Send Money to the Philippines

Money being sent home by millions of Filipino workers living and working abroad rose 9.4% from a year earlier to $1.4 billion dollars in March, the Bangko Sentral ng Pilipinas (BSP) said in a recent interview; also noting this was the highest monthly level to date. This brings the inflows for the first three months of the year to $4.0 billion, 13.2 percent higher than the year-ago level.

The higher inflows “reflected the rising number of Filipino workers abroad, the shifts in skill composition as well as the growing efficiency of banks and other financial institutions as remittance channels,” said BSP.

According to the BSP, more than eight million Filipinos, out of the national population of 90 million, work abroad. The United States, Britain, Saudi Arabia, United Arad Emirates, Italy, Canada, Japan, Singapore, and Hong Kong were the major sources of remittances.

Moody’s Investors Service, said significant remittance inflows from overseas Filipino workers have been a stable source of banks’ income. In a Global Banking report, the credit rating company said banks produced $185 million to $380 million in gross revenues from remittances last year mainly through delivery charges and the spread charged on foreign exchange rates.

It has been noted that overseas Filipino workers sent home on average $350 million, while the average remittance cost stood at $8 per transaction. The average transaction fee reached $3.50 and foreign exchange revenues, $144.50.

The BSP expects remittances to grow to $15.7 billion this year from $14.449 billion last year as more professional Filipinos go abroad to work in higher paying jobs such as medical workers, engineers, and marine officers and crew.

”In addition, the combination of rising remittance flows and the renewed interest of banks in building consumer financial services has helped revive domestically retail banking products, which have grown faster than other types of loans,” Lung said.

The sharp rise in housing and auto loans over the past four years has been driven by the rising demand from overseas Filipino workers and their beneficiaries, he added.

Lung said the Philippine banks face the difficult task of following their clients overseas as it entails possible higher compliance costs as regulatory requirements can differ in each jurisdiction. “Regulatory barriers as well as differing business environments in the past have limited the ability of some Philippine banks to offer full services to OFWs in their host countries,” he said.

Moody’s estimates that banks account for 79 percent of remittance transmissions. However, new entrants and new technology will erode banks’ dominance and the profits they derive directly from the remittance business. Wireless phone service providers have launched lower-cost remittance services via text messaging through mobile phones.  However with an increasing number of online choices for sending money to the Philippines Filipino workers abroad now have more and better options for sending money home.

Moody’s said that if governments allow temporary Filipino workers to become more permanent residents, such a development could impact the flow of remittances as earnings directed to purchasing durables in the Philippines could be increasingly spent in host countries.