors for success?

(2) Have any of your relatives gone abroad for employment? Based on the
conversation with him or her, make a list of problems one has to face
abroad as a foreign worker.

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Exercise

(1) Write very short answers to the following questions.
(a) What is foreign employment?
(b) Write any two reasons why people go for foreign employment.
(c) What is the required age of men and women for foreign employment?
(d) What percentage of GDP does the remittance contribute in Nepal?

(2) Offer short answers to the following questions.
(a) Mention the importance of foreign employment in the context of Nepal in
four points.
(b) Make a list of any four problems that one can face abroad as a foreign
worker.
(c) Imagine that two friends have just returned from two different foreign
countries. Compose a dialogue between them sharing their ideas and
experience in foreign lands.
(d) Write a letter to one of your relatives who is willing to go abroad without
any skill and experience for foreign employment mentioning at least four
pre-preparations before going there.
(e) What are some possible ways to generate more employment opportunities
in our own country? Mention any four of them.
(f) “Foreign employment is both rewarding and challenging.” Justify this
statement in a short paragraph.

(3) Write long answers to the following questions.
(a) Write the positive and negative aspects of foreign employment in the form
of a newspaper article for a national daily.
(b) What roles can the government, manpower companies and civil society play
to make foreign employment more systematic and well-managed? Present
in points.

Community Work

Meet at least four people of your community who have returned from foreign
employment and ask about their experiences in the foreign land. Then,
prepare a short report, including the pros and cons of foreign employment.

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Lesson Cooperatives and their
Economic Importance
8.5

Engage Yourself

You must have heard the saying ‘unity is strength’. A similar concept works for a
cooperative. It refers to a business or organisation owned equally by all the people
working there. Are there any cooperatives in your locality? What activities do they do?
Such financial organisations are essential for the economic development of our nation.
However, many problems are seen in cooperatives in Nepal. They need to be solved in
time, applying effective measures.
(1) What are cooperatives?
(2) What is the historical background of cooperative development in Nepal?
(3) Why are cooperatives important for a country like Nepal?
(4) What are the problems and challenges that cooperatives face in Nepal? How can they

be solved?

The word ‘cooperative’ in the general sense means cooperation or working together.
It is an organisation or a company of people who are financially organised for the
same purpose. A group of members own and control it. Each member of the group
has a share in it. It also refers to a business run by the people who work for it or
owned by the people who use it. They themselves get involved in the production of
goods or supply of services. These people share its benefits and profits. A cooperative
is also known as cooperative or coop or co-op.

The main objective of a cooperative is to make its members financially prosperous.
Economic development cannot be achieved by the efforts of a single person alone.
Especially low and middle-income people do not have a large amount of money at
once. However, if a lot of people get organised in a single place, everyone's small
amount of money can become big money, and everyone can invest that money in
turn. Therefore, cooperatives, in the broadest sense, refers to the work done by
people of the same purpose, profession, occupation and class together for their
economic and social development.

Some countries – for example, India and Israel – have done extremely well in cooperatives which
have helped improve the living conditions of farmers in rural areas.

Definition of Cooperative

International Cooperative Alliance (ICA) is one of the oldest ICA
non-government organisation that unites, represents and
serves cooperatives worldwide. It was founded in London,
England, on August 19, 1895 AD. In 1995, the ICA adopted the
revised Statement on the Cooperative Identity, which contains
the definition of a cooperative, the values of cooperatives and

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the seven cooperative principles. The Cooperative Identity Statement states that
a cooperative is an "autonomous association of persons united voluntarily to meet
their common economic, social, and cultural needs and aspirations through a
jointly-owned and democratically-controlled enterprise."

Values of Cooperatives: Cooperatives are based on the values of self-help, self-
responsibility, democracy, equality, equity, and solidarity. In the tradition of their
founders, cooperative members believe in the ethical values of honesty, openness,
social responsibility and caring for others.

Cooperative Principles: The cooperative principles are guidelines by which
cooperatives put their values into practice.

1. Voluntary and Open Membership: Anyone can join a co-op—they don’t
discriminate based on gender, social, racial, political or religious factors.

2. Democratic Member Control: Members control their business by deciding how
it’s run and who leads it.

3. Member Economic Participation: All co-op members invest in their cooperative.
This means people, not shareholders, benefit from a co-op’s profits.

4. Autonomy and Independence: When making business deals or raising money,
co-ops never compromise their autonomy or democratic member control.

5. Education, Training, and Information: Co-ops provide education, training and
information so their members can contribute effectively to the success of their
co-op.

6. Cooperation among Cooperatives: Co-ops believe working together is the best
strategy to empower their members and build a stronger co-op economy.

7. Concern for Community: Co-ops are community-minded. They contribute to
the sustainable development of their communities by sourcing and investing
locally.

Types of Cooperatives

According to the Department of Cooperative, the major types of cooperative societies
operating in Nepal are Saving and Credit, Multipurpose, Dairy, Agriculture, Fruits
and Vegetables, Bee Keeping, Tea, Coffee, Consumers, Science and Technology,
and Energy.

Cooperatives in Nepal

In the context of Nepal, Guthi, Parma Bhakari, Manka Khalah, Kulayan, Dewali,

Perm, Bheja, Dhikuri, etc., have been functioning as cooperatives since ancient

times. The establishment of the Department of Cooperatives in 2010 BS market

the formal development of cooperatives in Nepal.

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The cooperative movement in Nepal began with the
establishment of the first cooperative - Bakhan Multi-
Purpose Cooperative Institute - in Chitwan way back in 1957.
The cooperative was founded on April 02, 1957 AD (2013 BS,
Chaitra 20) in the initiative of Bakhan Singh Gurung. It had
begun with 60 members collecting Rs 10 each.

After that, the Cooperatives Act 2016 was issued in 2016 BS
to institutionalise the cooperatives. After a couple of years,
cooperative rules were established in 2018 BS and Cooperative Bakhan Singh Gurung
Bank was set up in 2020 BS. With the promulgation of the
Cooperatives Act in 2048 BS, the wave of establishing cooperatives started. In fact,
liberalisation and an open market economy in the 1990s also helped the emergence
of cooperatives in the country. As the cooperative movement spread to every nook
and corner of the country, the need for forming an apex coordinating body was
acutely felt. As such, the Nepal Federation of Savings and Credit Cooperative
Unions (NEFSCUN) was formed in 1988 AD.

Cooperatives are guided by certain objectives and goals. Therefore, the membership
of such organisations is voluntary. One can get services from such organisations
without any restrictions. A cooperative is a democratic organisation and is
governed by a person elected or appointed by the method accepted by its members.
Members have equal rights to the returns received from financial transactions. The
Constitution of Nepal 2015 has recognised cooperatives as one of the three pillars
of the national economy. Cooperative Act, 2018 helps cooperatives keep abreast of
the changing times.

As of January 2020, there are around 35,000 cooperatives in the country with 6.6
million members, out of which women constitute 50 per cent. Over 62,000 people
are directly employed in cooperatives. This sector contributes significantly to
enhancing access to finance, women empowerment, leadership development, and
capacity development, social integration, promotion of entrepreneurship, and
poverty alleviation.

Need and Importance of Cooperatives

Cooperatives have an important role to play in strengthening the economy of
Nepal. They can play a pivotal role in uplifting the economic conditions of the
people, especially those living in rural areas.

(1) They help to eliminate unemployment and poverty by providing capital
for people to run small and medium enterprises. Ultimately, they help to
strengthen the economic condition of the country.

(2) They support individual and collective economic development and help to
develop a productive spirit in rural society.

(3) They help to solve small household problems, as one does not ask for money
with moneylenders at high-interest rates.

(4) They teach farmers and common people to be frugal or economic.

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(5) They help to develop the habit of saving, and small savings can contribute to
huge capital formation.

(6) They help develop agriculture, animal husbandry, industry, trade, tourism,
energy, transportation, communication and finance sectors.

(7) The members of cooperatives always need to work together. Such teamwork
helps in the development of a sense of trust, reconciliation, cooperation.

(8) They help in raising the living standards of the locals and alleviating poverty.

(9) They create an environment for cooperation, coordination and investment at
the local level.

(10) They help to identify new possibilities and needs.

Problems of Cooperatives

The ultimate goal of cooperatives is the welfare of the community, which we have
seen in various rural parts where cooperatives have their own wonderful success
stories. They have not only succeeded in establishing economic ties at the grassroots
level but also in raising farmers' living standards and economically empowering
women. They have seen good growth with investments in various sectors such
as dairy, vegetables, tea, and coffee. Some dishonest cooperative operators have
tarnished the entire concept of community-based economic activity. The following
are some of problems of cooperatives in Nepal.

(1) Conducting illegal activities such as giving more loans to relatives and friends;

(2) Appointing members of the same family in higher posts such as managers;

(3) Using the deposited money randomly and spend as they please;

(4) Collecting deposits from common people and provide loans to the big business
house which is against the ethics of cooperatives;

(5) Lacking financial transparency as they do not audit financial transactions in
time;

(6) Some cooperatives have become notorious because the same persons are
involved in many cooperatives; and

(7) Some cooperatives spend too much money in the non-productive sector or real
estate sector. Such cooperatives are in a state of drowning due to the non-
recovery of loans.

Solutions

The following measures should be taken to develop cooperatives as the backbone of
real economic development and to make proper use of cooperatives.
(1) Investments made outside the criteria should be stopped;
(2) Strict action should be taken against those who misuse cooperatives and run

away;
(3) The tendency of cooperatives to spend only on the unproductive sector should

be discouraged;

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(4) Cooperatives should be developed as community-based and members-focused
organisations by developing them in terms of quality (rather than quantity);

(5) Cooperatives should be encouraged to invest in productive work and business;
(6) Arrangements for regular regulation and monitoring by government agencies

should be made;
(7) Periodical training should be arranged for the operators and managers of the

cooperatives;
(8) The activities of cooperatives should be expanded to the rural and ultra-poor

communities;
(9) Good governance should be achieved in cooperatives through strengthening

their self-regulatory mechanisms;
(10) The cooperatives should focus on poverty alleviation by enhancing access of

women and the marginalised groups to cooperatives; and
(11) Public awareness programmes need to be raised about the importance of

cooperatives.

While it is important to drastically reduce their number, at the same time, they
should also be minutely monitored so as to improve their management, improve
their internal control and, more importantly, check irregularities for the growth of
the cooperative sector.

Activities

(1) What activities do cooperatives carry out in your locality? Discuss among your
friends and present the conclusions in your classroom.

(2) What are the steps to be taken to establish a cooperative? Read the given
paragraph and find out.

Registration of Cooperative Organisation in Nepal

A cooperative organisation can carry out its functions only after its registration
under the Cooperatives Act 2074 (2017). According to the Cooperatives Act
2074 (2017), at least 30 members form a cooperative society. They must hold a
preliminary meeting before applying for registration. After preparing and passing
proposed bylaws and working schemes in the preliminary general meeting, they
should submit an application to the office of the registrar. The application should
include the proposed name of the cooperative, its address, objectives, working
areas, liabilities, total share capital, the total number of shares to be paid, two
copies of the law of the proposed cooperative, original copy of the working
scheme, copies of citizen certificates of members, and the sign of the chairperson.

