The OFW financial problems

Overseas Filipino market is growing bigger each year with over 2.2 million workers who left in the year 2016 to find their fortunes elsewhere outside of the Philippines.

People back home such as families and friends don’t know their daily struggles living in a foreign land when they ask for money, gifts or the so-called “balikbayan box.” I am not an OFW, but I feel their struggles for I have a lot of OFW friends, colleagues and relatives who tell me their woes being an OFW.

Outside family issues and the daily tedious grind, they are also met with problems when it comes to sending remittances, getting a loan, and other money transactions, all because they are not in the Philippines, and there is only so much the embassy can do for them.

So, what are the common financial problems that our OFW friends encounter?

Remittance Scams

Way back in November 2013, news broke out about two suspects who have been arrested for allegedly cheating OFWs of remittances by posing as beneficiaries using fake IDs to claim the money remitted from various countries through Filipino remittance companies operating worldwide.

Regardless if it was an inside job, security of our OFWs remittances is a topmost importance because their families depend on them for survival.

Lack of Savings

Overseas Filipinos are said to be very gallant because they provide for their family’s needs and more. In fact, it has become customary for every family to receive a balikbayan box every once or twice a year. These balikbayan boxes are filled with gifts, clothes, perfumes, latest gadgets and other what-nots.

But what most OFWs realize after years of working day and night is that they failed to set aside a bit of money for themselves. They fail to save or invest a bit of money they can use when the time comes for them to go home.

Getting a Loan

Debt is one of the top problems of any OFW. Often, these debts force them to commit crimes which land them into serving jail time. Why do OFWs get mired in loan troubles? If you’re an OFW, then you know the reasons perfectly well. But if you’re hoping to go and work abroad, then it’s important that you know why.

Placement fees.

OFWs especially the Filipino domestic workers are often asked for placement fees by their agencies, despite the no-placement-fee policy of the government.

Thus, they resort to getting an OFW loan for this, optimistic that once they get a job, they can pay it off quickly.

Loans abroad are easy but a high cost.

True enough, in Hong Kong or the Middle East, an OFW can get a loan without many requirements. Sometimes all lenders require is your passport and contract, or for some, a mobile number, employer’s landline, and 1-2 reference.

However, what OFWs fail to know is that these loans charge 60% yearly interest or more. Most of the time they are just told how much they are going to pay monthly, and when they think it’s manageable, they go for it, without second thoughts.

So when emergencies happen, and they take out more loans, they end up saddled with monthly payments more than they can afford to pay.

To sum it up, most of the woes of our OFWs boils down to lack of options and financial literacy. Lack of options because the government has failed to set up a centralized financial system or department where OFWs can remit their money, take out low-interest loans with friendly payment terms, benefit from financial literacy and management programs. They are forced to find their best way out to get cheaper fees to remit money, get high amount loans, etc.

Duterte’s promise

Watch Video: Pres. Duterte plans to convert Postal Bank to an OFW Bank
Credits: GMA News

In November 2016, President Rodrigo Roa Duterte has given the “OK” on the creation of the OFW Bank, which was confirmed by (DOLE) Labor Secretary Silvestre Bello 3rd. The OFW Bank was one of the three promises of then Presidential candidate Duterte during the campaign period.

The OFW bank will be utilized to cater to remittances and other banking needs of Filipino migrant workers all over the world. This supposed bank will also allow OFWs to become part owners through shares of stocks and have their credit facilities.

Do you know? The OFW Bank was first conceptualized in 2006 during Arroyo’s term but was never materialized.

However, an OK from the President is not enough to establish the OFW Bank. In fact, the creation of a separate bank for OFWs require a new law and not by a simple Executive Order.

For one, Duterte has expressed his intention of turning the Philippine Postal Savings Bank into the OFW Bank, which means the government needs to draft a law to acquire the Postal Bank for this purpose.

Second, the government will need to infuse P2 billion to P3 billion to implement the plan, according to Luis Carlos, Postal Bank assistant postmaster general for marketing.

Will the OFW bank be open in October 2017

OFW Bank is seen to operate early October of 2017, according to Finance Secretary Carlos G. Dominguez III.

OFW Bank will be established through the LandBank’s acquisition of the Philippine Postal Savings Bank, which will be converted into a LandBank subsidiary that will be owned 30 percent by OFWs.

Here’s the process of turning the Postal Bank into the OFW Bank:

Valuation of the Postal Bank
Approval process from the regulators
Negotiation process with the Postal Bank Corp.

As of September 21, 2017, the draft executive order that will execute the sale of the Philippine Postal Savings Bank to LandBank and convert it into the OFW Bank is already submitted for President Duterte’s approval.

Before its submission for Pres. Duterte’s approval, the sale has been approved in principle by the Monetary Board, the Bangko Sentral ng Pilipinas’ highest policymaking body.

Whether it will open next month, October, we have yet to see, but it looks possible based on how fast they were able to act in the process of acquiring the Postbank.

How can the OFW bank help our migrant workers

Saying that the OFW bank will be “utilized to cater to remittances and other banking needs of Filipino migrant workers all over the world” is too broad, so here’s a breakdown of what’s in store for OFWs once the OFW bank will open.

Save on remittance fees

Instead of sky-high (7.68%) remittance fees which OFWs pay to transfer money to their families in the Philippines, the OFW bank will charge little to no fees.

Low-interest loans

An average OFW pays 5.2% monthly interest to borrow money which is super high. With the OFW bank, overseas Filipinos can get low-interest loans to help them put up businesses and address immediate needs. Larger amounts are also given a longer payment term which will allow OFWs enough time to pay without affecting their budget.

Become part owner of the bank

According to Labor Secretary Silvestre Bello, OFWs can secure money using a credit line established by OWWA (Overseas Workers Welfare Administration) to buy shares of stock and become part owners. The ownership of the bank is open to all 4.8 million OFWs at P1,000 per share.

ID System for easy verification

The Integrated DOLE System will be used to verify the identity of OFWs in transactions with government agencies, banks, and the OFW Bank. iDOLE will eliminate fake documents from training schools which often defraud OFWs into shelling out money for fake certificates.

The iDOLE-OFW Card, as well, will serve as a debit card and an ATM card for the OFW Bank. It can also be used as a beep card for LRT and MRT, and for other purposes.

All these are just a few of the campaign promises of President Duterte. DOF Secretary Carlos Dominguez 3rd has stated that they are also proposing to rename the OFW Bank to Overseas Filipinos Bank to make it more inclusive and not only focused on workers.

According to LandBank President and CEO Alex V. Buenaventura, the government is looking to pilot the bank in the city of Dubai by January 2018.

Sources:

Manila Times: November 2016, Duterte Okays Creation of OFW Bank

Philstar: May 2017, Duterte Says Admin Preparing Draft Law For OFW Bank

Businessmirror: June 2017, DOF: OFWs will have own bank in October