1. 1 ADB Philippines Study TA 4185: Enhancing the Efficiency of Overseas Workers Remittances Session 3: Recent studies relating to remittance data quality and availability World Bank- IMF International Technical Meeting on Measuring Remittances, Washington DC 24 – 25 January 2005

2. 2 Objectives and Scope of Study The main objectives of the study were to review the flows of remittances to the Philippines, in particular from US and Singapore, and identify constraints in the policy, regulatory and institutional framework that hinder these flows. Proposals were developed to address the problems and constraints with the goal of: - Increasing formal remittance volumes; - Facilitating the shift from informal to formal channels; and - Encouraging, where applicable, the use of remittance proceeds for sustainable poverty reduction.

3. 3 Remittances to the Philippines In 2003, Bangko Sentral ng Pilipinas (BSP) recorded $7.6 billion in remittances through formal channels. While $4.1 billion are recorded to have come from the US, some of these amounts may have emanated from other countries given the practice by receiving banks of attributing remittances to the most immediate source, which are US correspondent banks. Including money transfers made through unregulated channels, some estimate that total remittances could be double the amount through formal channels.

4. 4 Countries surveyed under TA 4185 Market surveys and focused group discussions were conducted in the Philippines and two remitting countries to obtain a profile of Filipino remitters in those areas and their beneficiaries. Self- administered surveys were utilized for Singapore and US. Singapore – Singapore has a mix of contract-based workers (domestic and professionals) numbering around 128,000. US – The US has more than 2 million Filipinos including immigrants, high-income professionals, and ethnic Filipinos who have acquired US citizenship including a large number of irregular workers. The US survey was conducted in California.

5. 5 Survey Respondents 1,150 Overseas Filipino Workers (OFWs) in the Philippines for the Christmas holidays in 2003 (nationwide survey covering all regions). 89% contractual OFWs; 5% immigrant; 3% other country citizen; 3% others 300 beneficiary households in the Philippines 200 respondents from Singapore (including 37 in Philippine survey). 85% contractual OFWs; 11% immigrant; 4% other country citizen 434 respondents from US (including 71 in Philippine survey). Survey conducted in California in San Francisco, Sta. Clara, Alameda, and San Mateo. 69% contractual OFWs; 27% immigrant; other country citizen 4%

6. 6 Breakdown of Respondents in OFW Survey in Philippines by Country Saudi Arabia: 23.0% Seafarers: 13.9% Japan: 13.1% Hong Kong, China: 8.5% US & Canada: 7.7% UAE: 6.1% Taiwan, People’s Republic of China: 5.9% Europe: 5.2% Other Southeast Asia (Malaysia, Brunei): 3.4% Singapore: 3.3% Kuwait: 2.8% Other Middle East: 2.9% Other Asia: 2.0% Other Countries: 2.2%

7. 7 Stakeholders Interviewed In addition to remitters and beneficiaries, research included meetings and interviews with: Philippine and foreign regulatory agencies International agencies and financial institutions Bank and non-bank financial institutions including microfinance institutions, cooperatives, NGOs, and overseas Filipino organizations

8. 8 Definition of Filipino Migrant Population The Filipino migrant population or the universe of Filipino remitters is divided into 3 main types: Permanent: Immigrants who hold permanent residence or landed immigrant status in a foreign country, and whose stay does not depend on work contracts. Includes those who have acquired foreign citizenship. Temporary: Stay overseas is based or determined by a formal or informal contract of employment. These overseas contract workers are collectively referred to as Overseas Filipino Workers (OFWs). Irregular: Residents or workers overseas who do not possess valid passports or documents, or are without valid residency or work permits or who have overstayed.

9. 9 Profiles and Remittance Behavior of Survey Respondents Some characteristics of the survey respondents are noted below, and may very among other Overseas Filipino Worker groups. 80% of survey respondents regularly remit through banks or other regulated channels. Speed, trustworthiness, reliability and efficient service were rated as most important factors in selecting remittance modes. 9 out of 10 respondents save in banks or through personal hoarding, with 70% maintaining bank accounts in the Philippines and 52% using automated teller machine (ATM) for payments or remittance.