After filing the application for registration, they will receive a certificate of
registration. After applying the application along with the document, they are
submitted to the registration office. Then, the registrar checks all the documents.
If the documents are satisfactory, then the registrar will issue a certificate of
registration. After receiving the certificate of registration, the society can operate.

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Exercise

(1) Offer very short answers to the following questions.
(a) What do you mean by a cooperative?
(b) Introduce the International Cooperative Alliance (ICA) in a single sentence.
(c) Which is the first cooperative in Nepal?
(d) Mention any two types of cooperatives in Nepal.

(2) Answer the following questions in brief.
(a) What are the principles of cooperatives? Mention them.
(b) Give a short history of cooperatives in Nepal.
(c) Explain the need and importance of cooperatives in Nepal in four points.
(d) Discuss the role played by cooperatives in promoting local products in the
class.
(e) What roles should the state play in making the activities of cooperatives
more effective? Mention any four roles.
(f) Prepare a sample of news story focusing on the benefits of the cooperative.

(3) Write long answers to the following questions.
(a) What are unethical issues prevalent in Nepalese cooperatives? Mention any
three of them and write any four measures to solve them.
(b) Cooperatives are now established like mushrooms. Many people complain
that many cooperatives have not been to operate according to the spirit of
the cooperatives. What roles should the state play in making cooperatives
more effective and successful in Nepal? Make a list of any four of them.
Also, mention any three ways how cooperatives can gain more trust from
common people.

Community Work

There might be a cooperative in your community. Meet one of its authorities
and find out about its activities, sectors of investment, and achievements.
Present the report in the classroom.

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Lesson

8.6 Financial Education

Engage Yourself

Do you and your family members have a bank account? Do you have the habit of saving
money for the future? Why should people save money and invest in different sectors?
Although you cannot involve in income-generating activities actively, you can help your
parents save and invest the money in productive sectors. You can keep a record of your
family expenditure and prevent your parents and family members from making excessive
expenses. You can help your family in making wise economic decisions. With these
preparations, you can raise your family status and eradicate financial suffering in future.
You should try to apply the concept of financial management in your daily practical life.
(1) What is the meaning and importance of financial education?
(2) What are the different types of bank accounts?
(3) What are the various requirements to open a bank account?
(4) Why should we save money for the future? What are its benefits?

Finance, Financial Activities and Financial Institutions

In a general sense, finance means wealth or possessions. It is defined as the
management of money and includes activities like investing, borrowing, lending,
budgeting, saving and forecasting. All of these activities are related to economic
transactions and include monetary transactions in particular. People carry out
various economic activities related to income, savings, expenses and investments
as parts of financial activities.

Similarly, the organisations that help us to perform economic or financial
activities are called financial institutions. Banks, finance companies, micro-finance
companies, insurance companies and cooperatives are financial institutions. They
use various financial instruments or devices such as notes, coins, cards, cheques
and so on to carry out financial activities in financial systems.

Financial Education and Its Importance

We carry out various financial activities such as investing, borrowing, lending,
saving and so on through financial institutions in our daily life. They have become
an essential aspect of modern life. We need certain knowledge and skill to conduct
such financial activities. Financial education provides us with essential information
and ability. It is the process of building knowledge, skills and attitudes to become
financially literate. This method educates people on good money management
practices with respect to earning, spending, saving, borrowing, and investing.

According to the Organisation for Economic Co-operation and Development
(OECD), a unique forum where the governments of 30 democracies work together

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to address the economic, social and environmental challenges of globalisation,
“Financial education is the process by which financial consumers/investors improve
their understanding of financial products and concepts and, through information,
instruction and/or objective advice, develop the skills and confidence to become
more aware of financial risks and opportunities, to make informed choices, to know
where to go for help, and to take other effective actions to improve their financial
well-being.”

Importance of Financial Education

Most people in Nepal live in rural areas. They do not have enough access to financial
institutions. Every person should have abundant knowledge to utilise his economic
or financial resources. He or she needs to know the proper way to handle his or her
wealth. There is great importance of financial education in Nepal. Its significance
can be studied under the following points.

(1) It helps to understand the importance of finance and to manage it accordingly.

(2) It helps to understand the importance of money and its proper utilisation for
social and economic security.

(3) One can manage his or her household income in a systematic way with the
help of financial education.

(4) It provides information on how to save a portion of the family's income and
how to use the money received from abroad properly and productively.

Financial Education and Financial Literacy

Financial education has always been important for people in helping them to plan
a budget and manage their income, save and invest efficiently, and avoid becoming
victims of fraud. It can make people finance literate. The outcome of financial
education is known as financial literacy or financial capability. Financial literacy is
the combination of awareness, knowledge, skill, attitude and behaviour necessary
to make sound financial decisions and ultimately achieve individual financial well-
being.

Financial literacy is the ability to understand and effectively use various financial
skills, including personal financial management, budgeting, and investing. A
financially literate person knows the importance of finance and the ways to make
optimum utilisation of his or her financial resources. A strong foundation of
financial literacy can help support various life goals, such as saving for education
or retirement, using a loan responsibly, and running a business.

Status of Financial Literacy in Nepal

According to studies, Nepal has a low level of financial literacy. Most Nepali people

appear to have no financial plans based on their lifestyle. They spend money

without thinking about what they will do with it in the future. Many people still do

not have a bank account. Such pieces of evidence clearly represent the poor level of

financial planning in Nepal.

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People who are financially literate are better able to use financial products wisely,
make sound financial decisions, and optimise resources through better financial
planning. Individuals with good financial literacy can avoid financial hardship in
the future.

Banks, financial institutions, and educational institutions have a role to play in
ensuring that Nepalese citizens are financially literate. They should launch various
effective programmes to make all people understand the concept and importance of
saving, investing, and entrepreneurship. Financial literacy should be an important
area in the education of secondary school students because appropriate management
of personal finances creates requirements for a successful and quality life.

Financial System in Nepal

The central bank is the monetary, supervisory, and regulatory body of all the
commercial banks, development banks, financial institutions, and micro-finances
in our country. The central bank of Nepal is Nepal Rastra Bank. Nepal Rastra
Bank came into existence in 1956 AD as the central bank of Nepal. These
institutions are collectively known as financial institutions. The cooperatives and
non-governmental organisations working in the field of microfinance also come in
the category of financial institutions.

Nepal Rastra Bank has classified the financial institutions of Nepal into various
categories on the basis of their minimum paid-up capital required for their licence
and operation.

Types of Financial Institutions

Commercial banks (Class ‘A’ types): They deal with currency exchange, accepting
deposits, making loans and doing other commercial activities. As of March 2021, there are
28 commercial banks in Nepal. However, few of them are on the final verge of merging.

Minimum paid-up capital: Eight billion

Development banks (Class ‘B’ types): They finance small scale industries in different
sections of the economy. As of March 2021, there are some 33 development banks in
Nepal. However, few of them are in the acquisition process by commercial banks.

Minimum paid-up capital: The requirement for national-level development banks is
Rs 2.5 billion, development banks working in four to 10 districts should have paid-up
capital of Rs 1.2 billion, and development banks working in one to three districts should
have such capital of Rs 500 million.

Finance Companies (Class ‘C’ types): They collect small and scattered saving of
individuals and mobilise it in productive sectors in the form of investment or loan. As of
Ashad end 2077 BS, there are some 22 ‘C’ class finance companies in Nepal.

Minimum paid-up capital: National-level finance companies should have paid-up
capital of Rs 800 million, and finance companies working in one to three districts should
have paid-up capital of Rs 400 million.

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Micro Finance Development Bank (Class ‘D’ types): They can provide financial
support to the unemployed or low-income groups who have no access to financial services.
As of Ashad end 2077 BS, there are around 85 ‘D’ Class microfinance companies in
Nepal. However, around two dozen microfinance companies are currently in the process
of merger and acquisition.

Minimum paid-up capital: Rs 10 million for state-level microfinance company and Rs
100 million for national level microfinance company.

Functions of Financial Institutions

Banks and financial institutions collect savings as deposits and provide loans.
They also provide information on remittances, foreign exchange currencies, trade
government bonds (the loan taken by government through the issue of securities),
issue gold and silver loans, and provide bank guarantees.

Bank Account

A bank account helps for day to day banking transactions. It is an arrangement with
a bank in which the customers deposit and withdraw money, and the bank keeps
a record of it. It is also necessary to take loans from banks or financial institutions
and perform other financial institutions. Banks and financial institutions open
accounts in the name of ordinary people or institutions for conducting financial
transactions. They keep details of their customers to open an account. They provide
vouchers to customers when they deposit money after opening a bank account.
They also provide chequebook and ATM cards to withdraw their deposited money
and bank statement to view their financial transactions and balance.

Types of Bank Account

Current Account Saving Account Fixed Account

(1) Current Account: A current account is a personal bank account that you can
take money out of at any time using your cheque book or cash card. It is also known
as a checking account. Generally, businesses of firms that want to conduct various
bank transactions according to the need of their business open such accounts. In
the current account, banks generally do not provide interest on deposits because
the deposited money has to be used in business transactions. The features of the
current account are suitable for business purposes.

(2) Savings Account: The amount can be deposited in the savings account
anytime, but the amount can be withdrawn within a certain limit. The concerned
bank fixes such a limit. The bank pays interest on this type of account. Such an
account is useful for common people who want to save their money in banks. It is
also known as a deposit account

(3) Fixed Account: An account opened for a fixed period of time is called a fixed
account. Such an account is credited for a fixed period of three months, six months,

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one year, two years or more. The amount deposited in such an account cannot be
withdrawn before the stipulated time or maturity period. Interest is higher in such
accounts. If the amount is required before the stipulated period, the loan can be
taken by pledging the certificate of deposit in the time of deposit account.

Requirements to Open a Personal Bank Account

Documents and requirements necessary to open a bank account differ on the basis
of the customers. For example, requirements for personal account and account for
schools and colleges are different. The essential documents to open a personal bank
account are as follow.

Citizenship/Passport / Driving License/Voters ID Card
Birth certificate or minor identification letter in case of minor and citizenship

certificate/passport/voters card/driving license of the guardian.
In case of citizenship certificate not obtained by Nepalese individual,

recommendation letter from the local body.
Permanent Account Number (PAN) (if available)
Recent passport size photos
Addressing certifying documents like a utility bill
A customer needs to fill a form with details about his or her family, address, date of
birth, estimated annual earning, sources of income, samples of authentic signature
and so on, along with the above-mentioned documents.

Electronic Banking: The current progress and expansion in information technology
have led to the development of new technologies in the banking and financial
sector. The various types of financial services that can be provided with the help
of electronic machines are called electronic banking. It is commonly known as
e-banking. It is one of the popular modern ways of getting banking services using
the internet. For accessing e-banking systems, we just need an internet-enabled
computer and a web browser. Most banks provide e-banking systems through a
secured website. With the help of the e-banking like system, we can manage the
financial activities through the website of the service providing bank. Electronic
banking facilities include mobile banking, internet banking, ATMs, etc. Such
technology can be used to open bank accounts and withdraw money.

Automated Teller Machine (ATM): An ATM is a machine ATM
that dispenses cash or performs other banking services when
an account holder inserts a bank card. It is also known as a
cash dispenser. A bank or financial institution issues such
cards to its customers. We can get it from any bank after
opening an account. It is also called a debit card as we can
withdraw only the amount in our account. We can withdraw
the amount from our account with the help of the secret PIN
number provided by the bank in an ATM booth.

