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.

REMITTANCES

Definition: Remittances are the money that immigrants send to their home country while working abroad. There are 2 types of remittances:

1. Family Remittances: This is money sent by individual immigrants to family and friends back home. These remittances are often used to meet their most basic needs. Family remittances dwarf development aid and foreign investment. They are said to be the single most important factor fighting poverty in the world today.

2. Community Remittances: This is money sent by individual immigrants and by hometown associations to communities in their home country. This money has traditionally been used for infrastructure, like parks, roads and churches. Increasingly, it is destined for government coffers. Mexico has a ‘Tres por uno’ program, which matches 3 tax dollars for every 1 dollar donated to a regional government.

Remittances Worldwide:

-          1 in 10 people around the globe is directly involved with remittances.

-          The U.S. is the largest source country, with $42 billion of remittance outflows annually.

-          Latin America is the region with the largest and fastest growing remittance flow. It received nearly 40% of the $126 billion in remittance sent to developing countries in 2004.

-          Remittance to Latin America exceeds foreign investment and development aid.

-          Were remittances to stop flowing, Latin America’s economies would collapse in an estimated three months.

-          This rapid growth in remittances is slowing as more Latin American immigrants blend into U.S. society and send less money home.

-          Remitters come disproportionately from the working poor and many times are in the United States illegally.

-          Migrants remit on average 12.6 times a year, typically $150/200/250 each time. These remittances constitute approximately 10% of their household income.

-          A quarter of remitters send money home first, even before paying their own bills.

-          Remittance rates increase every year despite drops in the U.S. economy.

-          Remittances tend to increase when the home country’s economy slows, making it a particularly effective anti-poverty tool.

-          Remittances promote economic growth, increased investment and community development.

-          Remittances can also result in higher interest rates and inflation.

Remittance Statistics:

-          46% of all Hispanics born outside the U.S. regularly send money to their country of origin.

-          57% of immigrants from El Salvador send remittances

-          60% of U.S. remittance senders are male

-          63% are under the age of 40

-          59% are married

-          59% have not completed high school

-          57% make less than $30,000 a year

-          64% of those who are employed are unskilled laborers

-          45% say they plan to move back to their home country

-          55% do not have credit cards

-          43% do not have bank accounts

International Money Transfer Services

A common dilemma which faces Australians, South Africans, Canadians, British, New Zealanders, as well as citizens of smaller countries is sending money internationally. An array of choices does exist for international money transfers, but finding a quick, secure and inexpensive money transfer service is not always easy.

Money Transfer Options

Everyone has heard of the top money transfer companies. Most of the companies have locations throughout the world. Secondary countries have small copycat locations in various locations. The problem with these money transfer service is that you almost always have to perform transactions in person and you must use cash.

This presents a safety issue on both sides, as you become easy prey to those undesirables waiting in the shadows. Some money transfer services will allow you to transfer cash to a bank account, but those are few and far between.

Money transfer services seem to be a better option for people in remote locations who have no bank account and no local address. This service is also suitable for overseas travelers who need quick cash sent from their home.

There are advantages and disadvantages to using money transfer services:

Pros:

1. Multiple locations even in remote areas.
2. Internet access is not required.
3. No bank account is required to send or receive cash.
4. Money reaches the recipient quickly, depending on the location.

Cons:

1. You must pick up cash in person.
2. You cannot transfer money from a bank account or credit card.
3. This is a not a quick fix and not a solution if you send money on a regular basis.
4. Fees can be extremely high.

Cost

When transferring money through a money transfer service, the companies usually charge a percentage of the total amount transferred or a set fee for certain amounts. The amount the recipient receives will depend on the exchange rate and transaction fee that the money transfer agent charges.

This type of service is the best way to send small sums of money, such as on an emergency basis. Considering the fees and the exchange rates, this is not the best option if you need to transfer money frequently.

Other Options

1. If you have to send money to friends or relatives, consider making a payment to their credit card.
2. Consider gift cards. You can purchase them at retail stores or online. Many of them bear the VISA or MasterCard logo. The recipient can use them where these logos are displayed.
3. Consider an ATMCASH card. The recipient is sent a debit card. You load funds whenever the need money.

