Airtime as Remittances

Jan Chipchase is a Nokia researcher whose objective at the moment is to understand how the poor use mobile phones. At first glance, it shows no direct relation with the issue of remittance but on delving deeper it gets quite clear that the mobile phones used by the poor Ugandans are actually associated with the remittance industry. This is because the Ugandans use prepaid airtime as an informal money transfer mechanism, particularly to get value back to family in rural areas. The Ugandans are using prepaid airtime as a way to transfer money from place to place.

This is one of the most unique business models adopted in the African country facing severe challenges owing to the high level of poverty. The idea is simple. The earning member of the family, who works in a town/city instead of sending money back home, buys a prepaid airtime card valuing the same amount that he would have sent. But instead of entering the code into his own phone he calls up the village phone operator and read the code to her. The operator then uses the airtime of the phone and completes the transaction by giving the beneficiary the money, minus a small commission. Some African countries have already started off this with this unique scheme and others are also expected to follow suit.

Prepaid airtime as a currency substitute is quite costly in percentage terms, due to VAT), and a commission for whoever turns it back into cash. But when the other options also seem more costly, people generally opt for a better option which is more cost effective.

New Direct hiring Policy to aid the OFWs

The New Direct Hiring Policy issued by the Philippine government is going to bring a cheer for the overseas Filipino workers (OFWs) holding top positions by exempting them from paying the bond under it. After a meeting by the governing board of the Philippine Overseas Employment Administration (POEA), the decision to extend the exemptions to OFWs with executive posts was discussed at length. It was then discussed if it was possible to include the professionals not to be covered by the payment of the bond. Those professionals hired directly by the reputable corporations are considered having the best protection and so questions have been raised on whether they should be included in the new policy.

The various aspects of exempting the professionals from paying the US$ 5,000 repatriation bond and US$ 3,000 performance bond stated in the POEA memorandum Circular 04 are being reviewed and the POEA expects to reach a quick decision soon. Reports of the POEA show that majority of the deployed OFWs comprise of the skilled professionals like doctors, engineers, teachers and nurses.

The direct hiring policy has encountered some strong criticism from various migrant workers’ organisations which call it anti OFWs.

Mi Pay signs mobile money ecosystem contract with African operator

Mi Pay, a mobile payments provider and an East African operator have signed a contract to provide a mobile money ecosystem to the operator’s subscribers to gain from international remittance services and supporting a network of agents to support domestic payments made by mobile.
Mi Pay’s Streetvendor solution lets African mobile operators to empower local agents in Africa to buy or sell airtime to subscribers which in turn helps the entrepreneurial networks to grow. The solution allows agents to complete transactions from a mobile handset directly without the need for extra terminals. The direct channel top up service allows subscribers in Africa to gain airtime via their handsets which removes the need for physical vouchers.

This move is surely going to benefit those who have family members or friends living abroad and would also help the third parties to purchase prepaid airtime to be sent to subscribers in Africa.

CitiBank launches QuickRemit

With a view to expand its share in the global remittance market CitiBank acquired PayQuick this January. PayQuick, a brainchild of an Indian immigrant was launched in 2002. US immigrant workers sent home around $42.8 bn in 2007 and 73% of Latin Americans based in the US send an average of 10% of their pay checks back home every month. Traditionally wire transfers and online money transfer companies have been the preferred choice for remittances in countries like the US and Canada. QuickRemit is now aimed at removing the hassles involved in online money transfer. Often remitters face problems in terms of delays and the high fees associated with the money transfer agencies/companies. QuickRemit promises to remove these hassles and offer a user friendly service to the subscribers.

QuickRemit is in compliance with the anti terrorist and anti laundering regulations issued by the US. It offers a technology platform that removes the regulatory constraints and offers a simple hassle free service. It allows its customers to reach over 90 countries which is predicted to be the industry standard for sending remittances internationally.

With this Citi joins the league of banks like Bank of America, HSBC and Wells Fargo who have launched remittance solutions in the recent past.

Recruiters push for OFW bank

The Filipino recruitment firms have welcomed the idea of creating a special bank to cater to the needs of the overseas Filipino workers (OFWs). The vice President of the Federated Association of Manpower Exporters (FAME) said that it was high time for the OFWs to have their own bank to serve their financial needs. This comes at a time when the OFws are reeling under the pressure of the depreciating dollar.