Vedanta 363 Approved by Curriculum Development Centre,
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Credit Card: A credit card is a small plastic card that debit and credit cards
we can use to buy goods and services and pay for them
later. Commercial banks provide credit cards to their
loyal customers so that they can purchase anything on
credit. They have to pay the loan to the bank within a
certain period of time when they have the money. Its use
is similar to that of a debit card, but there is a limit to the
amount one can spend.

SMS Banking Service: We can perform financial transactions also by exchanging
messages from mobile these days. SMS banking service helps us know about
the amount of deposit and withdrawal from home through SMS received on the
mobile phone. Sending money to other people's accounts, paying an electricity bill,
telephone bill, and so on can also be done through SMS.

Saving

An amount of money or income that we do not need to use or spend is called saving.
Saving money is one of the best financial habits one can adopt. Saving money is
important because we can use it in future or for emergency purpose. Even a small
amount of money saved regularly can turn out to be a huge sum after many years.
Additionally, saving can help us to form capital, raise investment for any project,
earn additional income through interest, reduce financial stress and so on. Some
people also save money for various social functions such as marriage ceremony,
Bratabanda ceremony, and for fulfilling the needs of education and health.

Types of Saving

We can save our money in the following ways.

(1) By depositing it in a formal financial institution

licensed by the central bank for financial transactions

such as banks, provident fund, citizen investment

trust, etc. without keeping it at home. Khutruke saving
(2) By saving in semi-formal financial institution such

as cooperatives, mothers' groups, women's groups,

forest groups, etc. Such savings are less secure than formal savings.

(3) By saving in informal agencies such as in our own home, or by lending it to

relatives or moneylenders. It also includes investment in jewellery and real

estates.

(4) By depositing in a small amount in a small wooden, iron, plastic or earthenware

vessel. It is known as Khutruke saving.

In this way, conducting various economic transactions through the financial system
helps us in earning income. It also contributes to the economic development of the
country. We should also develop the habit of saving more by spending as little as
possible.

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Activities

(1) Discuss the process of opening an account in any bank or financial institution
and present the conclusion to the class.

(2) Here are two common sayings related to saving. Discuss their meaning among
your friends in the class.
(a) “A penny saved is a penny earned.” - Benjamin Franklin (an American
scientist and writer)
(b) “Do not save what is left after spending; instead spend what is left after
saving.” –Warren Buffet (an American financier and social worker)

Exercise

(1) Offer very short answers to the following questions.
(a) What do you mean by financial education?
(b) What are the types of financial institutions in Nepal? Name them.
(c) Introduce Nepal Rastra Bank in a sentence.
(d) Define electronic banking.
(e) Write a major difference between a debit card and a credit card.
(f) Why do we need to have a bank account? Write an appropriate reason.

(2) Write short answers to the following questions.
(a) Explain the relationship between financial education and financial literacy in
a paragraph.
(b) How is the status of financial literacy in Nepal? Is it satisfactory? Write in a
short paragraph.
(c) What are the types of bank accounts? Explain them.
(d) What is saving? Write the importance of saving in three points.
(e) What are the pros and cons of an ATM? Write any two advantages and two
disadvantages.
(f) How can we make safe banking transactions? Mention in points.

(3) Offer long answers to the following questions.
(a) Compose a dialogue between two friends discussing the usefulness or
importance of financial education in our life.
(b) Mention the measures to make financial education more effective in Nepal.

Project Work

Have your parents opened a bank account from any banks or financial
institutions? Why did they feel the need for a bank account? Have they used
an ATM and SMS banking service? Write a short report mentioning their
experience with these banking services.

Vedanta 365 Approved by Curriculum Development Centre,
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Lesson

8.7 Financial Instruments

Engage Yourself

Has your family ever taken a loan from any financial institutions for any purpose? Have
you ever received remittance from any financial institutions? Have you gained the
experience of applying shares for any companies? Such bank loan, remittance, foreign
exchange, securities and currencies are commonly known as financial instruments. They
make financial transactions dynamic and possible.
(1) What do you mean by financial instruments?
(2) Why are clean notes important?
(3) What are the essential requirements to take a loan from any financial institutions?
(4) What is the meaning of foreign exchange?
(5) What do you mean by securities? Why are they important?

Introduction

Our country uses various instruments for conducting financial activities in the
financial system. Such assets are called financial instruments. They are financial
assets that can be bought or sold. They refer to investments that can be traded.
They include currency, remittance, bond (an official document in which a company
promises to pay back an amount of money that it has borrowed and to pay interest
for the borrowed money), foreign exchange, cheques, bills, shares, investments,
and so on. They can be real or virtual documents with monetary value. They make
financial transactions possible and dynamic. They help in the proper functioning of
the finance sector of the country. The proper management and utilisation of these
resources contribute to a country's economic growth.

Some common financial instruments are described below.

(1) Currency

Currency means the system or type of money that a country uses. The Nepalese
rupee is the official currency of Nepal. Paper notes and coins are used in Nepalese
currency for financial transactions. Paper notes are more prevalent in most of the
countries in the world. The central bank issues and manages currencies in each
country. We have already learnt that Nepal Rastra Bank is the central bank in
Nepal. It issues new notes from time to time. It has also introduced a clean note
policy to bring clean notes into circulation. Therefore, we should not write, stitch,
tear or fold the notes indiscriminately. This shortens their life. The currency notes
depict Nepali nationality, nature, culture and civilisation, animals and structures.
Therefore, it is the duty of all Nepali citizens to preserve and protect Nepali notes.

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(2) Bank Loan

Financial resources are required to run any enterprise or business. When we
lack money for doing any activities, bank loans can serve as the best choice. We
can take loans from banks or other financial institutions to raise livestock, run
businesses, spend in calamity times, do social work, and for educational purposes.
We can meet our needs by taking the necessary loan through the banking system.
A bank loan is a loan taken from an individual or a financial institution on the
condition of repaying it with interest after a certain period of time. Before providing
the loan, the bank takes our property or something valuable, such as ornaments, as
collateral. There are different types of such loans. Some loan types require interests
only in which one has to pay the principal after their maturity. Some loan types
expect periodical EMIs or equated monthly instalments.

The common types of loans include working capital loans, purchase loans,
consumption loans, housing loan, overdraft loans and investment loans. If one is
unable to repay the loan taken from a bank or financial institution, he or she has
to pay compensation in addition to interest. In such cases, the banks or financial
institutions auction the collateral and take legal actions against the borrower
according to the existing system of the financial institution. It also blacklists such
a person. It will be difficult for such a person to take a loan from other financial
institutions in future. He or she also loses his or her social prestige. Therefore, it is
wiser to take a loan for the right work with proper planning, and one should always
pay the loan instalments on time.

(3) Remittance

The act of sending money from one place to another is called remittance. It
refers to the transfers, in cash or in kind, from a migrant to household residents in
the country of origin. A foreign worker can transfer money from banks, financial
institutions or licensed money transfer agencies. The total remittance inflow in FY
2018/19 was Rs 879 billion, equivalents to 25.4 per cent of GDP.

The act of sending money through private traders, representatives or unregistered
organisations is called Hundi. Such an act is considered illegal because money
exchange takes place outside the banking channels, and the process escapes
revenue to the government. Anyone found involved in such transactions is liable
to punishment.

According to the Foreign Exchange Regulation Act, anyone involved in Hundi forfeits
the money and such persons could be fined up to thrice the amount illegally transferred,
in addition to a jail term not exceeding three years.

Therefore, remittances should be sent from reliable and registered bodies only. A
large sum of hard-earned money on foreign land is being spent on unproductive
goods and consumption. This should be controlled and invested in productive
sectors.

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(4) Foreign Exchange

Currencies of countries other than Nepal are the foreign currency for Nepal.
Foreign currency is necessary to bring goods from foreign nations to Nepal.
Similarly, foreign currency is required to travel abroad. Nepal obtains the required
foreign currency by exporting goods abroad, from remittances earned abroad and
from the amount spent by foreigners coming to Nepal.

Our country has to pay foreign currency when importing goods and services from
other countries. Nepali currency has to be exchanged for foreign currency. The
act of exchanging money in this way is called foreign exchange. The more foreign
exchange reserves a country has, the more benefits it has. The exchange rate of
Nepali currency with the currencies of other nations is called the exchange rate.
Demand for foreign exchange has increased in Nepal because our country has to
import more goods and services from other countries. This trend weakens the Nepali
currency. Demand for foreign exchange has increased as more goods and services
have to be imported from other countries. As the economy of Nepal depends heavily
on imports, Nepali currency is in a degrading state.

(5) Securities

Securities are financial instruments issued by the government or a company
to raise funds. This includes government bonds, debenture bonds, shares, etc. A
government bond is a bond (official document) issued by a country's government
when they need money to invest in projects with a promise or commitment to repay
borrowed money at a fixed rate of interest at a specified time. Debenture bonds or
debentures are a type of loan often used by companies to raise money that is paid
back over a long period of time and at a fixed rate of interest.

Securities mean investment in a company that can be traded on the financial
markets and produces an income for the investor. Securities are issued to collect
and divide the capital required for the development and expansion of any business
goods and services. The companies mobilise the investment of investors and
contribute to the development of the country. Generally, the face value of Rs 100
per share is maintained.

The story of securities market of Nepal officially began with the issuance of shares by Biratnagar
Jute Mills Ltd and Nepal Bank Ltd in 1937 AD.

Types of Share

In Economics, share means any of the units of equal value into which a company is
divided. They are sold to raise money. It refers to one of the equal parts into which
the ownership of a company is divided. People can buy shares as an investment.
People who own shares receive part of the company’s profits. The types of share are
discussed below.

Share

Preference Share 368 Ordinary Share

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(a) Preference Share: Preference shares are shares in a company that are owned
by people who have the right to receive part of the company's profits before the
holders of ordinary shares are paid. They also have the right to have their capital
repaid if the company fails and has to close. It is also called preferred stock. Under
this, shareholders do not have the right to attend and vote in company meetings.
People who do not want to risk capital invest in such stocks.

(b) Ordinary Share: Ordinary shares are shares in a company that are owned by
people who have a right to vote at the company's meetings and to receive part of the
company's profits after the holders of preference shares have been paid. It is also
known as common stock. This stock is suitable for investors who are willing to take
more risks.

Differences between Preference Share and Ordinary Share

Preference Share Ordinary Share

Preferred share is the extension of common It is issued to the public to generate a stream of
stocks, but preferred shareholders are given funding to expand the business.
preference in dividend pay-out.

It guarantees a return on capital at a fixed rate. It doesn't guarantee a return on capital.

The rate of dividend is fixed. The rate of dividend may vary from year to year.

People who have this share can’t participate and People who have this share can participate and
vote in the company's meeting. vote in the company's meeting.

It is possible to convert it into an ordinary share. It isn't possible to convert it into a preference
share.

It is suitable for people who don't want to risk It is suitable for investors who are willing to take
capital investment. more risks.

Requirements to Apply for Shares

Certified copy of citizenship or copy of a birth certificate for minor
Applicant's address and parents' name, contact number
Bank account number DEMAT (dematerialised) account number
Recently taken photos Authorised signature

However, online platforms have been introduced to the share market these days.
Customers do not need to visit banks every time to apply for share these days. They
can apply for shares using the computer and the internet (through the Meroshare
platform) at home after completing certain procedures and filling up forms at the
bank.