When you have to send cash to others, there are many options available. While money transfer services are quick and easy, the fees involved often put less money in the pockets of the recipient. Gifts cards are great for one-time emergencies.

Debit cards are easy to obtain and can be used on a recurring basis as they are reloadable. This is an excellent option for people who are unable to travel to pick up money, such as the elderly. Debit cards also work well for students traveling abroad or anyone who relies on money sent from someone in another country.

Cash Transfer Options

There are four major ways to transfer money from the United States to someone in another country.

1. Cash Transfers – Money wiring services.
2. Money Orders – U.S. Postal Services, Banks, Various Retail Stores.
3. Banking Transfers – Checks, Foreign Drafts, Wire Transfers.
4. Pre-Paid Debit Cards – Gift Cards, Reloadable Cards

Cash Transfers

Money wiring services are commonly used because of their ability to rapidly send money to anyone worldwide, including the ability to transfer money online or by phone using a credit card or debit card.  You will need to locate a sending agent and a receiving agent.

Each transaction has a specific control number, which makes it easier to collect funds for the recipient.  Funds are normally available within the hour (depending on the business hours of the agent), and proper identification is required.

Money Orders

Money orders are one of the cheapest ways to send money.  They can be purchased at Banks, United States Post Office (issues international money orders), and local retail stores.

They cost anywhere from $1.00 to $8.50 and you must fill out the recipient’s name before mailing.  You will have a carbon copy for your records.  Money orders are traceable by a unique number located on the bottom of the money order.  U.S. money orders can be cashed in banks or post offices in most countries.

Although this is a cost-effective method or transferring funds, there is a maximum of $700 (U.S. Postal Service) and other retailers set limits on the amount of a money order.  Most banks have a limit of $1,000 and the fee can be as much as $10.00.  There is a delay in the recipient receiving the funds due to mailing, although you can pay extra to have delivery expedited.

Banking Transfers

Not all banks operate in the manner so you should check with your local bank for details.

Sending a Check Abroad

Sending a check to a recipient is quick and easy, but check clearing, especially in other countries may takes 4-6 weeks.  The recipient can be charged a fee of up to $50 for check processing.  Some countries do not honor foreign-drawn checks.

Foreign Drafts

Depending on your location, it can sometimes take a few days to a week for a bank to prepare a draft.  The money comes out of your account when the draft is prepared.  There is a fee of up to $25 for this service.  The recipient must wait until the draft is delivered via mail and they must have access to a corresponding bank.

Wire Transfers

Wire Transfers are quicker than Foreign Drafts since they are usually done immediately.  You are charged a fee of up to $40 and if you are not a customer, it could be as much as $60.  The recipient again, must have access to a corresponding bank.

Pre-Paid Cards

Pre-paid debits cards and gift cards can be purchased online or at most retail stores.  Most of them have either the MasterCard VISA Maestro or Cirrus logo.  You load the card with funds – some gifts cards can be purchased in different denominations.

You then mail the card to the recipient and notify them of the PIN number.  (It is important to do this separately since anyone who retrieves the card and has access to the PIN can then use the card).  The recipient can then use the card to withdraw cash at an ATM, or use it anywhere VISA MasterCard Maestro or Cirrus are accepted.  Some cards are reloadable (for a small fee), so you can add funds when needed.

Remittances to Zimbabwe

In a recent article, it is reported that the cost of living in Zimbabwe continues its climb but the importance of money sent home by relatives abroad is still drastically needed.

Fifty percent of the households investigated across all of the income groups in the main cities of Harare and Bulawayo are regular recipients of money and goods from relatives living outside of the country. This is according to “Remittances, Poverty Reduction and Informalisation.”

It is noted that parents are normally supported by their children through funds sent via transfer networks, according to the Global Poverty Research Group. The networks take advantage of the market in which US $1 is worth $500,000 Zim, compared to the official rate of $100,000 Zim.

An interview with an engineering student states that he manages to stay in school thanks to relatives in South Africa. He goes on to say that since January, many of his classmates have dropped out due to financial problems, “I do not even think we would be accessing the food we eat if it was not for the groceries they send.”