FAME has recommended that the OFW bank should set exchange rates friendly to OFWs to enable the beneficiaries to get maximum value for the foreign currencies they receive. It was also suggested that the service charges of the ATMs be dropped. The Land Bank in the meanwhile is learnt to be interested in managing the proposed bank for the OFWs. The Overseas Workers Welfare Administration (OWWA) could invest P1 billion in the project as preferred shares while the Land Bank and DBP could invest P350 million each.

Paybox and Celcom come together to launch new mobile payments and banking solutions in Malaysia

Malaysia based Celcom Berhad and Paybox, the well known company for mobile payment solutions have come together to launch a mobile banking and mobile payment solutions for the Malaysian market. E banking has a diverse presence in Malaysia till now. Just a few banks provide m banking solutions to their customers to enable them to access their e bank systems using a Java client on their phone. As most customers do not have Java enabled phones the benefits remain unused. Celcom is aiming at providing a simple platform for m-banking and m-payments. The idea is to allow the customers to access their accounts at any bank at a minimal investment by the participating banks.

In its initial stage Celcom will enable mobile access to the Celcom-TuneMoney Prepaid VisaCard. The card holders will get to check their balances, transaction details and recharge their prepaid airtime and transfer money to each other. The plan is to expand the system and provide extended remittance, bill payment and merchant payment services at a later stage.

With this Paybox aims at expanding its base in the South East Asia. The Paybox solution is provided to Celcom through its partner Idot TV Sdn Bhd. Idot TV is a technology enabler for mobile solutions and value added services. It has operations in Malaysia, Indonesia, Bangladesh and Cambodia.

PLDT launches VoIP offering for the OFWs

The Philippine Long Distance Telephone Co. (PLDT) has recently its own Voice over Internet Protocol (VoIP) facility for the overseas Filipino workers (OFWs). The move is expected to hit the international long distance (ILD) business but the company is hoping to attract more users because it will offer lower rates of $0.14 a minute. The service would require the users to download software into their computers which would target the Filipinos living abroad. In the first quarter of 2008, PLDT reported a continued decrease in international long distance revenues which has been accounted to the negative effects of the stronger peso. The ILD revenues continued to decrease as the dollar linked revenues were adversely affected by the 16% appreciation of the average US dollar-peso exchange rate in 2008.

With this VoIP service which is more or less similar to the services offered by Skype and Vonage, PLDT is expected to re gain its customer base. Dubbed as the PLDT Talkpad the service will allow the PLDT and Smart subscribers to call and send SMS to PLDT Talkpad subscribers at domestic long distance rates.

Land Bank extends support to the OFWs

In a move to help the Overseas Filipino Workers (OFWs) to remit money back home more conveniently, the Land Bank of the Philippines is now offering a high yield special deposit facility with an annual yield of 7% that would help the OFWs and their families to make more savings which in turn would help the OFWs once they come back to their country. In a statement issued by Land Bank President Gilda Pico said that the bank aims to issue around P2 billion worth of 5.5 year long term negotiable certificates of deposits, or LTNCDs and will be offered until May 16.

These LTNCDs will be offered in multiples of P20,000 but the maximum investment of P250,000 was set to ensure that the OFWs and their families stand to benefit more. This in a way is a win win situation for the OFWs who would be spending P13,699 to buy one unit of LTNCD and gain P20,000 after five and a half years. The LNTCD is indeed going to benefit the OFWs because not only is it free of the 20% withhold tax on interest on regular deposits, it also carries higher yields compared to the regular time deposits because it is subject to a lower reserve requirement of 2.0% under central bank regulations. Investors will be required to hold the security until maturity, unlike in time deposits, which can be pre terminated. Since, the LNTCD is negotiable, it can be used as collateral for bank loans or sold to another investor. Land Bank requires applicants to present documents to prove that they are OFWs or related to OFWs.

IOM comes up with a new project

The International Organisation of Migration (IOM) launched a P55 million project on remittance corridors in the Philippines and Indonesia. The project is aimed at improving research and inter regional information exchange on remittance corridors and national development in Southeast Asia and Europe. It will use three methods to establish remittance trends: research on remittance corridors, policy dialogues and pilot projects. The European Commission, through its AENEAS program, is funding IOM’s remittance project that seeks to identify links between migrant workers’ remittances and development. It is set for 18 months and is going to map remittance corridors for the Philippines from Italy, which has a population of 128,080 Filipino migrants. The research will be undertaken by the non-government group Economic Resource Center for Overseas Filipinos (ERCOF). It would also include remittances to Indonesia from the Netherlands and informal remittance flows from Malaysia to the Philippines and Indonesia.