Activities

(1) Your family member or relative must have gone abroad for employment. How
is the remittance sent by him or her used? For what purposes do they use the
remittance? Ask and present the conclusion in class.

(2) Collect information and notice about today’s foreign exchange rates of different
countries through daily newspapers or the internet and paste it on the notice
board.

Vedanta 369 Approved by Curriculum Development Centre,
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Exercise

(1) Write short answers to the following questions.
(a) What do you mean by financial instruments?
(b) How can we take care of paper notes? Write any two ways.
(c) Why do people take loans from banks? Write any two reasons.
(d) Why should people always pay loan instalments on time?
(e) Write the difference between a government bond and debenture in a
sentence.
(f) Mention any two effects of dirty notes in our country.
(g) Make a list of any two slogans to encourage foreign workers to send money
from authorised agencies only.

(2) Write short answers to the following questions.
(a) What is hundi? Why is it considered illegal in Nepal?
(b) Write a short paragraph about foreign exchange.
(c) Make a list of any four benefits of the investment in shares.
(d) Write any four differences between preference share and ordinary share.
(e) Make a list of all essential documents required for applying shares.
(f) Among the financial instruments mentioned in the lesson, which is the most
common and the least common for you? Explain both of them.

(3) Offer long answers to the following question.
(a) What is a remittance? There is widespread blame that the family of foreign
workers do not invest remittance in the productive sector. How should people
use remittance in productive sectors? What policies should the government
introduce to make people invest remittance in productive sectors?

Community Work

Visit a nearby bank in your community, meet one of its authorised people and
collect information about the loan lending process of the bank. Present your
findings in the class.

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Lesson

8.8 Insurance

Engage Yourself

Has your family ever suffered any unexpected loss? What was it? How did it happen?
Some unexpected events, such as accidents, deaths, flood, landslide, drought, fire, etc.
make our life painful. It is not possible to prevent them all the time. However, we can
ensure protection and compensate for our loss and damage with the help of insurance. It
minimises the risk and compensates us against unexpected loss.
(1) What is insurance?
(2) How did it begin in Nepal?
(3) What are the different types of insurance? How do they differ from one another?
(4) What things should we consider before choosing any insurance policy?
(5) What benefits do we get from insurance?

We all are exposed to a variety of risks and accidents in our daily life. Natural and
human made disasters such as flood, landslides, accidents, fires, and so on cause
untimely death of people and animals. Sometimes drought, flood, landslide, and
excessive rainfall destroy our crops. In this way, human life is always prone to a
variety of risks, crises and unexpected loss. Although it is possible to prevent some
such disasters and reduce their destruction, it is impossible to stop them. However,
there is an arrangement to recover our loss and keep us safe. It is commonly known
as insurance.

Insurance is an arrangement with a company in which one pays them regular
amounts of money, and they agree to pay the costs, for example, if he or she dies or
is ill, or if he loses or damages something. An insurance company is an organisation
that bears the financial risk of the loss and thus provides compensation in the
event of a loss. Once a person agrees to insure himself or herself according to the
insurance policy of any insurance company, he or she pays an amount of money once
or regularly. Such a sum of money that one pays regularly or once to an insurance
company for an insurance policy is called a premium. The written agreement for
insurance between an insurance company and a person who wants insurance is
called an insurance policy. The insurance proposal includes the name, address,
risk details, insurance fee, insured item, period, condition etc., of the proposer.

Insurance in Nepal

Insurance in Nepal doesn't have a long history. Modern Rastriya Beema Sansthan
insurance company began in 1947 AD. The first
insurance company in Nepal was named 'Maal Chalani Approved by Curriculum Development Centre,
ra Bima Company'. It was established on 8th Ashwin, Sanothimi, Bhaktapur
2004 BS (September 24, 1947 AD). It was later renamed

Vedanta 371
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as ‘Nepal Insurance and Transport Company’ in 1959 AD and further renamed as
‘Nepal Insurance Company Ltd’ in 1991 (2048 BS). It is currently operating a non-
life insurance business under the Insurance Act 2049.

The government of Nepal established 'Rashtriya Bima Sansthan' on 1st Poush, 2025
BS under Rashtriya Bima Sansthan Act 2025. Beema Samiti (Insurance Board) is
an autonomous body established to develop, systemise, regularise and regulate the
insurance business of Nepal. It was established under the Insurance Act, 2049.

As of March 2021 AD, there are some 19 non-life insurance companies, 20 life
insurance companies and 1 reinsurance company in Nepal. Rashtriya Bima
Sansthan is a state-owned insurance company that provides both life insurance and
non-life insurance. It has played a significant role in the development, expansion
and promotion of the insurance business in Nepal. It has a 25% share in non-
life insurance and a 50 % share in life insurance. It has been providing facilities
through branch offices and contact offices in different parts of the country.

Types of Insurance

Insurance

Life Insurance Non-life Insurance

(1) Life Insurance

Human life is uncertain. A person can die young, leaving his or her dependents
with insufficient financial resources. Life insurance can compensate for this lack. It
is a type of insurance that is purchased to protect the future of the insurer's family
by providing them with the resources they need to achieve a prosperous future. It
serves only in the case of death of the insurer and in times of his or her serious
illness or inability to continue work, depending on the types of policies.

Nepal Insurance Act 1992 has defined life insurance business as “The business
relating to a contract regarding the life of any person under which he/she or his/
her heir in the event of his/her death, will be paid a particular amount in case a
specified amount is paid in instalment on the basis of his/her age.”

Life insurance is an agreement under which the insured pays back the amount
paid in a certain period on the basis of his or her age. In whole life insurance, the
sum insured is given to the desired person (called nominee) after death. The life
insured must have completed 16 years of age and not reached 65 years of age. The
common policies of life insurance are described below.

Life Insurance

Whole Life Insurance Term Life Insurance Endowment Life Insurance

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(a) Whole Life Insurance:

When the term of insurance extends to cover whole life, i.e. until the death of the
life assured, it is known as whole life assurance. Theoretically, the premiums
under the policy must be paid until death. The sum assured becomes payable
only after the death.

(b) Term Life Insurance:

Term life insurance, also known as pure life insurance, is a type of life insurance
that guarantees payment of a stated death benefit if the covered person dies
during a specified term.

(c) Endowment Life Insurance:

An endowment life insurance policy covers the life of the insured and helps
the policyholder save regularly over a specific period of time so that he or she
is able to get a lump sum amount on the policy maturity in case he or she
survives the policy term. This maturity amount can be used to meet various
financial needs. This policy pays the full sum assured to the beneficiaries if the
insured dies during the policy term or to the policyholder on the maturity of
the policy if he or she survives the term. It is the most popular insurance policy
in Nepal.

(2) Non-life Insurance

Any insurance other than life insurance is called non-life insurance. It is also
known as general insurance. Natural disasters or other causes can result in the
loss of properties such as a home, a store, a car, a factory, livestock, or agricultural
products. Homes and shops can catch fire, and earthquakes can damage homes
and buildings. Landslides, soil erosion, storms, hailstones, snow, floods, droughts,
etc. can destroy farmers’ crops. Vehicles can meet an accident on the road. The
purpose of non-life insurance is to provide financial security to the insured by
compensating the damaged property in such a situation. The insured person is
provided protection against physical damage by compensating for financial loss.
Such insurance is usually for one year. It needs to be renewed each year.

There is a great importance of agriculture insurance in an agricultural country
like Nepal. Agriculture insurance is specialised in two areas in Nepal. They are
livestock, bird and poultry insurance, and crop insurance. Agriculture Insurance
provides insurance coverage for various agricultural activities like livestock,
poultry, fish, crops and fruits and farming against the risks of fire and natural
calamities (earthquake, flood, landslide and storm) and disease. As per the National
Agriculture Policy 2061 BS, Crop and Processing Insurance, 2069 BS has been
issued in coordination with the Ministry of Agriculture.

According to the provision, 75 % of the insured amount should be borne by the
government and 25% by the farmers. There is a provision to get 90% compensation
if the insured crop gets damaged. Likewise, people can get the amount of security
as compensation in case of death of the animal raised by them.

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Differences between Life Insurance and Non-Life Insurance

Life Insurance Non-Life Insurance

Life insurance is a contract or agreement made by Non-life insurance is an agreement made to
a person or his or her rightful claimant to receive a receive compensation for the loss of agricultural
certain amount of money in case of an accident or goods, business, and industrial goods in the
accidental death of that person. future.

The duration of the insurance is determined Such insurance is usually for one year. Then, it
according to the wish of policyholders. should be renewed.

Insurance premium should be paid on a periodical Insurance premium needs to be paid at the
basis (usually every six months or every year). beginning without paying it periodically.

The premium of life insurance is comparatively more The premium of non-life insurance is
than that of non-life insurance. comparatively less than that of life insurance.

After the completion of the insured period, the Money will not be refunded after the maturity
person can withdraw the amount saved and the period.
additional amount as per the agreement.

Benefits of Insurance

Insurance is a financial product that reduces or eliminates the cost of the loss or
the effect of loss caused by different types of risks. The benefits of insurance are as
follows.

(1) It helps to minimise risks and provides compensation against damage and loss.
(2) It is a type of forced saving that secures our future.
(3) It minimises our tax and provides a bonus.
(4) We can get a loan facility on the basis of our premium during emergencies.
(5) It helps to achieve a prosperous future.
(6) It grants peace of mind. It makes us sure that the financial loss caused by

accidents and disasters would be compensated.

Things to Consider While Choosing Insurance Policy

One should be familiar with the schemes, returns, bonus, premium amount and the
prospect of the company before choosing any insurance policy. Besides, we should
consider the following points while choosing the insurance policy.

Be clear about the purpose of the insurance.
Choose the most appropriate insurance policy for you.
Write the name of the nominee (beneficiary) clearly.
Do not provide wrong details and information.
Be familiar with the premium amount and payment intervals. Make sure that

you can always pay it on time.
Read the insurance proposal carefully. Do not hesitate to ask if you have any

queries or doubts.
Make sure the insurance agent has obtained a license from the insurance

committee.
Receive the payment receipt after paying the insurance fee.
Inform your family member about the insurance you have done.
Always pay the insurance premium in time without delay and failure.
Keep all insurance-related documents safely.

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Activities

(1) If anybody from your neighbourhood asks you to give information about
insurance? What information will you give? Discuss in groups and make a list of
necessary topics to include.

(2) Your family member may have taken a life insurance policy. How much is the
instalment to be paid for the insurance? What is the amount and duration
of insurance? What are the conditions provided by the insurance company?
Inquire and present all the facts in the class.

(3) Among the insurance policies given in the lesson, which one do you prefer the
most? Why? Discuss in class and share your ideas.

Exercise

(1) Write very short answers to the following questions.
(a) Define an insurance company with any two examples.
(b) What is an insurance policy?
(c) What do you mean by premium?
(d) Which is the first insurance company in Nepal?
(e) Introduce Rashtriya Bima Sansthan in a single sentence.

(2) Offer short answers to the following questions.
(a) Give a brief history of insurance in Nepal.
(b) What are the types of insurance? Introduce them.
(c) What are the common policies of life insurance? Explain them.
(d) What are the benefits of insurance? Mention any six of them.
(e) What things should we consider while getting insured? Mention them.

(3) Write long answers to these questions.
(a) What is non-life insurance? Why is it important in an agricultural country like
Nepal? Mention in points.
(b) What do you mean by insurance? Write any five differences between life and
non-life insurance.