The average salary in Zimbabwe is Zim $20 million, but the monthly cost of a basic food basket for a family of has risen to Zim $60 million, up from Zim $49 million. In US dollars this would be an increase from US $490 to US $600. Economist James Johwa recently stated during an interview, “Remittances played a key role in stabilizing household food security and access to essential services like education and hospital care.”

This dependency is not just for the lower income or poverty level – a government registry clerk states that she is equally dependent on money sent by her husband in Botswana. “My own salary cannot even buy half of what he sends. He sends money every month and that is basically how the family has managed to survive the crisis.”

For six straight years, Zimbabwe’s economy has been in recession. Unemployment is over 80 percent and inflation has far exceeded 1,200 percent. The informal sector that supported the livelihoods of the urban poor was demolished by the government in a 3-month span.

Johwa states, “Those receiving money and goods from the diaspora can afford such luxuries as cars; they can buy houses that are seen as prohibitively expensive in the local context. This is a small but financially sound class that has emerged alongside a growing poor class that can hardly put one day’s meal together.”

He further goes on to state, “There are stark differences in terms of access to food, goods and services,” said Johwa. “And the reality is that the majority of Zimbabweans are sliding deeper and deeper into hunger and poverty every day.”

Sending Money to Mexico part 2

Sending funds to Mexico by bank wire transfer:  This process may take 1 to 3 days. You must tell the bank that you want to wire the desired amount plus $32 to:

NationsBank, Department of State Branch, 2201 C St. NW, Washington, D.C. 20520, at 202-624-4750, via ABA number: 114000653; account number: 7476363838; account name: Pupid State Department; Special Instructions: OCS/Trust for Benefit of (Recipient’s Name), U.S. Embassy/Consulate (City, Country); and include the sender’s name and telephone number.

The wire instructions must include the recipient’s full name and overseas location. NationsBank notifies the State Department when funds are received. The $32 fee includes the $20 Department of State fee and NationsBank’s $12 wire fee.

Sending funds to Mexico by overnight or regular mail:  The sender obtains a cashier’s check or money order for the desired amount, plus the $20, made payable to the Department of State. A letter must be attached with the sender’s name, address, and telephone number, as well as the name and location of the overseas recipient.

Mail to:
Overseas Citizens Services, CA/OCS, Rm. 4811, Department of State, 2201 C St. NW, Washington, D.C. 20520.

Important notice to those who receive funds at the consulate: To request funds from a trust account, office hours are between 8 and 11 a.m. The person collecting the money must present a government-issued form of identification.

If the person collecting the money is other than the recipient, a written request specifying the name of the person authorized to receive the funds from the recipient to disburse the funds will be required.

Wells Fargo has a deal with Banamex whereby someone in the United States opens an account for an annual $10 fee and then pays $10 for each wire transfer. Banamex automatically opens an account for the recipient. The transfer can take from a day, which is unlikely, to five days at the outside.

A simple bank-to-bank transfer can vary in cost from $25 to $45 and take between one and three days.
There are many methods in which you can transfer money to Mexico. While money transfer services appear to be the quickest, they are often the most expensive.

Debit/ATM cards appear to be the most inexpensive with the added benefit of being able to reload funds from the convenience of your home or office at anytime.

Sending Money to Mexico

Whether you need to send money to a friend or family member for an emergency or if you send money to Mexico on a regular basis to support your family, there are different ways you can accomplish this. Wells Fargo, Citibank and Bank of America all have branches in Mexico. You can still pick up money at the U.S. Consulate.

Alternate Ways to Send Money

Debit/Cash Cards – There are numerous companies that offer cash cards or debit cards. Cards such as ATMCASH will send the recipient a debit card and you will have the capability to load funds on the card either online or via telephone. The recipient can retrieve the funds at most ATM machines. This card is reusable and you can add funds to it when necessary.

The sender would sign up for the service (ATMCASH.com) either online or by telephone. They would load or fund the account with the desired amount of money via credit card or bank account. The sender is provided with a security PIN number.

