U.S. EYES CREDIT CO-OPS FOR OFW REMITTANCES
Manila, May 28, 2003 By Des Ferriols, (Star) Credit cooperatives may soon be used to facilitate the remittance of dollars from overseas Filipino workers (OFWs) passing through the US financial system as US finance officials are studying the possibility of adapting the Mexican model for the implementation of the agreement to reduce remittance costs for Filipino workers.
Finance Secretary Jose Isidro Camacho said there is a possibility of using the network of credit cooperatives to do away with informal remittance services that have been suspected of facilitating the inflow of funds to terrorist groups.
In his meeting with US finance officials, Camacho said the model now being studied on the table is the Mexican model where the US made a similar commitment to reduce the cost of remittances that pass through US banks.
Camacho said the funds would still pass through the banking system but they would also go through the considerably larger network of credit cooperatives in order to reach inaccessible areas in the countryside.
He added this was the extent of US support that the country could expect from President Arroyo’s recently-concluded state visit since the government was unable to bring up the issue of securing US financial assistance in the implementation of the Anti Money Laundering Law.
"Unfortunately we were not able to bring it up," Camacho said. "But we are now studying the Mexican model where they were able to generate significant savings from the steps taken by the US government to reduce the friction cost of remittances."
The use of credit cooperatives, according to Camacho, would also eliminate the need for informal dollar remittance services that now proliferate in the provinces that are not covered by the banking network.
"I suppose this is also part of the US campaign to strangle the flow of funds into terrorist activities," Camacho said.
US and Philippine finance officials have signed a memorandum of intent that would reduce the friction cost of dollar remittances passing through US banks but monetary officials still do not expect any increase in dollar remittances from OFWs.
According to the Bangko Sentral ng Pilipinas, OFW remittances this year would only match last year’s total of $7.2 billion although long-term prospects were improved by the agreement signed last week.
In the agreement, the two countries agreed to institute mechanisms that would improve remittances services to the Philippines, ultimately reducing the friction cost for OFW dollars coming into the country through the US financial system.
According to BSP governor Rafael Buenaventura, the agreement would benefit over 80 percent of dollar remittances into the country that pass through US banks and financial institutions.
Buenaventura explained that although there were only few OFWs actually deployed in the US, the bulk of dollar remittances pass through the US, especially remittances from sea-based OFWs.
The US Treasury estimated that more than 7 million overseas Filipino workers sent more than $6 billion in remittances to the Philippines in 2001. About 70 percent of this amount was sent through banks and wire transfer services, with fees reaching as high as 15 percent of the value of the remittances.
"I suppose that there could be an upside if the agreement would translate in a significant decline in friction cost," Buenaventura said.
The BSP reported that remittances from OFWs for the first two months of 2003 grew modestly by 5.5 percent to reach $1.141 billion from $1.081 billion posted same period last year.
Reported by: Sol Jose Vanzi
© Copyright, 2003
by PHILIPPINE HEADLINE NEWS ONLINE
All rights reserved
PHILIPPINE HEADLINE NEWS ONLINE [PHNO] WEBSITE