Community Work

Meet one of the persons who has received COVID insurance benefits or any
life and non-life insurance schemes in your community. Inquire about his or
her feelings after receiving compensation. Prepare a short report, including
his or her experience.

Vedanta 375 Approved by Curriculum Development Centre,
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Lesson

8.9 Revenue and Tax Collection

Engage Yourself

What development activities are taking place in your locality? What government services are
available in your neighbourhood? Have you ever paid tax to the government on any topics?
The government needs a lot of money to run the administration, carry out development
work, mobilise the army and police, and other activities and for the overall development of
the country. It obtains income in the form of revenue and tax from its citizens.
(1) What do you mean by revenue and tax?
(2) What are the types of revenue and tax?
(3) What are the prevailing taxes of Nepal?
(4) Why should citizens pay taxes to the government?

Revenue

A state carries out various responsibilities such as protecting the borders of the
nation, carrying out development work, providing service to people, carrying out
administrative work, maintaining law and order, and so on. The government does
all these activities for benefit of citizens and to upgrade their lifestyle. It needs a
lot of money for doing so. The government receives income from various sources
for all these activities. Such money that the government receives in a certain time
period, especially in a year, from various sources is called government revenue. The
sources include VAT, income tax, custom duties, and excise duties. The revenue
remains in the state reserves, and the government spends according to the law.

Revenue is the income of the government that it collects from various sectors.
Revenues earned by the government are received from sources such as taxes levied
on the incomes and wealth accumulation of individuals and corporations and on
the goods and services produced, exports and imports, non-taxable sources such as
government-owned corporation’s incomes, central bank revenue and capital receipts
in the form of external loans and debts from international financial institutions.
The government receives revenue through tax revenue and non-tax revenue.

Types of Revenue

Revenue

Tax Revenue Non-tax Revenue

Tax Revenue: The total amount of money that the government receives from
taxation is called tax revenue. The income from customs duties, income tax, VAT on
imports, VAT on domestic products, excise on imports, excise on domestic products,

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land tax, taxes on properties, profit tax, and so on are examples of tax revenue. Of
them, VAT is the largest sources of government tax revenue, followed by income tax.

Non-tax Revenue: Non-tax revenue is government revenue not generated from
taxes. It includes profit from government-owned corporations, passport fees,
tourism fees, income from natural resources such as forest and hydropower, and
so on.

Tax and Its Types

Tax is an amount of money paid to the government that is

based on one’s income or the cost of goods or services he or

she bought. It is the amount that the government receives

from the people according to the law, and the people have Tax collection

to pay to the state according to the law. The person or

organisation paying the tax does not expect any benefit from paying the tax. That

is, it is a mandatory payment made by citizens without expecting tax benefits.

While it is the right of the state to collect taxes, it is the duty of the citizen to pay

taxes. Tax is the major source of revenue for the government, and the development

of any country’s economy largely depends on the tax structure it has adopted.

Tax

Direct Tax Indirect Tax

Direct Taxes: Direct Taxes are those which are paid directly by the individual or
organisation to the government. They are levied on income and profits. The burden
of direct tax is on an individual, which cannot be transferred to others. When a
person buys a house or a plot of land, he or she has to pay a certain amount of tax
which cannot be transferred to others. Examples of direct taxes are income tax,
wage tax, property, real estate tax, etc. Such taxes can be revised as needed. They
are based on equality and progress. This type of tax helps control inflation. Direct
taxes are estimated to contribute about 30 per cent of the total revenue in Nepal.

Advantages and Disadvantages of Direct Taxes

Advantages Disadvantages

Direct taxes promote equality among payers and They discourage hard work and encourage bribery
citizens as they are based on the ability of persons and corruption.
to pay.

They are productive as they make up an important They discourage investment as investment and
source of revenue. saving are at risk.

They are flexible as they can go higher or lower. They are responsible for creating social conflicts.

They help to control inflation. They reduce purchasing power.

They are certain, and the collection of direct taxes High tax rates can cause tax evasion.
is generally economical.

Indirect Taxes: Indirect Taxes are those which are not paid directly by the

individual or organisation to the government. They are levied on goods and services

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Merits and Demerits of Indirect Taxes

Merits Demrits

Indirect taxes are both convenient and burden-free Indirect taxes do not raise civic awareness
as payers do not need to pay a lump-sum amount at because millions are not even aware that they’re
once, and taxes are already added on commodities. paying a tax because it is hidden in the price.

They are broad-based as no one can escape the They are regressive in nature as they affect the
indirect tax net once he or she purchases a tax- poorer section more than the rich.
imposed commodity.

They can be revised in accordance with the They raise the price of commodities and add to
requirements of the government. price inflation.

They are difficult to evade or cheat since such taxes Tax revenue is uncertain as it depends on the
are included in the price of the commodity even if spending pattern.
the tax rate is high.

Differences between Direct and Indirect Tax

Advantages Disadvantages

It means money that people must pay to the It means a tax charged on goods and services,
government themselves, such as income tax, vehicle such as VAT, excise duty, custom duty,
tax, property tax, capital gain tax, and so on. education service tax, health service tax, etc.

It is levied on income and activities conducted. It is levied on product or services.

Tax collection is difficult. Tax collection is relatively easier.

It is paid after the income reaches the hands of the It is paid before goods and service reach the
taxpayer. taxpayer.

It is a progressive type of tax as those with higher It is a proportional type of tax because the tax
income have to pay more, and those with lower is the same for the rich and the poor.
income have to pay less tax.
It cannot be transferred from one person to another. It is transferred to others.

Prevailing Taxes in Nepal

(1) Value-added Tax (VAT): Value-added Tax (VAT) is a tax based on goods and
services. It is a tax that is paid at each stage in the production of goods or services
and by the final customer. It is considered an improvised form of sales tax. The
tax is levied on goods and services at a fixed rate, and the final burden of the tax
falls on the consumer. VAT was introduced in France on April 10, 1954 AD. It has
spread around the world more quickly than any other new tax in modern history.
More than 160 countries around the world use value-added taxation at present.

In Nepal, VAT was introduced on November 16, 1997, AD (Mangsir 1, 2054 BS).
Mangsir 1 has been celebrated as the National Tax Day since 2069 BS. If an
entrepreneur makes a transaction of more than Rs 2 million, he or she should
register for compulsory VAT. For this, a certificate can be obtained by registering
at the Inland Revenue Office. We should also develop the habit of collecting
mandatory VAT bill after purchasing goods and services. We pay the price including
VAT, but when the businesspersons do not pay the VAT amount we paid to the
revenue, the state economy gets weakened. Only the businesspersons get rich. Due
to this, the state cannot carry out development work for our convenience as per
our expectations. The country cannot develop. Therefore, we should never forget to
take the VAT bill.

Pakistan is the first country to introduce VAT among SAARC nations. It was introduced in 1992 AD.

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(2) Excise Duty: Excise duty is a tax on some types of goods such as alcohol,
cigarettes, or petrol paid to the government. Excise duty is imposed on the
consumption of selected goods, such as alcoholic beverages and tobacco products.
A licence is required to engage in manufacturing, importing, selling and storing
of excisable goods. Likewise, the Excise Act, 2002 prohibits importing excisable
services without having a licence. Excise is another important source of government
revenue.

Excise duty raises revenue by imposing taxes on specific goods and services. Unlike
VAT, it is generally levied only on specifically defined goods, particularly on four
product groups: alcoholic beverages, mineral oils, tobacco products and other goods.
(3) Customs Duty: Customs duty is the tax levied on the goods imported from
abroad and the goods exported abroad or the tax levied at the customs point while
importing and exporting. It is also considered an important source of revenue.
Therefore, each country has established administrative units of customs in its border
areas. The main customs are established at the main ports, and small customs are
established at other places are established. The Government of Nepal has collected
customs duty by establishing main customs at Kakarvitta, Biratnagar, Birgunj,
Bhairahawa, Nepalgunj etc. and small customs at many other places.
(4) Income Tax:: Income tax means a tax that one has to pay on his or her income,
usually higher for people with larger incomes to the government. It is considered
the ancient tax system. It originated in Britain in the 12th century. In ancient
times, income tax was levied on animal husbandry, agriculture, fisheries and now
it is levied on all sectors, including business, employment, investment and profit.
In Nepal, this tax is levied on all sectors. However, non-profit organisations, non-
professional sports organisations and political parties registered in the Election
Commission do not need to pay income tax.

Every citizen has to pay tax according to his or her income according to the law. Each
year, the government divides the taxable income into two categories, individual
and family. There is a facility to get tax exemption even on the income, which
is more than the prescribed limit. For example, the amount insured, the amount
deducted for the provident fund and the amount invested in the citizen investment
fund are not subject to income tax. All these deductions are made for income tax.
Every good citizen has to pay income tax. Many institutions provide remuneration
to their staff after deducting income tax.

Tax Collection Authority of Local Government

The Ministry of Federal Affairs and General Administration has published a
guideline and circulated it among all local governments highlighting their revenue
and tax collection rights. As per the guideline, local governments can collect
taxes like property tax, land and house tax, business tax, vehicle parking tax, tax
on consumption of herbs, and service tax in the tourism sector. Similarly, local
governments can collect taxes on roads and consumption of water, electricity and
public libraries or any other public properties. Likewise, the local governments
can also collect taxes for various services like parks, ponds, bus parks, drainages,

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bridge, and public toilets, among others. However, the local governments cannot
collect taxes on any goods being supplied by the central government, provincial
governments and any other government-owned agencies for projects being
developed under foreign aid or domestic sources itself. Local governments also
cannot collect taxes under any other heading that are projected tax-free by the
government policies.

Activities

(1) The COVID-19 pandemic has declined revenues and brought socio-economic
hardship on a scale not seen before in our country. What programmes should
the government launch to face this challenge? Discuss among your friends and
make a list of some measures.

(2) How many members in your family pay tax? For what purposes do they pay tax?
Discuss with them and make a list.

Exercise

(1) Offer very short answers to the following questions.
(a) What is revenue?
(b) What are the major sources of revenue? Name any four of them.
(c) What is tax?
(d) What is VAT?
(e) Why should we always take the VAT bill?
(f) What do you mean by income tax?

(2) Write short answers to these questions.
(a) What are the types of revenue? Introduce them with examples.
(b) What are the types of taxes? Write about them with examples.
(c) What are the advantages and disadvantages of direct tax? Mention in a
table.
(d) Mention the merits and demerits of indirect tax in a table.
(e) Write any four major differences between direct and indirect tax.
(f) Introduce income tax in a paragraph.
(g) What are the four prevailing taxes in Nepal? Introduce all of them.

(3) Write long answers to the following questions.
(a) “VAT is the largest sources of government tax revenue, followed by income
tax.” Justify this statement.
(b) What do you mean by excise duty and custom duty? Mention their importance
in the context of Nepal.

Community Work

What types of taxes are levied on your local body? Go to your rural municipality
or municipality, collect the necessary information and prepare a report to post
on the school notice board.