ATMCASH would then FedEx the debit card to the recipient. The sender provides the recipient with the PIN number and when the card arrives, they can retrieve the funds at an ATM location.
It is important before choosing one that you read the fine print disclosing the fees as they differ with each card company.

Money Transfer Services – This is still a popular way to transfer funds

If you send money through a money transfer service, it usually can be picked up in a matter of minutes. Some of these services charge rates of up to $10 to send $300 or a flat fee of $30 to send up to $30. The recipient is also charged a fee at the receiving end of about 10 percent.

Bank Transfers

Bank of America and Wells Fargo have relationships with Mexican banks and transfer billions of dollars to Mexico annually.

If transferring money to arrive through a bank or to a different destination other than the consulate, it is important that you know what wire transfer companies exist and the cost of their services. There are several wire transfer businesses or bank services to send money to people in Mexico.

Many of these places are reducing their fees, which vary considerably, so it is best to do some comparison shopping. The money is normally available from 15 minutes to one day, depending on the type of service requested.

Sending Money through the Consulate

In emergency situations only, money may be sent through the consulate. The most protected way is by establishing a Department of State trust fund. This service is available only to U.S. citizens and on an emergency basis. Depositors must establish a trust account in a recipient’s name.

The department, upon receipt of these funds, authorizes payout to the recipient from the appropriate U.S. embassy or consulate. Overseas Citizens Services Trust (OCS) takes approximately one working day and funds are disbursed in local currency. The State Department has a $20 processing fee for this service.

Sending Money To Mexico – Now And the Future

Remittances from the U.S. to Mexico have become a ritual among migrant workers. The modest wire transfers of cash assist in paying for food, school supplies, or even a new home for family members left behind in Mexico.  It is not only expected of the migrants to send money home, but the Mexican economy also relies heavily on the flow of remittances.

Mexico’s Central Bank reports that it received nearly $24 billion in 2007 and nearly $23.7 billion in 2006.  It is estimated that in 2004, $16.6 billion was sent to families in Mexico from the United States.

Who Benefits

Remittances serve as a sort of pension fund, a community development fund, and educational fund for many of Mexico’s elderly and young, but studies have shown that families only receive a portion of the money intended for them.

A study by an official in the Social Development Ministry, and two professors at the College of the Northern Border, a research institute outside Tijuana, concluded that families receive only about half of that amount.

The remittances have become so large that economists and business leaders here say the Mexican government has become excessively reliant on them, relying on this money to increase the balance of payments, disguise the decline in foreign investment, and use it as a substitute for broader anti-poverty programs.

Tougher Regulations

In a report back in January, the World Bank said that Mexico leads the world in the number of migrants with 11.5 million, but opposition toward illegal immigrants in the U.S. – many who are Mexican – has caused Federal law enforcement to crack down on entrance into the United States and deportation and/or imprisonment has resulted in a decrease in the amount of remittances sent.

In the last year, state and local governments have passed a number of ordinances and bills tightening employment regulations and providing more thorough investigations of Social Security numbers.

Sluggish Economy

The lethargic economy in the United States is affecting everyone and the decline in remittances has wounded Mexico’s families as well as their financial system. Virtually all money Mexico receives is derived from remittances coming from the United States.

A combination of the declining economy and tougher employment regulations are making it more difficult for migrants to find employment, therefore, decreasing the number of remittances sent home.  One of the giant’s in money-transfers – reports a 5 percent decrease in revenue in 2007.

The Mexican central bank said the final quarter of 2007 was nearly flat, at 0.2 percent, in remittances, showing how migrant money moves with the health of the U.S. economy.

Rise and Fall

From 2000 to 2006, the amount of remittances grew significantly until 2007, when
The number began to decline.  January through May of 2008 has seen a decline of $668.28 million.  Just in the month of May, a decline of $171.3 million less than the year before.

This is not a good sign – not just for the migrants and their families, but Mexico as a whole suffers significantly from this drastic decline as well since remittances from the United States equal 2.8 percent of its gross domestic product.

Improving the Impact of Remittances

Over the past several years, remittances have had a more significant impact on emerging economies than ever before.  There are over 150 million people worldwide who have left their home country to live and work in a foreign land.  Many of these workers leave a family behind and pursue work outside of their home country to provide financial support form their loved ones.

