RURAL  BANKS,  MICROFINANCE  INSTITUTIONS  PLAY  KEY ROLES  IN  REMITTANCE

MANILA, November 4, 2004 (STAR) The study, conducted by the Asian Development Bank (ADB), strongly suggest that community-based institutions such as rural banks, cooperatives, and microfinance institutions should be tapped to link money transfers from overseas Filipino workers (OFW) for economic development.

The study pointed out that two thirds of OFWs come from the provinces where not all of the larger banking institutions are able to reach or service.

Likewise, the national government must recognize and offer incentives to non-government organizations (NGOs) and microfinance institutions to initiate programs on savings mobilization, investments, credit access, or enterprise development for OFWs and their families.

While 80 percent of the formal flows move through the commercial banking system, rural banks and the emerging microfinance institutions have a better reach of the OFWs families.

"The availability of safe, reliable, and affordable means of sending money has reduced the use of unregulated channels," said the team of consultants consisting of Ildefonso Bagasao, Ma. Elena Piccio, Ma. Lourdes Lopez, and Peter Djinis.

When properly harnessed and leveraged, and coupled with fiscal discipline and mobilization of savings, these remittances could in the long term serve as a driver for economic reform.

The use of cell phones and smart cards for sending remittances offers a technological solution to the problems of the "last mile" stage of remittance delivery. Telecommunication companies and others using this technology must address the requirements of the anti-money laundering statutes.

However, the study notes that remittances have been used mostly for excessive consumption, rather than to increase the productive capacity of the migrant sending country. More should be done to educate not only the OFWs but also the beneficiary of remittances as to savings and other productive uses of remittances.

Migration is also said to have perpetuated a culture of dependence on remittances not only on the part of beneficiary families but also the migrant sending country, which may conveniently postpone needed structural reforms to put the macroeconomic house in order.

"The compensatory nature of remittances presents a moral hazard or dependency syndrome that will likely impede economic growth as recipients would tend to reduce their participation in productive endeavors," it said. "Unless governments are able to come up with policies that will induce migrants to invest productively, it is unlikely that remittances could be transformed as a significant source of capital for development."

In the Philippines, almost 10 percent of the population works overseas. And the country has become the third largest migrant-sending country in the world next to Mexico and India, with more than 7.5 million Filipinos residing and/or working overseas.

In 2003, $7.6 billion in remittances were recorded to have flowed through formal channels to the Philippines. But this amount is believed to be only half of what is actually sent or received, due to money transfers made through unregulated channels.

The country also contributes a substantial number of sea-based workers, with the about 255,000 Filipino seafarers accounting for 28.5 percent of the world’s supply of seafarers - the largest in the world. Of the $47 billion that overseas Filipinos remitted through formal channels from 1990-2001, 14 percent were from Filipino seafarers.

As economic growth of the Philippines continues to be hampered by political and socioeconomic conditions, around 2,700 Filipinos leave daily for foreign countries as immigrants, temporary contract based workers or simply as tourists, hoping to find work in developed countries.

With about 175 million people now living outside their countries of birth, migrant remittances are emerging as a new strategy for developing countries. – Ted Torres


Reported by: Sol Jose Vanzi

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