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Lesson

8.10 Consumers’ Rights

Engage Yourself

What is the name of your rural municipality or municipality? Have you ever visited their
office? Rural municipalities and municipalities are local bodies. There 753 such local
bodies in Nepal. They have the authority to utilise the means and resources available in
their respective local bodies. They prepare development proposals to run development
projects.
(1) What do you mean by consumers’ rights?
(2) Why should consumers be aware of their rights?
(3) What are various efforts made for the protection of consumers’ right in Nepal?
(4) What are particulars to be mentioned in consumer goods?
(5) What is consumer education?
(6) What benefits do we get from consumer education?

Introduction

We need a variety of goods and services in our daily life.

We buy and bring necessary goods from the market and

also consume various services such as water, electricity,

telephone, sanitation, health facilities, education,

entertainment by paying a certain price. It is the right Customer asking information
of every consumer to get the goods and service facilities about goods
according to the price he or she has paid. A person who

consumes goods and services for personal purposes is called a consumer.

Consumers of single goods and services can be not only consumers, but also
producers, suppliers and distributors of other goods and services. Therefore, all the
individuals, institutions, companies, etc. who consume goods and services are also
consumers. Consumers International, the membership organisation for consumer
groups around the world that promotes the rights and interests of consumers,
regards all of us as consumers.

Consumer right is 'the right of each customer to have information about different aspects of a
good or service such as its quality, quantity, strength, purity, price and standard.'

The constitution of Nepal has also declared consumer right as a fundamental right
of every citizen. It has included Consumer’s Right in Article 44 under Fundamental
Rights in Part 3. It states, “Each consumer shall have the right to quality foodstuffs
and services. A person who has suffered from substandard object or service shall
have the right to be compensated as provided for by law.” This constitutional
declaration has enabled consumers to fight if their rights are violated.

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History of Consumer Rights

The history of the consumer rights movement is not very long. It only gained motion
after the Second World War. On March 15, 1962, the then US President John F
Kennedy declared four consumer rights while serving an order to the US Consumer
Advisory Council. They are now regarded as fundamental rights. Kennedy stated
that consumers had the right to safety, the right to be informed, the right to choose
and the right to be heard. These rights were not universally recognised until the
UN recognised them. International Consumers' Day is observed on March 15 every
year to commemorate the special day.

The history of consumer rights in Nepal is not so long either. The movement has
made much progress, but there’s still a long way to go. After the political change in
1990, consumer rights issues came to the notice of rights activists and lawmakers.
The turning point came when the government introduced the Consumer Protection
Act, 1998 and the regulation in 1999 AD. Before the introduction of these acts,
there were some legal provisions in the Civil Code, but there was no specific law
for the protection of consumers.

Efforts Made to Protect the Rights of Consumers

(1) The United Nations Guidelines for Consumer Protection (UNGCP) are accepted
as the international standard for good practice in consumer protection. They
were first adopted by the General Assembly on April 16, 1985, later expanded
by the Economic and Social Council on July 26, 1999, and revised and adopted
by the General Assembly on December 22, 2015 AD. The guidelines have
introduced the following rights as the rights of consumers.
(a) The right to safety: To be protected against products, production
processes and services which are hazardous to health or life.

(b) The right to be informed: To be given facts needed to make an informed
choice, and to be protected against dishonest or misleading advertising or
labelling.

(c) The right to choose: To be able to select from a range of products and
services, offered at competitive prices with an assurance of satisfactory
quality.

(d) The right to be heard: To have consumer interests represented in the
making and execution of government policy, and in the development of
products and services.

(e) The right to satisfaction of basic needs: To have access to basic
essential goods and services, adequate food, clothing, shelter, health care,
education and sanitation.

(f) The right to redress: To receive a fair settlement of just claims, including
compensation for misrepresentation, shoddy goods or unsatisfactory
services.

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(g) The right to consumer education: To acquire knowledge and skills
needed to make informed, confident choices about goods and services
while being aware of basic consumer rights and responsibilities and how
to act on them.

(h) The right to a healthy environment: To live and work in an
environment which is non-threatening to the well-being of present and
future generations.

(2) According to the Consumer's Protection Act 2054 (1998) enforced on Baisakh
1, 2055 (April 13, 1999), for the purpose of protecting the rights and interests
of consumers, every consumer shall have the following rights:

(a) Right to be protected from the sale and supply of consumer goods and
services that may harm life, body, health and property.

(b) Right to be informed about the prices, attributes, quantity, purity, quality,
etc., of consumer goods and services so as to be safe from unfair trade
practices.

(c) Right to be assured of an opportunity to choose consumer goods and
services at competitive prices as far as possible.

(d) Right to be assured that an appropriate agency will hear matters
concerning the protection of the rights and interests of consumers.

(e) Right to be heard and compensated against exploitation and grievances…….
hardships resulting from unfair trade practices.

(f) Right to consumer education.

Particulars to be Mentioned in Consumer Goods

According to the same act, a producer shall compulsorily mention the following
particulars on the labels of consumer goods:

(a) Name and address of the producer, and registration number of the industry.
(b) In the case of consumer goods such as food and medicines, their ingredients as

well as their quantity and weight.
(c) Quality of consumer goods whose quality has been determined, if any.
(d) Method of consuming consumer goods and possible impact of such consumption.
(e) Price, batch number, production date and expiry date of the consumer goods.
(f) In the case of consumer goods such as electronic goods, hardware and

machinery, guarantee thereof, date of guarantee, and other necessary matters.
(g) In the case of consumer goods that are inflammable, dangerous or fragile,

precautions for their safety.
(h) Other particulars as prescribed.

Consumer Education

Consumer education refers to formal and informal education that helps consumers
to ensure their rights. US Department of Education has defined consumer education
as a process by which consumers develop skills to make informal decisions in the
purchase of goods and services.

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Consumers have the right to complain if they feel cheated with fraud or substandard
goods and services they want to consume or have consumed. In such cases,
the consumer himself or herself can lodge the complaint through a consumer's
organisation. There is a legal provision to compensate the consumer in case of
loss or harm due to the use of substandard products. Compensation committees
have been established in every district to hear complaints from consumers. The
government has also made provisions to replace such committees with consumer
courts.

According to the Consumer Protection Act, complaints can be lodged through the
Department of Commerce, District Administration Office, the nearest police station
or the concerned department or ministry. Inspection Officers have been arranged
to protect the rights and interests of the consumers. The inspection officers have
been given various powers. Unfortunately, very few people have stood up for
their rights. And very few cases have been filed against those who have provided
substandard goods and services.

Most consumers do not claim compensation for the loss they have suffered because
of two reasons. Firstly, many people do not know that the law protects their rights,
and secondly, they do not bother to begin legal actions. The major lack in our
country is consumer rights education. If we want more and more people to know
about consumer rights, we must generate and strengthen awareness programmes
effectively. All stakeholders need to make much efforts to promote consumer
protection. Consumers’ right and consumer education-related materials need to be
introduced at the school-level curriculum.

The benefits of consumer education can be mentioned in the following points:

(a) Consumers can get a wide variety of options when they shop for products and
services.

(b) It makes consumers aware of the problems they can face while purchasing
goods and services.

(c) Consumers can know the quality of purchased goods and services.
(d) It forces companies to pay close attention to the needs and wants of their

customers.
(e) It motivates consumers to provide feedback that can be used to improve the

quality of products and services.
(f) It provides consumers with complete information about the market. This helps

in choosing appropriate goods and services.
(g) It assists the consumers in getting maximum satisfaction by proper utilisation

of their money and lead a better living standard.
(h) It familiarises the consumers with the various acts enacted by the government

from time to time. It ultimately provides information on legal provisions of
their rights to consumers.

Activities

(1) How does the black market violate the rights of consumers? Discuss among
your friends and make a conclusion to share in the classroom.

(2) Compose a song or poem to make consumers aware of their rights.

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Exercise

(1) Write very short answers to the following questions.
(a) Who is a consumer?
(b) Introduce Consumers International in a single sentence.
(c) What do you mean by consumers’ rights?
(d) When do people celebrate International Consumers’ Day every year?
(e) When and why was the Consumers' Protection Act implemented in Nepal?
(f) Why do many consumers do not claim compensation for the loss they have
suffered? Mention any two reasons.
(g) If you feel cheated with fraud or substandard goods and services, where
should you complain?

(2) Answer these questions in brief.
(a) Write a brief history of consumer rights in the world and in our country.
(b) Prepare a news sample by mentioning the activities of any two organisations
formed to protect the rights of consumers.
(c) Mention the usefulness of consumer education-related materials at the
school level.
(d) Are the efforts made to protect the rights and interest of consumers enough
in Nepal? If not, what programmes should the government and public
people launch to make it more effective?
(e) How does the black market hinder the rights of consumers? Discuss among
your friends and make a list of any four conclusions.

(3) Offer long answers to the following questions.
(a) What are efforts made for the protection of the rights of consumers in
Nepal? Prepare an editorial mentioning those attempts.
(b) What is the purpose of the Consumers' Protection Act, 2054? According
to this act, what are the particulars to be mentioned in consumer goods?
Mention them in six points.
(c) What is consumer education? Make a list of any six benefits of consumer
education.

Community Work

Are consumers in your community satisfied with the products and services
available there? Have they faced any problems related to the black market,
overpricing, adulterated products, and so on? Collect information from at
least five people and write a short report.

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Unit Our International Relationship
and Cooperation
9

Introduction

Different countries of the world need the assistance from one another for their progress.
Hence, they need to maintain the cordial international relationship among themselves. Every
country has to maintain a smooth international relationship for its overall development. No
country can remain isolated at present. Therefore, international organisations such as the
UNO has been set up to maintain international peace, relationship and cooperation. It has
several specialised agencies to coordinate its work through negotiated agreements.
The concept of globalisation has become popular recently. The world has become a global
village now because the internet or communication and transportation facilities have
brought the people of different countries very close to each other. Almost all the countries
of the world have realised the importance of international understanding as no country in
the world can produce necessary things for it itself. In some way, it has to depend on others.
Therefore, they help each other at the time of need. International cooperation based on
mutual benefit is growing stronger at present. In this unit, we are going to study about
United Nations and its organs, specialised agencies of the United Nations, role of Nepal in
the United Nations, activities of the United Nations in Nepal, current affairs and their effects
and globalisation and localisation.

Learning Outcomes

On the completion of this unit, the students will be able to:
• explain the relationship between Nepal and UNO along with its specialised agencies;
• mention the impacts of contemporary events that have happened in the world on

human life and
• present the concept of localisation and globalisation.

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Lesson

9.1 United Nations and Its Organs

Engage Yourself

How long can you live without other’s assistance? Can a nation exist alone without the
aid of another country at present? The United Nations is an organisation to which most
countries belong. Its role is to encourage international peace, cooperation, and friendship.
It has six principal organs.
(1) Why is it essential to have such an international organisation that works to address

the world’s problems?
(2) What are the organs of the United Nations? What are their functions?
(3) What would have happened if there were no organisation like the United Nations at

present?

Introduction UNO logo

The United Nations is an international organisation founded on
24th October, 1945 AD. It was established in succession to the
League of Nations. The League of Nations was set up in 1919
AD following World War I. Its primary objective was to keep
world peace. However, not every country joined the League.
The United States, for example, was never a member. Others
that had joined later quit, and the League often failed to take
action. Though it did not succeed, the League set a dream for a
universal organisation. The result was the United Nations.

The UN has four main purposes:
(1) To maintain international peace and security;
(2) To develop friendly relations among nations based on respect for the principle of

equal rights and self-determination of people;
(3) To work together to help poor people live better lives, to conquer hunger, disease

and illiteracy and to encourage respect for each other’s rights and freedoms; and
(4) To be a centre for helping nations achieve these goals.