Remittances came from permanent, temporary and undocumented Filipino workers, whose number reached 8.2 million in 2007. Filipino migrants can be found in 193 countries. But the growing concerns in terms of the remittance business are what the IOM is going to analyse. It will look at concerns like the high placement fees, expensive transfer costs, differences in the regulatory approaches and ways of strengthening financial literacy of the OFWs and their families.

OFW inflows jump 15% to $2.5 billion in 2 months

The Bangko Sentral ng Pilipinas (BSP) recently reported that the remittances made by the Overseas Filipino Workers (OFWs) back home rose by 15.5% to $2.5 billion in the first two months of the year from a year ago level. In February, the remittances rose to $1.3 bn or 16% higher than the figure recorded in the same month last year. The fact that the number of skilled workers living abroad has risen sharply is accounted as the possible reason behind this trend. Workers deployed in the first two months of the year rose 14.6% to 199,378.

Last year, the Philippine Overseas Employment Administration (POEA) reported an increase in the number of OFWs which comprised of a significant number of trained professionals, including, doctors, engineers and teachers. The trend as evident has continued in the first few months of this year as well. Another curious fact is that the number of both sea based workers and land based workers has also gone up. Another reason that can be attributed to this positive trend is the assistance provided by the local banks and other financial institutions working at the grass root level. These institutions have facilitated the increase in the volume of the remittances received by the families of the OFWs. As far as the source of these remittances is concerned, countries like the US, UAE, UK, Italy and Japan were the top countries where the OFWs are based at the moment.

OFWs dismiss OWWA claims

Days after the Overseas Workers Welfare Administration claimed that the orgainsation lost around P70 million in pre departure loans, a migrant workers’ group, Migrante International has shot back and accused the OWWA of covering up its failure in managing funds. John Leonard Monterona, Migrante-Middle East (Migrante-ME) regional coordinator said that the entire issue was yet another attempt to stop the welfare programs given to the Overseas Filipino Workers (OFWs). Previously, Labor secretary, Marianito Roque had said that he had decided to suspend the assistance after the OFWs failed to re pay the loans. Monterona believes Roque was forced to issue the statement after the lawmakers were about to investigate the alleged misuse of OWWA funds. He says the loans were suspended just after the OWWA Omnibus Policies was passed and implemented by the agency’s Governing Board. Migrante suspects that more hidden misuses and diversion of funds have been done or charged to OWWA fund. Monterona said that as the OWWA fund was perched at P10 billion mark it was prudent to consider lowering OFW membership fees at a time when prices of all commodities have gone up. He feels by lowering the OWWA membership fee and removing the unnecessary government fees the government can provide some relief to the OFWs and their families.

Bad news for departing Overseas Filipino Workers (OFWs)

As if the recent changes were not enough to give sleepless nights to the millions of Overseas Filipino Workers across the world, the Overseas Workers Welfare Administration (OWWA) has now come up with a decision that is going to compound the problems. Acting Labor Secretary Marianito Roque said that the OWWA would no longer give loans to departing OFWs. He said that the decision was taken after he found that most of the OFWs who availed the loan facility did not pay back which cost the organisation nearly P70 million. He further said that only 30 per cent of the people actually paid back. Additionally the low payment rate was also a problem, he said.

According to Roque, many OFWs declined to make the payments saying they could no longer pay their P40,000 loans. This expectedly brought severe financial losses which the organisation is no longer in a mood to bear. The OFWs also supposedly said that since they were paying $25 membership fee per employment contract, they claimed that the OWWA fund money is their money and so they don’t have to pay their loans. On an average, nearly 2,000 to 3,000 OFWs leave their country for foreign lands daily, which means OWWA collects around $75,000 or over P3 million membership fee daily.

The OFWs who are already facing financial woes at the moment are crying foul because with each passing day it is becoming more difficult for them.

