Remittances from overseas Filipinos workers (OFW) play a big role in keeping the country’s economy afloat. The money sent home by these overseas workers is behind the consumption-driven growth that has allowed the Philippines to become among Asia’s most promising markets.
In 2013, total cash remittances from overseas Filipinos reached $22.76 billion, growing 6.4 percent from the level in 2012 and well beating the Bangko Sentral ng Pilipinas’ (BSP) target of 5 percent. That year, the country’s economic growth surpassed analysts and the market’s expectations at 7.2 percent.
With sound indicators and a rosy backdrop, the remittance business offers great growth potential, especially for the consumer goods sector. Fortunately, due to the recent amendments to the Manual of Regulations for Banks, even the small banks such thrift and rural banks are now allowed participate in the foreign exchange business.
Through BSP circular 865, thrift, rural and cooperative banks were given the authority to buy and sell foreign currencies, thus allowing them to tap and optimize the boom in the remittances market. For 2014, the BSP reported that cash remittances surged 5.7 percent to $22 billion as of November, again beating the 5.5-percent growth target set by the central bank for the whole year.
In an increasingly competitive market, developments such as the liberalization of the foreign exchange market provide a big boost as rural banks strive to develop more products and become more responsive to their clients’ needs. It also helps the central bank create a stronger financial sector as banks are given a new lifeline to remain relevant in the societies they serve.
The latest regulation on foreign exchange dealings is just one item in the string of reforms that the central bank rolled out to strengthen the country’s financial sector.
Late last year, the BSP increased the minimum capitalization of all banks to ensure that they have cushion against possible financial shocks in the future.
However, this new power granted upon banks entails additional market risks. Banks are therefore expected to implement ample risk management measures to monitor and manage foreign exchange exposures.
Besides providing banks additional growth opportunity, this development also works to the benefit of OFW families, as they may now have more access points to receive money from abroad. Rural and cooperative banks account for bulk of the country’s banking sector in terms of network, with over 2,500 offices nationwide.