MANILA, 21 July 2004 — Housewife Helen Julian has long dreamed of starting a rice trading or canteen business — anything to convince her seafarer husband to stop wandering the world’s oceans and come back to his family in the Philippines.
But setting up a business means taking a risk and husband Victor has a hatred of loans or sinking his hard-earned money into something uncertain. So he chooses to continue risking his life and fighting homesickness laying oil pipes in European seas.
“My husband is afraid of taking a loan or going into business,” said Helen, 42, who lives on the outskirts of Manila. “He fears we might eventually fall deep in debt, he’s afraid of debts. We don’t even own a credit card.”
So it is for many of the eight million Filipinos whose remittances prop up the debt-laden Philippine economy, but whose absence leaves a gaping hole in families and society. After buying houses, appliances, cars and insurance — mostly education, life insurance or pension plans - overseas workers, nearly a tenth of the country’s 83 million population, face a blank when it comes to where to put their money next.
“Remittances, a big percentage, remain untapped for savings because almost all of them go into consumption,” said Fernando Aldaba, chairman of the economics department of the Ateneo de Manila University.
“What is more important is how to transform the remittances to investments. Because if the remittances are transformed into investments, then it will create more employment which will prevent some of our people going out.”
Southeast Asia’s highest jobless rate and pitifully low wages for jobs that do exist drive the exodus and conjure up perverse trends such as doctors retraining as nurses to get jobs abroad.
Every day, an average of 2,500 Filipinos leave to work abroad as health and IT workers, domestic helpers, entertainers and seafarers, making the country the world’s third-largest remittance recipient after Mexico and India.
The Philippine central bank has doubled its projected annual rise in remittances to 6 percent this year after migrant workers sent home $7.64 billion in 2003, about a tenth of the country’s total export receipts last year.
A few individuals and some institutions — mostly banks and insurance firms — have realized the economic potential.
Italy-based Cristina Liamzon used her 25 years of experience in development work in the Philippines to organize Filipino workers in Rome to invest in their own country.
Liamzon has linked 50 Filipino workers — just a handful out of some 20,000 living in Rome — in the past four years with a group of Philippine rural banks giving uncollateralized loans of up to 150,000 pesos ($2,683) to help them start a small business.
Loan repayments have so far been 100 percent, but expanding the initiative would require higher capital to cover rising transaction costs and more staff to screen loans.
“We need more resources now to expand, but the need is really there,” Liamzon said, adding that almost 95 percent of her clients were first-time borrowers.
Several local banks, including top-ranked Metropolitan Bank and Trust Co. (Metrobank), Bank of the Philippine Islands, and Philippine National Bank (PNB) have launched credit schemes tailor-made for overseas workers.
The Philam group, a unit of the American International Group Inc., also offers savings and investment packages specifically for Filipino migrant workers. In the past four years, Metrobank — which has the largest share of the remittance business with 40 percent of inflows — has deployed staff to conduct weekend seminars for Filipinos in Taiwan and Hong Kong on how to manage their money.
So how many actually invest? “I would say less than one percent. Most of them would buy property,” said Angelito Villanueva, Metrobank senior executive vice president for overseas operations.
“We tell them in our seminars: Hey, you are here not to stay here forever. At some point in time, you have to go back home and you have to lean on something when that time comes,” he said.
Although some banks and financial institutions have been educating workers on investments, most of them do so with a sales pitch for their products.
“They are providing investor education to overseas workers but, by their own admission, it’s a distribution channel for them,” said Angelo Bengco, a former Merrill Lynch sales director who founded Bellwether Advisory Inc. to give independent financial advice.
“A good number of these people enter into investment schemes or investment products which they have little knowledge of.”
Memories are still fresh of a pyramid investment scam that duped about 1 million small investors, a third of them overseas workers, out of at least 20 billion pesos in 2001.
“The life itself of an overseas worker is very hard. So when you invest your money, you should be aware of the risks you are taking and you should be aware of what the alternatives are out there,” said Dante Tinga, co-founder of Bellwether.
Tinga and Bengco suggest that migrant workers, especially those in low-wage groups such as domestic helpers, pool their resources and open accounts with offshore banks that could give them better investment returns.