Migrante protests tax duty

The Arroyo government is under fire again. This time it is the impending documentary stamp tax (DST) which has caused massive furore. Migrante, an alliance of overseas Filipino workers’ organisation is accusing the government of burdening the OFWs and their families by imposing this tax.

The tax which is in the eye of the storm is expected to be tabled soon and once that happens the OFWs fear that it will be imposed on all international transfers. Migrante fears that the imposition will be equivalent to 0.15% of the remitted amount. In a situation when most OFWs are earning anything between US $250 to US $400 monthly the tax would certainly break their backs.

Migrante says that the OFWs are already finding it diffcult to sustain in the times of economic crisis and soaring food prices and the government instead of taking corrective measures is doing little to help them. The mood is certainly not good and the Arroyo government needs to take notice.

Gulf inflation and the business of remittances

Once upon a time, the Gulf was known as the exotic land of mystery. As time passed by, the notion changed and the oil rich region came to be the land of opportunities. But with the problem of rising prices and weak currencies getting intense, the overseas workers are now seriously considering a life away from the Gulf.

The six Gulf Cooperation Council (GCC) states have been the major destinations for the migrant workers from countries like India, Philippines and Sri Lanka. The oil windfall is one of the reasons behind the popularity of this region. But as the Gulf reels under inflation, the remittances too have been going down and the tumbling dollar is making it difficult for the overseas workers to sustain themselves. For the Indian workers in particular the problem has meant a return back home, given the fact that the Indian rupee is surging against the dollar.

According to GulfTalent, the cost of housing amounted to 35 per cent and 31 per cent of household income in 2007 which is forcing a large number of expatriates to head back home. The problems are brewing and the air of uncertainty is engulfing the Gulf region. It won’t be long that one gets to know the magnitude of this problem and its implications on the overseas workers living in the Gulf.

“No Remittance”

It seems like the Arroyo government is finding it increasingly difficult to win the confidence of the Overseas Filippino Workers (OFWs) and the locals. The preventive measures aimed at providing relaxation to millions of remitters working abroad have backfired and the OFWs are not in a mood to wait and watch. They have come up with the “no remittance day” campaign to protest against their own government which is under severe attack from almost all quarters.

Migrante International has been in the top league while protesting against the government. It issued a directive some time back to all its affiliates and chapters to go all the way for the “zero remittance” day at least once a month to mark a protest against the government.

The campaign was launched on March 2, the day when most OFWs were supposed to remit their money. The organisation has been quite vocal in its dissent over the policies of the government it calls corrupt. They demand the removal of President Arroyo who has been a target of a lot of criticism.

The robust remittance received from the OFWs led to tremendous economic growth in Philippines last year, but with the tides of economic prosperity turning against the country, the anti-government move has grown quite rapidly. The government has realised the potential dangers from such movements and has appealed from immediate withdrawal but the Migrante International so far has not thought of backing out.

Japan: A Case in point

A lot is being said about the dependence on the United States for the remit that most developing countries receive from their immigrants settled there. Though it is true that United States is the largest foreign aid donor, it is often overlooked that some other countries too have been playing a huge role in this direction. Japan, a G8 country is a case in point. It comes second to the United States in offering foreign aid and has been a chief contributor for the past several years.

Over the years, Japan has emerged as a chief source of finance and several projects have been in the pipeline to help the migrant workers to use the remittances for starting their own businesses back home. Labour shortage has been one of the chief reasons behind the influx of a large number of unskilled labourers in the country which is one of the most industrialised nations in the world. Consequently, a lot of migrants now prefer Japan as their place of work. Statistics also show that Japan has played an important role in the development of some of the third world countries which are dependant on the remittances sent by the overseas workers. According to the Philippines Central Bank Filipino workers in Japan remitted $ 413 million in 2003, making them the largest source after Filipinos in the US and the Saudi Arabia.

Today, people from as distant countries as Peru and Chile are choosing Japan as their preferred place of work. With the US economy going through a rough patch, the Asian upsurge is indeed a possibility.

The OFW Hedge Funds

Philippines is in perpetual danger of facing an economic slowdown that is probably going to cripple the economy at a much faster pace. Being dependant on the US, Philippines is certainly going to weigh and measure every thing that happens in the US because of the strong repercussions that could felt in the South Asian country. The government in particular has had to answer some tough questions on the issue as the country saw a whooping rise in the prices of essential commodities. With the drama unfolding everyday there was a new launch recently to help the situation get better. The hedge funds are dubbed as the shields to protect the Overseas Filippino Workers (OFWs) from the declining value of the peso against the US dollar. Though the effort seemed earnest, the critics have been quick to rubbish it.

