Overseas Filipino workers remittances through the banking sector for the period 2000-2004

Date of Publication

2006

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Rene B. Hapitan

Defense Panel Member

Leonardo B. Araneta
Raem R. Mendoza
Janet O. Chua

Abstract/Summary

Remittances provide direct, immediate, and far-reaching benefits to Overseas Filipino Workers, their beneficiaries, and their home country. It keeps the Philippines afloat with the large volume of foreign exchange entering the country. It increased the country’s consumption expenditure by 4.9 percent as of 2003. Remittances also comprise 10% of GDP as of 2004. Moreover, banks expect remittances to contribute 15-20% to their income, according to interview results. Banks could also make use of the transmitted funds for loans and investments to generate income. With the established bank-client relationship, the banks could likewise offer or package additional products to the remitters and/or their beneficiaries. The formal banking channel has positioned itself well to take advantage of the expected yearly 6% increase in remittance volume coming into the country. They have proven their services to be secure and efficient due to the strict monitoring by Bangko Sentral ng Pilipinas and rigorous compliance to Anti Money Laundering Act requirements. Established networks both abroad - tie ups and subsidiary banks – and local provide a conducive set up to service foreign remittance. As a result, however, banks incur high overhead expenses that drive transaction costs upward. Furthermore, the aggressive strengthening of other industry players such as telecommunications giants and other formal channel players continues to bring the prices down and threatens to decrease banks’ share of the market. Hence, the researchers recommend two strategies that banks could utilize to maintain and to increase their market share. Breakthroughs in technology such as real-time money transfers, text messaging services and the like offer cost-effective solutions to decrease transaction costs while keeping their prices competitive. Banks could develop an efficient computer system that would require little human labor. This will minimize expenses for the deployment and stay of local bank representatives abroad to manage a subsidiary. Automation of AMLA and other procedural compliance could also cut the transaction time and costs. Banking the un-banked is another strategy that banks could exercise. Approximately 35% of remittances pass through non-bank channels. This provides a significant market for banks to tap. Banks need to educate OFWs about the benefits of remitting through banking channels to themselves, their beneficiaries and their country. Offering specially tailored bank products and services will also attract remitters to use banking channels, resulting to the banks’ increased market share. While bank players in the remittance industry are confronted with their current weaknesses and threats in the future, the existing strengths and brighter opportunities will still dominate in the long-term. This should be the constant aspiration of banks to further develop and enhance the remittance industry by introducing products that could address the factors which drive remitters to unreliable transfer methods and, therefore, introduce improvements to the formal system.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU13497; CDTU013497

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

1 computer optical disc ; 4 3/4 in.

Keywords

Emigrant remittances--Philippines; Banks and banking--Philippines; Finance--Government policy-- Philippines; Alien labor, Philippine; Developing countries--Economic conditions

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