The bullish outlook on remittances from overseas Filipino workers (OFWs) this year bodes well for businesses like rural banks, which act as formal remittance channels and serve as an affordable conduit between OFWs and their beneficiaries here in the Philippines.
Industry analysts expect OFW remittances to increase by 8 percent to 8.5 percent this year, anchored on improved global prospects and the reconstruction efforts following the onslaught of Super Typhoon Yolanda.
Remittances account for almost 10 percent of the gross national product of the Philippines.
As of August 2013, personal remittances increased 7.4 percent to $2 billion.
There are early reports that remittances from Hong Kong and Singapore—home to two of Asia’s biggest overseas populations of Filipinos—could grow by as much as 20 percent in the aftermath of Yolanda, as OFWs gear up for special reconstruction efforts and expenses.
Besides fueling consumption growth, an increased inflow of US dollars and other foreign currencies into the Philippines will mean dynamic business opportunities for rural banks by utilizing the Bangko Sentral ng Pilipina’s (BSP) Philippine Payments and Settlement System, or PhilPASS.
Under PhilPASS, an online and real-time payment system the BSP administers to facilitate transaction between banks, rural banks can offer cheaper transaction fees to OFWs and their families.
The PhilPASS remit system offers a rate of P50 per transaction compared to P100 to P500 per transaction charged by other money transfer systems.
The system acts as the local clearinghouse for the transfer of remittances from a local bank to another bank where the OFW beneficiary maintains an account.
OFW families are expected to save at least P92 million to as high as P922 million, because of the faster and cheaper delivery of remittances to the beneficiaries at a lower rate using PhilPASS.
In addition, the system provides safer means of sending OFW remittances via a formal banking channel. OFWs and their families or beneficiaries will also have peace of mind when using PhilPASS as it is equipped with an efficient feedback mechanism that enables OFW remitters to trace the status of their remittances.
OFW remittances also provide microfinance institutions (MFIs) with an important source of funds that can help propel the growth of micro and small businesses in the countryside.
MFIs can partner with OFWs to promote microfinance as one of the more productive ways by which remittances can be put to use. Instead of simply being used to purchase items, the money can be invested to livelihood programs that will benefit not only OFW families but also rural communities.
In response, rural banks will be encouraged to develop credit facilities with less stringent requirements to address the needs of small and medium enterprises, farmers and fisher folk.