Transcript Leveraging Remittances for Development and Poverty Alleviation Mr. Diwa C. Guinigundo Deputy Governor Bangko Sentral ng Pilipinas International Forum on Remittances 2007 Washington D.C. 18-19 October 2007

Leveraging Remittances for
Development and Poverty Alleviation
Mr. Diwa C. Guinigundo
Deputy Governor
Bangko Sentral ng Pilipinas
International Forum on Remittances 2007
Washington D.C.
18-19 October 2007
Outline of Presentation
 Global trends in migration and remittances
 Development perspective on remittances
 The Philippines experience with remittances
and its impact on development and poverty
alleviation
 Policy thrust of the BSP to harness
remittances for development
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Global Flows on International Migrant Remittances
(US$ billion)
3
INFLOWS
2000
2001
2002
2003
2004
2005
2006e
Change
2005-06
(%)
Change
2001-06
(%)
All developing countries
Low-income countries
Middle-income
Lower MICs
Upper MICs
East Asia and the Pacific
Europe and Central Asia
Latin America and the
Caribbean
Middle-East and North Africa
South Asia
Sub-Saharan Africa
High income OECD
85
22
63
43
20
17
13
20
96
26
70
48
22
20
13
24
117
32
85
61
23
29
14
28
145
40
105
75
30
35
17
35
163
41
123
86
37
39
23
41
188
46
142
95
47
44
31
48
199
47
152
101
51
45
32
53
6
2
7
6
9
3
5
12
107
81
116
110
128
125
149
119
13
17
5
46
15
19
5
50
16
24
5
52
21
31
6
59
23
30
7
66
24
35
7
68
25
36
7
68
5
3
0
0
64
86
62
37
World
132
147
170
205
230
257
268
3
83
OUTFLOWS
2000
2001
2002
2003
2004
2005
2006e
Change
2004-05
(%)
Change
2001-05
(%)
17
7
5
9
161
44
-3
50
All developing countries
12
14
21
25
32
37
High income OECD
76
83
88
98
111
119
High income non-OECD
22
22
22
21
20
21
World
110
118
131
144
163
177
Source: Migration and Development Brief 2, World Bank Development Prospects Group
Remittance-Receiving Countries By Region (2006)
South Asia
18%
Sub-Saharan Africa
4%
Middle-East and
North Africa
13%
Europe and
Central Asia
16%
Latin America and
the Caribbean
26%
Source: World Bank Global Development Prospects 2006
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East Asia and the
Pacific
23%
Development Perspective on Remittances
Macroeconomic impact
 Strengthen BOP position
 Raise international
reserves
Remittances
 Increase domestic
consumption
 Contribute to Financial
sector development
Household impact
 Alleviate poverty
 Higher Human capital
investment
 Improve living conditions
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Migration and Remittances: The Philippine Case
 An estimated 8.2 million Filipinos are now
working or living abroad
 Philippines receive large remittance inflows
from overseas Filipinos (OFs)
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Top Remittance-receiving Countries, 2006
(in US$ billions)
27.5
24.7
22.5
12.8
12.6
8.9
Source: World Bank Global Development Prospects 2006
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7.3
Growth in OF Remittances
 Average annual
growth rate of 11.7
percent between
2000 and 2006
15000
30
25
20
10000
15
10
5000
 Expected growth
rate of 10 percent
in 2007
5
0
0
-5
2000
2001
2002
2003
2004
Remittances
Source: Bangko Sentral ng Pilipinas
8
2005
Grow th rate
2006
Jan-July
2007
Macroeconomic Impact of OF Remittances
Level
(in US$ Bil)1/
Remittances as % of:
GDP
XGS
FDI
GIR
DSB
2000
6.05
-10.9
8.0
14.9
270.1
40.2
96.6
2001
6.03
-0.3
8.5
17.5
3092.8
38.4
92.4
2002
6.89
14.2
9.0
18.2
446.6
42.1
88.7
2003
7.58
10.1
9.5
19.6
1543.4
44.4
95.3
2004
8.55
12.8
9.9
20.0
1242.7
51.7
118.5
2005
10.69
25.0
10.9
23.9
576.5
57.8
142.2
2006
12.76
19.4
10.9
24.7
544.2
55.6
161.5
2007
8.13
16.0
10.7
25.4
573.7
29.0
204.8
(J-Jun)
(J-Jun)
(J-Jun)
(endJuly)
(J-Jun)
(J-July)
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Growth
Rate
(%)
1/ Cash remittances coursed through the banks
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Allocation of remittance income
 Food, utilities and other expenses for
household operations
 Education, medical/health care expenses
 Consumer durables
 Improving or building housing; buying real
estate
 Loan repayments (including loans to pay for
migration costs)
 Income-generating or livelihood activities;
 Savings
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Empirical Evidence on the Impact of
Remittances on Poverty in the Philippines
 Household surveys show that a 10 percent
increase in remittances:
 reduces poverty rate by 2.8 percent;
 increase school attendance by 1.7 percent;
 decrease child labor per household per
week by 0.35 hour; and
 raise entrepreneurial activities by 2
percent.
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Empirical Evidence on the Impact of Remittances on Poverty in the Philippines
(contd)
 Remittances positively affect the well-being
of the poorest households (bottom 20
percent; 1st quintile);
 Magnitude of the impact of remittances rises
with the income quintiles (2nd-4th quintiles);
 Effect of remittances becomes insignificant
for the richest 20 percent of families.
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Principles to Improve the Remittance
Environment
 Enhance transparency and promote
competition in the remittance market
 Improve access to financial services
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13
What the BSP Has Done
 Promoted competition and transparency
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
Required banks and non-banks to post
remittance charges and other relevant
information in institutions’ premises and
websites