The money that these migrant workers send home to support loved ones is called a remittance, and over $300 billion in sent worldwide every year by migrant workers.  Remittances are a great stimulant for a growing economy, but they are not having the full impact that they could have with a few important changes that would make the money sent home even more productive for growing economies.

Lower Transaction Costs

There are several factors that can affect the cost of sending and receiving remittances.  The cost of sending money from the US to Mexico, for instance, is very different than the cost of sending money from the US to Viet Nam.  Areas like Latin America, where remittances are common, have done a good job of making the process easy and affordable.

The problem with costly remittance options is that if the costs are prohibitive, workers either won’t send funds, or they will send funds through less traditional, less safe methods.  There are options that are available now such as prepaid debit cards, which in some countries make up nearly 50 % of total remittances.  This is a trend that needs to grow to lower overall transaction costs.

One of the reasons why it is difficult to lower transaction costs is that regulations for tracking funds sent between foreign countries have become more stringent in the wake of a crackdown on the financing of terrorists.  Financial institutions must adhere to a strict reporting system, keeping transaction costs high in many countries.

Better Data Collection

Because many people sending and receiving remittances do so outside of traditional methods, it can be difficult to track to the true amount of money being sent between nations.  This problem is magnified in rural areas, where many remittances are never accounted for.  There are also countries with informal systems of sending money through middle men outside of the financial system.

As data collection has improved over the past decade, the reality about just how much money is being sent in the form of remittances has been eye opening.  As we understand how much money is really being sent, we can better plan ways to make the remittance system run even more efficiently.

Making Every Dollar Matter

While the majority of remittance funds being received around the world go to meeting the daily needs of basic living around the world, we could certainly do a better job of ensuring that educational opportunities are available for families receiving money from overseas each month.  Teaching people how to make wise financial decisions will help to end the perpetual cycle of poverty that so many around the world are born into.

Remittances

The world seems to be becoming a smaller place, with more people leaving their homelands seeking a better life or better wages in foreign countries than ever before.  The economy is truly becoming global, with money being sent between the home countries of migrant workers and the countries that they are working and living in all the time.  This money that is sent home from people working abroad is called a remittance, and is a major player in the overall global economy.

Recent statistics show that there are over 150 million migrant workers worldwide.  These workers send home remittances to the tune of about $300 billion each year, mostly in amounts between $100 and $300 each month.  There are over 1.5 billion financial transactions directly related to sending and receiving remittances from abroad every year around the world.

Because sending money to some countries through official financial channels can be challenging, there is a significant amount of remittance money that is saved by workers and carried to their families by other people they trust traveling to their home countries.

Most funds that are sent home in the form of remittances are used to meet the day to day living needs of family members left at home by the migrant workers.  However, not all money that is sent home is immediately spent, leaving opportunities to save and invest in the future for people receiving remittances.

This money is helpful to local economies, but would be even more useful if, globally, we did a better job of tracking remittances, lowered transaction costs, and developed a more organized effort to use remittances from abroad to better overall economies.

If we look at the most recent data available, over 1/3 of all the remittances in the world are going to Asia, with the lion’s share in Asia being sent to Southeast Asia.  Countries like Indonesia and the Philippines send many workers abroad and generate a high level of remittances coming in.  Filipino workers are likely to be found in both North America and the Middle East.

The second highest area of incoming remittances geographically is Latin America and the Caribbean, a region that receives between 20 and 25% of worldwide remittances.  Mexico receives the largest amount of money after seeing many workers move north to the United States, brining in as much as all of South America combined.

One area to look at beyond just which countries are seeing the largest remittance flows is the breakdown of funds being sent to rural areas versus those sent to developed areas.  Transaction costs are generally fairly small in developed areas, but in rural areas they can be much higher, decreasing incentives to send money through traditional channels that are safe and that can be tracked.

The key to harnessing the true economic power of remittances lies in understanding who exactly is sending money, how the money is being sent, and what foreign governments can do to encourage even more money to be sent.  As we make sending money home easier, we’ll see even more economic growth as a result.