Thursday, 10 September 2009

Teaching OFWs to Save and Invest


ECONOMIC officials and economists would often say the remittances from overseas Filipino workers (OFWs) have been keeping the economy afloat. This is true, because the spending of families that receive remittances is driving the economy with their consumption, from building a house to the purchase of cars and durable goods.

It is said that OFWs’ remittances account for about 10 percent of the country’s gross domestic product (GDP), which is nothing to sneeze at. About 10 percent of Filipinos have opted for working abroad to support their families back home. Last year they sent home $16.4 billion in remittances. During the first half of this year, they sent home $8.5 billion, or 2.9 percent higher than the figure in the same period last year, thus proving wrong the predictions by experts that remittances will decline this year because of the global recession.

Now, monetary authorities are looking to harness the remittance funds for productive endeavor, such as investments. They are now encouraging OFWs to save money for investments, instead of going into indiscriminate consumption. OFWs will now be a partner in nation-building with their investments in, say, time deposits, treasury bills, corporate bonds and stocks. They can also invest in franchising or become entrepreneurs themselves. It will have a tremendous effect on the economy if remittances are channeled to savings and investments.

But first, OFWs have to be taught how to save and invest. This has become the advocacy of the Bangko Sentral ng Pilipinas under Governor Amando Tetangco Jr., who launched the Financial Literacy Campaign for OFWs in October last year. Some banks have lent a helping hand to the campaign, among them the Land Bank of the Philippines, Development Bank of the Philippines (DBP) and the Philippine National Bank. Central bank officials and fund managers would visit countries where there is a high concentration of OFWs, with the message of the importance of saving and investments. They have so far visited Saudi Arabia, South Korea, Hong Kong and Singapore, seeking out Filipinos there. Locally, people from Security Bank and DBP would also tour the countryside to raise awareness on the importance of savings.

The campaign has apparently made a significant headway, with about a third (32 percent) of the families of OFWs saving some of the money sent home, as against only 15 percent before the campaign was launched.

The key here, of course, is financial literacy, as has been pointed out by Tetangco. This involves teaching OFWs and their families how to handle and manage their money. And for those going into business like franchising or entrepreneurship, they have to be taught how to run a business. Many of these OFWs and their families have neither the training nor the experience in running a business. That’s where the campaign for financial literacy becomes so important. It is important that OFWs be taught to become financially sophisticated, as Tetangco has said. It would be a waste of money for OFWs to go into businesses and not be able to make money out of them or, worse, go bankrupt.

When more OFWs and their families go into businesses, they can create jobs and then the government can collect more taxes. The multiplier effect would no doubt be tremendous. With jobs available here, fewer Filipinos would be opting to work abroad.

When the businesses grow, perhaps OFWs need not stay long abroad. They could then come home to be with their families, with their businesses sustaining them and their families till old age.

Indeed, remittances can be used to create businesses here and jobs, with the government collecting more tax revenues. There is every reason to make them work as such, and every reason to knock down all disincentives to the OFWs’ transforming part of the remittances to sustainable ventures.

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