Those against it say that the hedging fund is discriminatory as it comes for $10,000. Most OFWs say that they earn anywhere between $500 to $1000 which gives them to opportunity to avail the hedge funds. The average Filipino working abroad looks at the funds as the means to attract businessmen and remittance firms. With the recession looming large, the strengthening peso has seen a sharp cut in the overseas Filipino workers’ incomes. They have had to remit more money back home to make up for the lost value. They are now hoping for lowering prices of essential commodities, state subsidised college education and scrapping of the 12 per cent value added tax to raise their cost of living.

Banking transactions made by the Mexican remitters

The last post was regarding remitting done by Mexican workers living abroad, it gave an idea on how remittance has emerged in the country in the past few years. In this post the idea is to delve deeper into the matter. The focus is to be on the banking system in Mexico and whether it is systematised enough to cater to the needs of the millions of residents who have family members working in countries like the US and Canada. There is no dearth of banks, currency exchange houses and business houses that buy dollars in Mexican cities and towns. But the chief problem is with regards to the banking knowledge that people have especially, those living in the semi urban areas. A large number of the people do not use the ATMs. Consequently, most cash remittance take place through money orders by mail or through relatives and friends.

Bank to bank money transfers are a good option any given day. These transfers are quick and safe. A small fraction of the Mexicans who receive cash from relatives staying abroad also have “binational bank accounts” but most stay away from it fearing the high costs that the banks charge for this facility.

Of all the banks that operate out of Mexico, Bancomer is a leading name which has branches in Los Angeles and is associated with the US Postal Service. It has won the trust of the non resident Mexicans who have accounts with it and wish to have ATM cards for their relatives. Other banks should follow suit and try to establish presence in countries which have a large Mexican population.

Remittance: The Mexican Way

The Mexicans and the Hispanics constitute a large part of the American population. These immigrants have traditionally, politically and sociologically played a big role in the US. Most of these migrants remit their savings back to their countries through retailers and depend largely on them for the transfer of their cash. It is indeed quite interesting to trace how the Mexican and Hispanic immigrants staying in America sent a considerable chunk of their earnings to their folks back home thereby helping the economy to strengthen itself.

Since the 90s the remittance from the US to Mexico has seen a sharp increase. It has also seen how the once manual transfer of remittance has made way for computerised procedures which have reduced the time and cost to a large extent for the remitters in the US. In the 90s remittances were mostly hand delivered since the two countries share a common border it was the commonest way of sending money back home. Such a situation gave rise to the emergence of retailers who offered diverse financial services and came up with some innovative schemes to attract more customers. These retailers in way practised the now-famous offshoring and outsourcing business. As most of their customers belong to the poorer sections of the society they preferred offering products that were specifically aimed at fulfilling their needs.

With the advent of online money transfers, electronic money and innovative banking products the Mexican immigrants have got better options for remitting their money. It is indeed one of the classic examples of coming of age in terms of the remittance business.

Remitting for a better tomorrow

The world in the 21st century has indeed got smaller. Distances are no longer keeping us apart and with means of technology evolving everyday, man is finding more ways of staying in touch. Gone are the days when we cringed at the thought of leaving our country and going to a new place in search of a better life. The Asians in particular have been migrating to countries such as, USA, England, Australia and South Africa in large numbers. With better opportunities of employment in these countries attracting the migrants, the lure of moving out of the native countries is getting stronger. But it’s not just the promise of a bright future that has caught the fancy of the migrating population. The prospect of earning better to support their families in the poor native lands is something every migrant looks at eagerly when he leaves his homeland.

In an estimate around 150 million migrants remitted over US$300 billion to their families in developing countries in 2006. The figures are enough to draw the conclusion that most of the migrant workers in developing countries save money to remit their earnings to their families they have left behind. The money that comes from these sources not only aid the families but also the weak economies around the globe which are largely dependent on the money that is send by the non resident workers earning a living in the developed countries.

Remitting procedures hence are needed to be simplified in order to enhance the transfer of money in a particular time frame. With the number of migrants growing by each passing day the remitting business is becoming more important.