For a visitor returning to Kathmandu after a few years' absence, the presence of the Pussycat Dance Bar in Thamel comes as a surprise. Less than a decade ago, this area, popular with tourists, was characterised by trekking equipment shops, backpacker hotels and travel agencies advertising whitewater rafting.

Today, Thamel resembles a red-light district. Every street houses several dance bars, with names like 'X Bar' and 'Girls Bar', advertised by pictures of cartoon-pneumatic, near-naked blondes. Red lights glow behind tightly closed curtains. Pretty women, none of them blonde, stand in doorways, inviting passers-by to step inside. And indeed, many of the women who dance here also work as prostitutes.

A headline in the Nepali Times earlier this month proclaimed 'Thamel's lost innocence'. But the mushrooming dance bar scene is not limited to this part of the capital. Many areas of Kathmandu now boast a growing number of dance bars, and their rise is a result of the turbulent changes that have swept Nepal in recent years.

Foremost among them is migration to the cities, an Asia-wide phenomenon that in Nepal's case has been exacerbated by a decade-long war. The conflict, between Maoist rebels and the government, has killed more than 13,000 and damaged the tourist-dependent economy of a country where 40 per cent of the population lives beneath the poverty line, driving hordes into the cities in search of work.

A recent report by a charity group, Save the Children, found that most of the women who worked in Kathmandu's dance bars were migrants from rural Nepal.

'Women are finding work in dance bars in exponentially increasing numbers as the city's population - both women migrating to the capital for safety and work, and men, migrating for the same reasons, who become possible customers in need of female entertainment - dramatically rises,' said the report, 'The Movement of Women: Migration, Trafficking, and Prostitution in the Context of Nepal's Armed Conflict'.

Although a peace agreement was signed in 2006 and tourism has subsequently picked up, new, inter-ethnic conflicts have bubbled over, jeopardising the livelihoods of many. In the Terai region, in the southern plains of Nepal, a violent movement for the rights of local people - which is sometimes expressed as outright secessionism - has killed 130 in the past year.

Several of the women working in the Pussycat bar hail from the region, including Ms Giri, who was widowed at 18. At the end of last year, she left her baby boy with her parents in a small village in eastern Terai to look for work in Kathmandu; she sends home money every month. Her parents have little idea of what she does.

Other women come from nearer by.

'I had to come to the city to get work,' says Gita Thapa, a shy 25-year-old who left her village near Kathmandu two months ago. Ms Thapa, who works as a 'hostess', serving drinks to men in the Pussycat bar, is dressed in a shiny pink trouser suit, lots of jewellery, and a thick, practical pair of socks. It is a cold night.

Twenty-year-old Asmita Lama left her home in Trisuli, a small village in a beautiful valley in central Nepal, two months ago, looking for work. She quickly found it, dancing. 'I don't like Kathmandu,' she says, as she stands shivering in the littered street just outside the bar, where she works nine-hour shifts seven times a week.

It is not hard, however, to see what attracts young women to a place like the Pussycat bar. Millions of Nepalis earn only a few rupees a day. Here, dancers earn 6,000 to 15,000 Nepali rupees (HK$750 to HK$1,870) a month, depending on how risque their acts are and the hours they dance. 'Hostesses' earn 3,000 to 4,000 rupees.

These comparatively high salaries are paid for by the inflated cost of drinks. Typically, a beer in Kathmandu costs about 30 rupees. In the Pussycat it costs 300.

But the sure-fire way to earn more is to have sex with customers. In most dance bars, this is almost always optional, according to the NGOs that have researched the phenomenon; indeed, the women in the Pussycat bar attest to this.

Rupa Nepali, a dancer who says she is 17 but looks older, left Pokhara two months ago after her husband abandoned her. Leaving her three-month-old daughter with her parents, she came to Kathmandu and found work as a dancer.

A month ago, she says, she found she did not have enough money for the bus fare home to visit her baby. 'That was the first time I slept with a man for money,' she says, eyes downcast. 'I don't like doing such things.' Her client paid her 1,500 rupees and since then she has had sex with several men for the same price.

There is nothing new in Nepali women selling their bodies.

Ethnic minority groups, in particular, have long worked as prostitutes both within and without their communities; Tamang and Sherpa women, for example, are believed to have worked for centuries as concubines in Kathmandu's feudal court. And Nepal has long provided neighbouring India with prostitutes. Every year, large numbers of Nepali women travel to Calcutta; from there, many move to Mumbai and Delhi. Many NGOs say that these women - and the women working as prostitutes in Kathmandu and other Nepali cities - have been 'trafficked', a problematic word that defies easy definition. Most agree, however, that trafficking involves elements of violence, deception, coercion and forced labour.

John Frederick, a Kathmandu-based writer and expert on Nepal's sex trade, says that NGOs that speak of trafficking in relation to the women of Kathmandu's dance bars are unhelpful. Most women, he says, freely choose to work in them, though the choice may not be easy or pleasant. Ill-educated and poor, with few if any job opportunities, the chance for such women to earn enough to raise the living standard of their entire, extended family, is not easily passed up.

'It's like an economic door that has opened up, all over the country,' he says. 'There is employment for these women that didn't exist before.'

Social change has played its part, he adds. 'Not so long ago, you didn't see girls and boys here holding hands; now you do. There's a big opening up in Nepal and this, to some extent, is part of that.'

Deepak Puri - a skinny 18-year-old who works at the Pussycat bar as 'captain', a job that involves overseeing drinks orders and bills - agrees. 'It's the effect of western culture,' he says, gesturing to a table at which a group of men sit with dancers, drinking heavily.

A growing danger looms, in the form of Aids. About 70,000 of Nepal's 26.4 million people have HIV, and the infection rate is mounting.

A recent report, by the Harvard School for Medical Health, found that 40 per cent of Nepali women who had gone to India as sex workers and returned home were HIV positive. Most continue to work as prostitutes on their return, on the street, in brothels, and in dance bars.