More OFW households investing remittances

MORE HOUSEHOLDS that receive remittances from Overseas Filipino Workers (OFWs) allocated portions of the inflows into savings and investments this quarter, according to the Bangko Sentral ng Pilipinas (BSP) Consumer Expectations Survey (CES) released on Friday.

This development might be connected the spate of new investment products geared at OFWs, according to a central bank official.

Conducted last Oct. 1-11 among 6,389 households nationwide, the survey results, which showed less pessimism among Filipino consumers this quarter, also found that the “percentage of OFW households that utilized their remittances for savings rose to 42.1% from 39.7% in the previous quarter,” the BSP said in a statement discussing the results.

OFW remittances are a key driver of private consumption, which in turn anchors economic growth in the Philippines. Of the total number of households included in the survey, 558 reported receiving OFW remittances.

While the BSP noted that the number of households that allotted their remittances for investment remained steady, a slight increase was still reflected in the results: 6.8% of OFW households used remittances for investment, compared to 6.3% in the previous quarter.

BSP Assistant Gov. Ma. Almasara Cyd N. Tuaño-Amador, who discussed the results of the survey in a media briefing, noted that “this is something that should be favorable, because in terms of [OFW] financial objectives… that’s a sign of OFWs [becoming empowered] in terms of their financial freedom.”

Ms. Tuaño-Amador drew attention away from the quarter-on-quarter improvement in OFW households’ saving abilities toward the far more significant changes over the years.

“In the first quarter of 2007, only 7% of the OFW households had some money left for saving,” Ms. Tuaño-Amador noted. “Now we’re seeing the number at 42.1%.”

The percentage of OFW households that utilized their remittances for savings stood at 7.2% in the first quarter of 2007, before consistently hitting double digits in subsequent quarters up to the latest survey. This particular measure of savings reached a peak of 50.4% in the first quarter of 2010.

“The trend seems to suggest that they’re becoming more financially educated, perhaps even more financially capable of really using some of their remittances toward investing, toward saving,” Ms. Tuaño-Amador said.

“Obviously, their salaries could be increasing,” Ms. Tuaño-Amador added, but then emphasized that “the activism on the parts of banks to offer more products, more services…” to OFWs has been bringing this segment of the population into the “financial mainstream.”

The past year has not been short of news relating to new financial products and services particularly geared at OFWs. Last month, for example, the Rizal Commercial Banking Corp. (RCBC) launched MyWallet TeleMoney, a Visa-powered prepaid card that specifically caters to OFWs.

Earlier this year, the same bank also introduced four new dollar time deposit schemes — two- to five-year options that offer interests of 1.75% to 2.5% — which have already attracted $25 million in placements as of September, according to bank officials. The bank said it was targeting $50 million in deposits in the new schemes by yearend.

New remittance arrangements have also been announced earlier this year, such as those between BDO Unibank, Inc. and Singapore’s DBS Bank Ltd.; and Philippine National Bank and US group Wells Fargo & Co.

Money sent home by Filipinos abroad hit a fresh peak for the year in September, the BSP reported last month. Cash remittances which Filipinos coursed through banks went up 7.9% to $2.107 billion in September from the $1.953 billion recorded in 2013’s comparable month. The latest figure was the highest monthly volume seen since December 2013’s $2.173 billion.

September inflows brought the year-to-date tally to $17.645 billion, up 6.1% from the $16.637 billion registered in the comparable 2013 period. Major sources of cash remittances were the United States, Saudi Arabia, the United Arab Emirates (UAE), the United Kingdom, Singapore, Japan, Canada, and Hong Kong.

Remittances, equivalent to around 10% of gross domestic product, support growth by boosting private consumption. Money sent home by Filipinos abroad totaled $22.968 billion last year, 7.4% more than the $21.391 billion seen in 2012 and topping a 5% growth forecast. BSP expects inflows to rise again by 5% this year.

This quarter’s CES results also showed the other expenses of OFW households. According to the statement, “96.1 percent used the remittances that they received to purchase food and other household needs. Nearly three-fourths (72.2 percent) of the OFW households allocated part of their remittances for education, 56.3 percent for medical expenses and 42.1 percent for debt payments… [T]hose that allotted their remittances for… the purchase of consumer durables and house remained steady. Those that apportioned part of their remittances to purchase cars/motor vehicles decreased.”

Ms. Tuaño-Amador noted that some changes in the survey, such as the increase in households reporting use of OFW remittances for food at 96.1% versus 95.9% a quarter ago, and the concurrent decrease pertaining to car and motor vehicle purchases at 6.8% from 8.4%, may just reflect a change in behavior brought about by the holiday season, when families would opt to put off car purchases in view of an uptick in food expense. –Raymund Luther B. Aquino, Reporter, Businessworld