How did the United Nations begin?

The idea of the United Nations was born during World War II. Between 1939

AD and 1945 AD, World War II raged between two groups of countries. By May

1945, World War II came to an end. Yet world leaders understood that they still

needed to protect international peace and human rights. World leaders who had

collaborated to end the war felt a strong need for a mechanism that would help

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bring peace and stop future wars. They realised that it was possible only if all
nations worked together through a global organisation. The United Nations was to
be that Organisation.

The first step towards the formation of the UN was the St James’s Declaration
(London declaration) signed on 12th June, 1941 at St. James’ Palace in London
by nine governments from Belgium, Czechoslovakia, Greece, Luxembourg, the
Netherlands, Norway, Poland, Yugoslavia and France, expelled from their native
lands by the Nazis of Germany and their supporters. It was an inter-allied
declaration made between them and representatives of Commonwealth nations
(Great Britain, Canada, Australia, New Zealand and the Union of South Africa)
that laid the foundation for the UN. Then, on 14th August, 1941, Winston Churchill,
the Prime Minister of Britain and Franklin Roosevelt, the President of the USA
met on a ship on the Atlantic Ocean and made a joint promise to end the war and
ensure the equality of nations and universal peace. This agreement is called the
Atlantic Charter. It was a declaration of eight common principles in international
relations, which outlined a plan for world peace and provided the basis for the
United Nations organisation.

On New Year’s Day 1942 AD, representatives of the United Nations, the United
Kingdom, the Soviet Union and China signed a short document known as the
Declaration by United Nations. The next day, representatives of 22 other nations
added their signatures. This vital document assured the participant governments
the maximum war effort and bound them against making a separate peace. The
name ‘United Nations’ was first officially used in this declaration. On 30th October,
1943 AD, foreign ministers of the Soviet Union, Great Britain and the United States,
together with the Chinese ambassador to the Soviet Union signed the Moscow
Declaration to establish a general international organisation for the maintenance
of international peace and security. In December 1943 AD, Roosevelt, Churchill
and Stalin met in Tehran, the capital of Iran and declared that they had worked
out determined plans for the final victory. This is known as the Tehran Declaration.
In the autumn of 1944 AD, the representatives of China, Great Britain, the Soviet
Union and the United States held a business-like conference at Dumbarton Oaks
(Washington, D.C). On 7th October, 1944 AD, they submitted a proposal for the
framework of the world organisation to all the United Nations governments and
the people of all countries for their study and discussion. From February 4 to 11
in 1945 AD, a conference of Roosevelt, Churchill and Stalin was held at Yalta in
Crimea to discuss the post-war world. They scheduled another meeting for April in
San Francisco to create the United Nations.

In the spring of 1945 AD, delegates from 50 nations gathered at San Francisco
in America. They were determined to set up an organisation that would preserve
peace and help build a better world. On June 26, 1945 AD, the representatives of
those 50 countries signed the Charter, the guiding principles of the United Nations.
Poland was not represented at the Conference because, at that time the state did
not yet have a new government in place. However, Poland signed the Charter by
15th October, 1945 AD and is therefore considered one of the original members of
the United Nations. After the represented countries, the five permanent members

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of the Security Council (China, France, the USA, UK and USSR) signed the Charter
of the United Nations and officially recognised it on 24th October, 1945 AD. In this
way, the UN formally came into existence with just 51 countries. There are 193
member countries of the UNO at present. United Nations Day is celebrated on 24th
of October each year.

The emblem of the United Nations was approved on 7th December, 1946 AD. It has a
map of the world surrounded by a wreath consisting of cross olive branches.

The official languages used at the United Nations are Arabic, Chinese, English,
French, Russian and Spanish. The working languages at the United Nations
Secretariat are English and French. Most United Nations documents are also
issued in all six official languages.

Arabic was added as an official language in 1973 AD.

The UN Charter consists of a preamble and 111 articles grouped into 19 chapters.
Chapter 2 of the Charter establishes the criteria for UN membership. The
requirements are as follows:

(1) Should be an independent peace-loving nation;

(2) Should accept the obligations contained in the UN Charter;

(3) Should be able to carry out those obligations in the judgement of the
Organisation;

(4) Should be recommended by the Security Council with the approval of nine
members, including all five permanent members, and

(5) Should be approved by the General Assembly with the presence and voting of
two-third member nations.

Organs of the UNO

The UN Charter establishes six principal organs of the United Nations. Article 7 of
the Charter mentions them. Here is a summary of their composition and functions.

(1) The General Assembly (Articles 9 to 22)

All members of the United Nations are

members of the General Assembly. Each nation

has five representatives, but each country has

one voting right. At the start of each regular

session, the assembly elects a new president,

21 vice-presidents (latest update) and the

chairpersons of the assembly’s six central

committees. To ensure fair and reasonable

geographical representation, the presidency Meeting of General Assembly

of the assembly rotates each year among five

regional groups of states, which are the African group, the Asia-Pacific group, the

Eastern European group, the Latin American and Caribbean group and Western

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European and others group. The regular session of the General Assembly begins
each year in the third week of September and usually continues until the third
week of December. The assembly normally adopts its resolutions and decisions
by a majority of members present and voting. A two-thirds majority must decide
essential issues such as recommendations on international peace and security, the
election of members to some principal organs and budgetary matters.

Since the General Assembly represents all its member nations, provides a platform
to member countries to hold discussions on various issues, passes the budget of
the UN and prepares its plans, programmes and policies, it is also known as the
parliament or legislature of the UN. Most discussions in the General Assembly
take place in its six central committees. They are

First Committee (Disarmament and International Sector)

Second Committee (Economic and Financial)

Third Committee (Social, Humanitarian and Cultural)

Fourth Committee (Special, Political and Decolonisation

Fifth Committee (Administrative and Budgetary) and

Sixth Committee (Legal)

Functions and Powers of General Assembly

According to the Charter of the United Nations, the General Assembly may:

Consider and make recommendations on the general principles of cooperation
for maintaining international peace and security, including disarmament;

Discuss any question relating to international peace and security and, except
where a dispute or situation is currently being discussed by the Security
Council, make recommendations on it;

Discuss and make recommendations on any questions within the scope of
the Charter or affecting the powers and functions of any organ of the United
Nations;

Initiate studies and make recommendations to promote international political
cooperation, the development and codification of international law, the
realisation of human rights and fundamental freedoms and international
collaboration in the economic, social, humanitarian, cultural, educational and
health fields;

Make recommendations for the peaceful settlement of any situation that might
weaken friendly relations among nations;

Receive and consider reports from the Security Council and other United
Nations organs;

Consider and approve the United Nations budget and establish the financial
assessments of Member States;

Elect the non-permanent members of the Security Council and the members of
other United Nations councils and organs and, on the recommendation of the
Security Council, appoint the Secretary-General.

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(2) The Security Council (Articles 23 to 32)

The Security Council is the most powerful part of the United Nations. It is

responsible for making sure that countries behave peacefully towards each other

and for deciding what the United Nations should

do if countries go to war. It has 15 members:

5 permanent members and ten temporary

members. The ten non-permanent seats are

distributed on a regional basis: 5 for African

and Asian countries, 1 for Eastern European

countries, 2 for Latin American and Caribbean

countries and 2 for Western European and

other countries. They are elected for two years Meeting of Security Council

based on geographical representation.

At the end of World War II, those “big five” countries played key roles in the
establishment of the United Nations. Therefore, the permanent members of the
Security Council have the power of veto. To pass a resolution in the Security
Council, nine members of the council must vote “yes”, but if any of the five members
vote “no”, it is called a veto, and the resolution does not pass. Therefore, the veto
is the power of any of the five permanent members of the Security Council of the
United Nations to cast a negative vote against any decision made by the General
Assembly. The Security Council, unlike the General Assembly, does not hold
regular meetings. It can be called to meet at any time on short notice. Nepal has
been elected twice for the non-permanent members of the Security Council.

Recently, many countries have suggested that there should be more permanent
members of the Security Council, such as Japan and Germany.

Functions and Powers of the Security Council

To maintain international peace and security according to the principles and
purposes of the United Nations;

To call upon the parties to a dispute to settle it by peaceful means;

To investigate any conflict or situation that might lead to international hostility
and recommend terms of settlement;

To recommend to the General Assembly about the admission of new members
to the United Nations;

To recommend to the General Assembly the appointment of the Secretary-
General and together with the Assembly, elect the judges of the International
Court of Justice;

To request the International Court of Justice to give an advisory opinion on
any legal question and

To authorise the use of force or peacekeeping forces to maintain or restore
international peace and security.

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(3) The Economic and Social Council (ECOSOC) (Articles 61 to 72)

The Economic and Social Council is the forum to discuss economic problems,
such as trade, transport, economic development and social issues. It also helps
countries reach an agreement on how to improve education and health conditions
and to promote respect for and observance of universal human rights and freedoms
of people everywhere.

The Council has 54 members who serve for three-year terms. Seats on the Council
are allocated based on geographical representation, with 14 allocated to African
states, 11 to Asian nations, 6 to Eastern European countries, 10 to Latin American
and Caribbean countries and 13 to Western Europe and other countries. Voting
in the Council is by a simple majority, with each member having one vote. One-
third of its members are changed through its election every year. There are eight
(revised edition) functional commissions of the ECOSOC.

Functions and Powers of the Security Council

To serve as the main forum for international economic and social issues;
To promote a higher standard of living, full employment and economic and

social progress;
To identify solutions to global economic, social and health-related problems
To facilitate international cultural and educational cooperation;
To encourage universal respect for human rights and fundamental freedoms.

(4) The Trusteeship Council (Articles 86 to 91)

In 1945 AD, when the United Nations was established, eleven territories (mostly
in Africa and in the Pacific Ocean) were placed under international supervision.
The primary goals of the Trusteeship Council were to promote the improvement
of the inhabitants of Trust Territories and their progressive development towards
independence. It carried out its work for 49 years. However, since Palau achieved
self-government in 1994 AD, the Council has formally suspended its operations.
The Trusteeship Council is composed of the permanent members of the Security
Council. Each member has one vote and a simple majority makes decisions. They
will meet only as the need arises.

Functions and Powers of the Trusteeship Council

Under the Charter, the Trusteeship Council is authorised to examine and discuss
reports from the Administering Authority on the political, economic, social and
educational improvement of the peoples of Trust Territories and, in consultation
with the Administering Authority, to examine an appeal from and undertake
periodic and other special missions to Trust Territories.

(5) The International Court of Justice (Articles 92 to 96)

The International Court of Justice, also known as the World Court, was
established by the Charter of the United Nations in 1945 AD and began its work in

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April 1946 AD. The seat of the Court is at Peace Palace in The Hague (Netherlands).
Of the six principal organs of the United Nations, it is only one not located in
New York. The Court is composed of 15 judges elected for a nine-year term by the
General Assembly and the Security Council. No two judges can be from the same
country and it takes a majority of nine judges to make a decision. All judgements
passed by the Court are final and cannot be appealed. The official languages of the
International Court of Justice are English and French.

Functions and Powers of the International Court of Justice

To settle, in accordance with international law, legal disputes submitted by
States, and

To give advisory opinions on legal questions referred to it by authorised UN
organs and specialised agencies.

