What OFW remittances mean, and how the Overseas Filipino Bank can make it better

The phenomenon of overseas Filipino income has become part of the nations economy and has rooted itself rather deeply in our culture.

Beginning in the 1970s, this employment option hs become a preferred source of income for many skilled and semiskilled pinoys.

Based on the 2016 Survey of Overseas Filipinos of the Philippine Statistics Authority (https://psa.gov.ph/content/2016-survey-overseas-filipinos)  there were 2.2 million overseas Filipinos in the survey period from April to September 2016. About 97 percent of which were contract workers. Based on the same survey, more than half of them are female.

Data derived from the same PSA survey shows that the 2.2 million OFWs generated 203 billion pesos, or an average of 97,000 pesos per OFW. This, being a rough average based on survey data, may actually be higher across occupations.

Latest figures on remittances from January to June 2017 show that overseas Filipino Worker remittances totaled $13.813 billion, up 4.7 percent from $13.192 billion a year ago. With this, we can reasonably expect more than 27 billion dollars from OFWs for the year, beating last years figure by about a billion dollars.

That said, OFW remittances form a big part of the backbone of our economy.  Partly true, since the 27 billion dollars or so is made outside the country and enters our financial system practically as fresh funds.

Along with exports and Business Process Outsourcing (BPO) it has consistently been in  the top three sources of foreign exchange over the last twenty years which has allowed our economy to remain more resilient against recession compared to our neighbors who do not have large net foreign factor income such as these remittances.

These remittances have also allowed us to maintain a high level of Gross International Reserves, giving us the muscle to keep our debt levels and foreign exchange requirements stable.

The value of OFW money

The value brought by this income is about a tenth of our Gross Domestic Product.

While not included as part of our GDP, OfW remittances are always measured as a ratio to this figure because of its effect on local economic activities especially at the community and family level. Generally speaking, GDP added to this foreign factor income equals our Gross National Product. (http://nap.psa.gov.ph/statseries/03/ss-200307-es2-01.asp)

Nonetheless, these incomes matter because these are funds generated go straight into household incomes and are spent on daily essentials, food, education and property which has a strong multiplier effect on the local economy- all injected into stuff which forms part of our GDP.

Which is why just like any foreign income, all countries place value on its economic contributions.

Unlike export receipts which may takentime to collect, OfW income flies in fast.

Of the 2.2 million OFWs in the 2016 PSA survey, a total  of 1.9 million OFWs sent cash remittances to their families during the survey period from April to September 2016. Out of every ten, about seven were able to save less than 25 percent of the total amount received. Around 20 percent saved about 25 to 49 percent.

Such savings often go into long term expenses such as housing.This nonetheless shows just how vital these funds are as they directly inject resources into the economy.

Concerns about OFW incomes

While the contribution to the economy cannot be denied, there has for some time a lot of concern about these incomes.

After family essentials like food, shelter and education are spoken for, frivolities like gadgets, toys and unecessary appliances follow.

Worse, some of them make foolish investments that drive some into debt.

The family gets so used to the flow of income that the OFW breadwinners sometimes are prodded to stay abroad to keep that lifestyle going.

The big question asked is whether these incomes which case come at a social cost of surrendering vital parenting duties, are able to truly help families transcend socioecononic constraints.

OFW incomes hold vast potentials

Noting the positive impact of OFW incomes on families and the larger ecnomy, what could be done, therefore, is to plow these excess earnings into small businesses and investments that can serve as lot of potential for a further multilpier could be had if only these finds are responsibly invested.

Such investments, as we all know, do not only reduce the family’s dependence on an absent parent, but could also drive economic activity for lower income generating sectors such as agriculture and other activities in the rural areas.

What an OFW Bank can do

Now comes the OFW bank. A campaign promise of the current government, it is built from what remains of the Philippine Postal Savings Bank (PPSB).

Through Executive Order No. 44, the PPSB will be acquired by the Land Bank of the Philippines and will be converted into the Overseas Filipino Bank.

This promises  to be a vehicle through ehich a big part of this 27 billion dollars may be channeled to responsible investments that can multiply the positive effects of their foreign employment and perhaps find a way to eventually cease their dependence on being employed abroad.

The same bank can push financial literacy programs and drive savings to create worthwhile pursuits for these incomes that allow the savings to grow.

We hope that this bank is able to channel these funds into more productive activites, such as microfinance for small business especially agriculture, which could tremendously benefit rural areas and spread wealth and opportunity to the countryside. Many OFWs dream of the day they finally go home. May this bank be the vehicle for many to do so.