10. 10 Profiles and Remittance Behavior of Survey Respondents (continued) In Singapore, where more than half of respondents were in domestic work which typically paid low wages, 80% stated they were able to save, and almost half indicated that they keep their savings in Singapore banks. A large percentage of respondents, 41% in the nationwide Philippines survey and 49% in Singapore, had to borrow money to pay for recruitment expenses, and 19% said they borrow while working overseas. Average amount of remittance sent monthly is $340. Monthly remittances ranged from $205 to $524. Beneficiaries surveyed use remittances for food, utilities, household expenses, personal care and effects, communications, transportation, education and special occasions.

11. 11 Issues Raised for Measuring Remittances and Challenges Ahead General issues raised in measuring remittances include: Lack of common definitions for overseas worker population Lack of common methodologies of measurement Lack of common definitions for formal and informal Lack of data on transfers through informal channels Importance of field surveys to supplement and capture data not collected by central banks

12. 12 Issues Raised for Measuring Remittances and Challenges Ahead (continued) Recognition of field study limitations and potential for target groups to give biased perspectives on OFWs and OFW behavior Importance in collecting data for permanent, temporary and irregular workers for a broader view of remittances/transfers and migrant population Better recording and disaggregation of data are important for enhancing information systems and improving the recording of remittance flows. Need for collaboration and cooperation among agencies and countries for a common framework for measuring remittances

13. 13 Appendix: Additional information from TA 4185 on trends and potential developments that could impact future remittance data availability and quality

14. 14 Competitive Market: Formal remittance market between the Philippines and remitting countries is competitive and dominated by commercial banks. Decreasing Costs: With the entry of more players and new technology-based products(e.g. cell phones, debit cards), remittance costs could be pushed lower, which should increase the formal sector’s share of the remittance flows. Convergence: Services offered by Philippine banks, licensed non-bank money transfer agencies, courier companies and ethnic stores acting as agents for banks have converged. The industry is characterized by partnerships, alliances or tie-ups, and revenue sharing among different players. Industry players have observed a reduction in the use of unregulated channels. Remittance Trends in the Philippines

15. 15 Some of the conclusions and recommendations included in TA 4185 based on the market survey and other industry research are: Philippine Government should take bilateral initiatives to establish greater access to remitting countries financial markets for Philippine banks and banking products to encourage more remittances through the formal sector. Increasing Efficiency and Remittance Flows through Formal Channels

16. 16 Increasing Efficiency and Remittance Flows through Formal Channels OFWs with irregular status lack access to banking and other formal remittance facilities, forcing them to use unregulated remittance facilities. Consideration could be given to accepting identity cards issued by Philippine consular officials as identification for opening US bank accounts. Since the Philippines is an archipelago with many underdeveloped areas, the door-to-door system for remittances will continue to be used unless problems of interconnectivity are addressed.

17. 17 Increasing Efficiency and Remittance Flows through Formal Channels The emergence of cell phone based delivery system will compete with door-to-door system offered by banks. Non-bank money exchange and remittance agencies should be regulated and supervised for anti-money laundering compliance. Financial literacy programs conducted in Pre- Departure Orientation Seminars for OFWs should be extended to recipient families and rural communities where the majority of OFWs originate.

18. 18 Increasing Efficiency and Remittance Flows through Formal Channels Electronically centralizing databases of agencies involved in the overseas deployment system could improve the exchange of vital information on migrant stocks and flows, upgrade communications between home agencies and overseas offices, and enhance the authentication of documents.

19. 19 Additional Information for TA 4185 The complete technical assistance report and market study including survey questionnaires can be accessed on ADB’s website at : http://www.adb.org/Documents/TARs/PHI/ tar-phi-4185.asp