Enhancing the Efficiency of Overseas Workers Remittances

This paper tries to identify measures to maximize the development impact of remittances to a migrant-sending country like the Philippines. The paper highlights that formal channels are very popular in the Philippines as:

• Present remittance costs are reasonable;
• Banks have been able to reduce costs to compete with informal transfer agencies through use of technology and marketing;
• Formal banking channels provide a number of safe and reliable products.

The paper further enumerates the barriers to remittances flow. These include:

• Regulatory barriers:
  • Anti-money laundering (AML) issues: Difficulty in producing identification in remote areas;
  • Exclusion of highly paid Filipino professionals abroad from tax breaks.
• Non-bank related barriers:
  • Labor demand: The flow of remittances is affected by international demand for Filipino workers;
  • Inadequate financial orientation on departing workers.

To conclude, the paper makes following recommendations:

• Bilateral initiatives by the Philippine government to open remittance windows in host countries to smoothen the transfer process;
• More dialogues between the Philippines and the Financial Action Task Force (FATF) officials to hasten the lifting of Philippines from the non-cooperative countries list;
• Establishment of online remittance systems to reduce costs;
• Leveraging of remittances for development: Involving community-based financial institutions in the delivery of remittance and entry-level financial products and services to beneficiary families.