Launched the OFW web portal linking to
banks’ relevant web pages on remittance
services and products, branches and
remittance centers, services fees/rates
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Survey of Remittance Charges
(in US $, including FX mark-up)
Source of Remittance
USA
United Kingdom
Singapore
Ave. Amt. of Remittance per
transaction
400
600
200
2000
2006
2000
2006
2000
2006
8.00-12.00
7.09-11.59
9.48-13.96
7.85-11.73
3.82
2.94-3.76
8.00-17.00
10.0914.
59
10.97-18.74
9.70-13.58
3.82
2.94-3.80
14.00-17.00
12.0914.
59
13.96-23.53
9.70-15.42
6.71
4.40-6.79
Provinces
16.00-19.00
14.0917.
59
13.96-23.53
9.70-17.27
9.60
4.99-9.82
4. Advice and Pay *
8.00-16.00
8.09-14.18
10.97-18.74
7.71-15.42
3.82
3.76-4.76
1. Credit to Account (Own Bank)
2. Credit Other Local Bank
3. Door-to-Door:
Metro Manila
*The bank notifies the beneficiary of the remittance by phone; the beneficiary picks up the remittance from the nearest
branch.
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What the BSP Has Done (contd)
 Improved payment and settlement systems and access to
financial services
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
Authorized rural banks to accept foreign currency
deposits

Approved interconnection of 3 ATM networks
(Megalink,Bancnet, Expressnet)

Approved use of alternative modes of remittances,
e.g., internet, short messaging system

Clarified the acceptable IDs for financial transactions
particularly for OFs’ beneficiaries in remote areas
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Channeling Remittances to Productive
Uses
 Procyclicality of OF remittances
 Remittances cannot be treated as buffer for
macroeconomic shocks
 OFs motive for remitting is predominantly
profit-driven or investment related
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Channeling Remittances to Productive Uses (contd)
 Promoted financial learning
 Conducted Financial Learning
Campaigns (FLCs) in 13 major cities
around the country since February 2006,
with 2 more in 2007
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PESO REMITTANCE
CONSUMPTION
SAVINGS
Bank instruments (TD/SD/
Mutual funds/UITF)
P5,000 up
Savings in Cooperatives
TD/SD
P5,000 up
Agri-business
Treasury instruments
T-bills, T-notes
P100,000 up
Stock Market
Retail business
Insurance (life, non-life,
Education, pension)
Real Estate
Lending business
Others
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SMEs/MICROFINANCE
Others
Channeling Remittances to Productive Uses (contd)
 Microfinance advocacy
 Assist in the channeling of remittances
to productive uses in rural areas
 Facilitate access to basic financial
services
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Website: www.bsp.gov.ph
E-mail: [email protected]
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