Manila Times: Opportunities abroad are also opportunities here

The recently-concluded 45th Annual Board of Governors’ Meeting of the Asian Development Bank (ADB) tackled a number of economic issues not only in the Philippines but also for the whole region. But one thing that created a lasting impression and curious interest for the rural banking industry was the forecast on the level of remittances from our modern heroes, the Overseas Filipino Workers (OFWs), this year.

The Manila-based multilateral funding institution predicted that the country’s gross national product (GNP) will grow by five percent this year due to a strong service sector and the continuously steady flow of OFW remittances, the latter being the consistent economic driver over the years. The flow of remittances is anchored not only on more Filipinos opting to find better opportunities overseas, but also on the sustained demand for professional and skilled Filipino workers abroad.

Foreign governments have done their part to keep the steady flow of Filipino workers for their respective countries. This year, enhancements in the recruitment systems of host countries are expected to support the resilience of remittance flows, including the launching of the International Direct e-Recruitment System for Filipino workers in Taiwan, the signing of a Memorandum of Understanding on Labor Cooperation and a Protocol on Regulating the Recruitment and Employment of Domestic Workers with Lebanon and Jordan, and the amendment of the Korean Employment Permit System. These factors underpin the general prognosis that influx of much-needed foreign currencies will continue to grow for years to come.

On a grand scale, OFW remittances generate various activities in the Philippines, as well as augment the stability of the local consumer market. Boosted by remittances, families of OFWs typically are a strong player in the market, be it in real estate or in commercial and industrial sectors. They have money to spend and they are active purchasers.

How significant is this for banks?

Banks now account for around 90 percent of the entire remittance business as OFWs shifted from informal channels like couriers and door-to-door delivery services to safer methods to send money home through the banking system.

As such, several banks have opened various services to accommodate these remittances. Nearly all major banks have services tailor-fit for OFWs, as well as a few value-adds to gain new foreign-based depositors and keep the existing ones. For rural banks, a steady flow of OFW remittances means a healthy money transfer business. Thus, several rural banks have joined the Philippine Payments and Settlements System (PhilPaSS) of the Bangko Sentral ng Pilipinas last year.

The PhilPaSS Remit System for OFW remittances is an online and real-time gross settlement payment system administered by the BSP to facilitate payment transactions between banks. It offers a rate of P50 per transaction compared to P100 to P500 per charged by other money transfer systems.

With PhilPaSS, rural banks can offer a faster yet more affordable service to clients in the countryside who are also beneficiaries of many OFWs. By utilizing this system, rural banks can offer cheaper, if not the cheapest transaction fees without incurring any losses.

A number of rural banks are set to course their financial transaction through PhilPaSS as part of the many innovations of the Rural Bankers Association of the Philippines.

The PhilPaSS-Remit system is also part of the advocacy of the BSP to help Filipinos abroad and their beneficiaries by providing a safer, faster, and cheaper means of remittance. The project is one of the initiatives undertaken by the BSP in coordination with the Association of Bank Remittance Officers Inc. through a memorandum of agreement in December of 2009 but was only implemented in the second quarter of 2011. The BSP has encouraged banks and financial institutions to course OFW remittances through its electronic payment and settlement system so that beneficiaries of Filipinos working abroad could enjoy lower fees.

According to the BSP, the settlement of OFW remittances through the PhilPaSS Remit System would result in savings of between P100 and P500 per transaction as current system charges between P150 and P550 per transaction. OFW families are expected to save at least P92 million due to the faster and cheaper delivery of remittances to the beneficiaries at a lower rate of P50 per transaction.

Of course, rural banks can offer other value-added services, just like their bigger brethren, aside from savings through the use of PhilPaSS. Among the other financial and non-financial products and services rural banks offer to OFWs and their families include high-yield medium/long-term time deposit, children’s savings accounts, education and housing loans, bills payment and collection services, and advisories about successful business ventures and skills in partnership with different government agencies. These opportunities can help improve the utilization and conversion of remittances into productive investments and other business opportunities.

The number of OFWs is expected to increase every year. Being away from their loved ones for many years is the ultimate sacrifice an OFW has to bear for the financial betterment of his or her family. Admittedly, this supreme sacrifice has also served as the fulcrum of the national economy. The least we in the industry can do is to maximize every foreign currency-denominate remittance that is sent home.

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