(6) The Secretariat (Articles 97 to 101)

The Secretariat, headed by the Secretary-General, consists of an international
staff working at the United Nations Headquarters in New York and all over the
world. It carries out the day-to-day work of the organisation. Its duties are varied
as the problems dealt with by the United Nations. These range from administering
peacekeeping operations to mediating international disputes or surveying social
and economic trends and challenges.

The Secretary-General is the chief officer of the United Nations. Staffs of
international civil servants assist him or her. The Secretary-General is appointed
for five years by the General Assembly on the recommendation of the Security
Council. There have been nine Secretaries-General since the UN was created. The
current Secretary-General of the United Nations is Antonio Guterres. He has been
appointed for the post since 1st January, 2017 AD. He was the Prime Minister of
Portugal from 1995 AD to 2002 AD. He had also worked as the United Nations
High Commissioner for Refugees between 2005 AD and 2015 AD. The appointment
of the Secretary-General follows a regional rotation.

Functions and Powers of the Secretariat

To administer peacekeeping operations, mediate international disputes and
organise humanitarian relief programmes;

To lay the groundwork for international agreements;

To inform the world – the media, governments, non-governmental organisations,
research and academic networks, schools and colleges and the general public
–about the work of the United Nations;

To assist in carrying out the decisions of the United Nations;

To organise international conferences on subjects of vital concern for
humankind;

To interpret speeches and translated documents into the six official languages
of the United Nations.

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Activities

(1) Present an act on the General Assembly session of the United Nations in the
classroom.

(2) Present a sample of news story, including the activities of the General
Assembly of the UN.

Exercise

(1) Write very short answers to the following questions.
(a) What type of organisation is the United Nations?
(b) What is the Atlantic Charter?
(c) When was the UN established?
(d) What is veto?
(e) Name the six principal organs of the United Nations.
(f) Name the five permanent member nations of the UN Security Council.
(g) Who is the current Secretary General of the United Nations?

(2) Write short answers to the given questions.
(a) Mention the historical background of the establishment of the UN.
(b) ‘The role of the UN is more significant at present.’ Do you agree with this
statement? Present your views in four points.
(c) Critically analyse the activities of the UN.
(d) Has the UN been successful in achieving its objectives? Present your opinion
in four points.
(e) What roles can the UN play to protect the rights of small and poor countries?
Clarify.
(f) Explain the roles played by the UN to maintain peace in the world.

Project Work

Prepare a table showing the organs of the UN with their functions on an A4
size paper and present it in your classroom.

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Lesson Specialised Agencies of the
United Nations
9.2

Engage Yourself

Have you seen vehicles having number plates of blue letters in white background? Such
vehicles belong to diplomatic agencies, such as the United Nations. Do you know about
any international organisations working with the UN? They are its specialised agencies.
They work in accordance with relationship agreements between each organisation and
the UN.
(1) What are the names of the specialised agencies of the UN in Nepal?
(2) What activities do UN agencies carry out in Nepal?
(3) What benefits have Nepali people received from such agencies?

UN specialised agencies are international organisations that coordinate their work
with the United Nations through negotiated (agreed) agreements. They are legally
independent of the United Nations and have separate budgets, members, rules and
personnel. The amount of their funding comes from voluntary contributions from
governments, institutions and individuals.

Some specialised agencies, such as the International Labour Organisation (ILO), have
been in existence longer than the United Nations.

The UN has several specialised agencies that carry out various functions on behalf
of the UN at present. They are described below with their logos, websites, date of
establishment, headquarters and significant activities.

UN Specialised Agencies

(FAO) Food and Agriculture Organisation works to eradicate hunger and
malnutrition and to raise levels of nutrition. It helps Member states in
www.fao.org the development of agriculture, forestry and fisheries, helping them
move towards achieving food security. It helps them govern, prevent
October 16, 1945 AD and mitigate risks and crises and support them in preparing and
Rome, Italy responding to disasters. It also carries out several activities to reduce
rural poverty. World Food Day is observed every year on the 16th of
(ICAO) October.
International Civil Aviation Organisation studies problems of
www.icao.int international civil aviation and establishes standards and regulations. It
creates safety standards for air travel and gives information and advice
April 4, 1947 AD to airlines. It also works to create policies in support of a safe, efficient,
Montreal, Canada secure, economically sustainable and environmentally responsible civil
aviation sector.

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(IFAD) The International Fund for Agricultural Development (IFAD) is an
international financial institution and UN specialised agency dedicated
www.ifad.org to eradicating poverty in rural areas of developing countries. The Fund
was established as one of the major outcomes of the 1974 World Food
November 30, 1977 AD Conference. It focuses exclusively on rural poverty reduction, working
Rome, Italy with poor rural populations in developing countries to eliminate
poverty, hunger and malnutrition raise their productivity and incomes
(ILO) and improve the quality of their lives.
International Labour Organisation promotes international labour rights
www.ilo.org by formulating international standards on the freedom to associate,
collective bargaining, the abolition of forced labour and equality of
April 11, 1919 AD opportunity and treatment. It also leads efforts to eradicate child
Geneva, Switzerland labour worldwide. It is responsible for research and recommendations
in the field of labour conditions and practices. It aims is to promote
(IMO) lasting peace through social justice. ILO was awarded the Nobel Peace
Prize in 1969.
www.imo.org International Maritime Organisation is the United Nations agency
concerned with international maritime activities. It is responsible for
March 17, 1958 AD improving the safety and security of international shipping and for
London, United Kingdom preventing oceanic pollution from ships. It is also involved in the
facilitation of international sea traffic.
(IMF) International Monetary Fund checks on economic developments in
member countries, encourages international trade and helps and
www.imf.org advises poorer countries that have economic problems. It works to
foster global monetary cooperation, secure financial stability, facilitate
December 27, 1945 AD worldwide trade, promote high employment and sustainable economic
Washington, the USA growth and reduce poverty around the world.
International Telecommunication Union is committed to connecting
(ITU) the world. It promotes international cooperation in the use and
improvement of telecommunications of all kinds. It is responsible
www.itu.int for the worldwide allocation and regulation of frequencies for
communications and the regulation of telegraph, telephone and radio
May 17, 1865 AD services. ITU was originally established in 1865 AD as the International
Geneva, Switzerland Telegraph Union in 1865 AD in Paris.
United Nations Educational, Scientific and Cultural Organisation
(UNESCO) promotes international cooperation and facilitates the exchange
of information in the fields of education, science, culture and
www.unesco.org communications. Its specific concerns are to achieve education for all,
promote natural and social science research through international and
November 4, 1945 AD intergovernmental scientific programmes, support the expression of
Paris, France cultural identities, protect and enhance the world’s natural and cultural
heritage and promote the free flow of information and freedom.
(UNIDO) United Nations Industrial Development Organisation is a department
of the United Nations that is responsible for encouraging industrial
www.unido.org activities in developing countries. It allows give each country an
opportunity to create a flourishing productive sector, increase its
November 17, 1966 AD participation in international trade and safeguard its environment.
Vienna, Austria Universal Postal Union regulates international postal affairs. It is the
primary forum for cooperation between postal sector players. It
(UPU) helps to ensure a truly universal network of up-to-date products and
services. It fosters the sustainable development of quality universal,
www.upu.int efficient, accessible postal services to facilitate communication among
the people of the world.
October 9, 1974 AD
Bern, Switzerland

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(World Bank) World Bank is an international banking organisation established to
control the distribution of economic aid between member nations
www.worldbank. and to make loans to them in times of financial crisis. It helps
org poorer countries to develop their farming, industry and health and
education systems. Its two main parts are the IBRD (International
December 27, 1945 AD Bank for Reconstruction and Development) and the IDA (International
Washington DC, America Development Association).
The World Health Organisation is responsible for helping governments
(WHO) of various nations to improve their health services and limit the spread
of diseases. It helps various countries improve their people’s health
www.who.int by giving medicines and proving information and education about
diseases and immunisation. It also provides leadership on global
April 7, 1958 AD health matters, shapes the health research agenda and sets norms and
Geneva, Switzerland standards.
World Intellectual Property Organisation is an official organisation
(WIPO) that deals with the protection of intellectual property. It protects
the rights of the owners of intellectual property. It ensures that the
www.wipo.int rights of creators and owners such as musicians, writers, scientists and
inventors are protected worldwide. It believes that creators should be
July 14, 1967 AD recognised and rewarded for their originality and creativity.
Geneva, Switzerland World Meteorological Organisation facilitates worldwide cooperation
in meteorological observations, research and services. It also provides
(WMO) vital information for early warnings of weather, climate and water-
related phenomena. It provides information on the state of the
www.wmo.int atmospheric system and oceans. It also monitors the interaction of the
atmosphere with the Earth’s surface, ecosystems and human activity.
March 23, 1950 AD World Tourism Organisation is responsible for the promotion of
Geneva, Switzerland responsible, sustainable and universally accessible tourism. It pays
particular attention to the interests of developing countries in the field
(UNWTO) of tourism. It is engaged in a global campaign to protect children from
all forms of exploitation in tourism, including sexual exploitation, child
www.unwto.org labour and trafficking.

January 2, 1975 AD
Madrid, Spain

Some UN Programmes, Funds, Bodies and Entities

(IAEA) It is an international organisation to promote research into and the
development of atomic energy for peaceful purposes. It monitors
International Atomic nuclear technology internationally with a view to controlling the
Energy Agency development and use of nuclear weapons. It is widely known as the
world’s “Atoms for Peace and Development” organisation within the
(UNIFEM) United Nations family. It works with its member states and multiple
partners worldwide to promote the safe, secure and peaceful use of
United Nations nuclear technologies.
Development Fund It provides financial and technical assistance to innovative programmes
for women empowerment and gender equality. It encourages women
for Women to participate in mainstream development activities.

(UNEP) It provides leadership and encourages partnership in caring for the
environment. It supports environmental monitoring, assessment and
United Nations early warning.
Environment
Programme

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(UNHCR) It provides legal protection for refugees and seeks durable solution to
their problems, either by helping them to return to their homes or to
United Nations High settle in other countries.
Commissioner for
Refugees

(UNHABITAT) It promotes socially and environmentally sustainable towns and cities
with the goal of ensuring adequate shelter for all.
United Nations
Human Settlement

Programme

(WFP) It fights against global hunger. It delivers food to victims of war, civil
conflict and natural disaster.
World Food
Programme

(WTO) It is an international organisation that deals with the rules of trade
between different nations and encourages them to trade fairly.
World Trade
Organisation

In this way, various specialised agencies of the UN have been working for the
economic and social development of Nepal since she became its member on 14th
December, 1955 AD. To make their functions more effective, various measures
should be taken. Some of them are given below.

(1) Good governance should be maintained, and public participation should be
increased.

(2) The government and common citizens should create open atmosphere for them
to provide normative advice and technical support in their areas of expertise.

(3) The government and concerned authorities should help them identify the real
problems of our country, request them to solve them and promote our living
standards, human skills and potential.

(4) The government should appeal and facilitate such agencies to work for the
welfare of needy and marginalised groups.

Activities

(1) Prepare a list of the specialised agencies of the UN with their date of
establishment and functions. Compare your list with that of your friends.

(2) Find out the information about UNHCR and UNESCO with their activities and
work with the help of the internet. Present your finding in your classroom.

(3) Prepare a model of a news story focusing on the contribution of UNICEF.

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