Investment options many, but cash-rich OFWs still end up broke

WHEN the Bangko Sentral ng Pilipinas (BSP) launched its Financial Literacy Campaign in Cebu in 2006, BSP director of corporate affairs Fe dela Cruz said the seminar speaker asked the 85 overseas Filipino workers (OFW) present how many years they had been working overseas.

“Some answered five years, others 10 years, others 25 years,” she said.

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But when asked how many of them now had a lot of money, no more hands went up.

It is a sad fact that although many OFWs earn tens, and even up to hundreds, of thousands of pesos monthly, after years of deployment, they are still broke. Many blame their spouses for mismanaging their funds.

Materialism

Fr. Ulyses Desales, port chaplain of the Apostleship of the Sea (AOS)-Cebu, which counsels seafarers, said most OFWs are from poor families, so the sudden windfall gives the family the opportunity, which they grab, to buy the latest gadgets like pricey cell phones and flat TVs, and undergo hair rebonding.

“It boils down to the values of the family,” said Overseas Workers Welfare Administration (Owwa) 7 Officer-in-Charge Mae Codilla. “They are overcome by materialism.”

Remittances have also disappeared at bingo tables, and high-earning ship officers complain of having sent enough money to build a house only to find their families still renting their homes and borrowing money to meet their daily needs.

OFWs themselves throw lavish parties when in town, said Philippine Overseas Employment Administration (POEA)-Visayas Director Evelia Durato, so that when they are due to ship out again, they will have to borrow money, and then they fall prey to lenders.

Savings

Magsaysay Maritime Corp.-Cebu office branch manager Hazel Mae Gitgano said to foster a saving mentality, the Magsaysay Savings Program allows employees, crew and their families to pool their money together. The program is administered by the Bank of the Philippine Islands for investment in stocks and bonds.

The problem is that whenever the seamen disembark from the ship, they redeem their money, instead of leaving it in the program to grow. Seamen disembark often because their contracts are usually from three to 10 months at a time only, Durato said.

So OFWs and their families still need to learn a lot about financial literacy.

Literacy

At the Pre-Departure Orientation Seminar, OFWs are already given talks on financial literacy and values orientation to prepare them for their eventual reintegration into the Philippines, Durato said.

From 2007, the Owwa 7 also arranged similar talks for the families of OFWs organized into 142 family circles in Central Visayas. But attendance to the talks is voluntary.

Chaplain Desales said he talks with seamen and their wives about how to handle money during casual house visits.

Portal

To promote savings and investment, BSP Deputy Gov. Diwa Guinigundo told Sun.Star Cebu that the BSP launched the OFW Portal
(http://www.bsp.gov.ph/about/advocacies_ofw.asp) in 2007 so OFWs can easily get information on bank products, and remittance fees and centers.

He said the percentage of OFW households using their remittances for savings had risen from 7.2 percent in the first quarter of 2007 to 40 percent in the first quarter of 2009.

Livelihood training

For those interested in starting a business, Department of Trade and Industry (DTI)-Cebu program management division chief Elias Tecson said that on Tuesdays, the DTI conducts for the Owwa 7 seminars teaching OFWs how to identify business opportunities and make a business plan.

On Wednesdays, the DTI gives skills training, such as on cake decorating; massage; beadwork for fashion accessories; the making of laundry soap, ice cream and smoked bangus; and even establishing of a laundry service. He said the DTI can help in marketing the products.

The Technical Education and Skills Development Authority (Tesda), under the Pangulong Gloria Scholarship program, also gives free training in vocational and technical courses.

Financing

For financing, OFWs displaced by the global crisis can get loans of up to P50,000 to start a business under the Filipino Expatriate Livelihood Support Fund (FELSF).

But they must take the free business courses on the management of their livelihood projects before they can get the loan, which is payable in two years with interest rate of five percent per annum.

Owwa 7 has disbursed at least P5.85 million to 117 FELSF beneficiaries in Central Visayas as of last month, Codilla said.

There is also the Owwa-National Livelihood Support Fund Livelihood Development Program for OFWs which, in Cebu, has been administered by the Visayas Cooperative Central Fund Federation (Victo-VCF) since 2004.

Released

Victo-VCF loan officer Tita Eunice Enriquez said the loan amount for the program was up to P200,000 with an annual interest rate of nine percent. Appliances, cars or lots can be used as collateral.

From 2005 to 2008, a total of P27,425,000 was released to 177 borrowers in Central and Eastern Visayas, with Central Visayas making up 90 percent of the figures, she
said.

Most of the loans were used to start van-for hire or jeepney businesses, piggeries, sari-sari or general merchandise stores, beauty parlors and auto repair shops.

Delinquent

Enriquez said 30 percent of borrowers were delinquent or had missed making a payment at least once.

Some delinquencies were caused by the businesses closing because of the failure to get enough clients or the OFWs’ lack of knowledge on the businesses they had gotten into.

But the most common reasons for delinquency, Enriquez said, were (1) the lack of experience in managing a business, with some not keen on recording their expenses and unable even to distinguish between sales and profits, and (2) the diversion of the money to other uses, like shopping, gambling, tuition of the children, and even the placement fee to an agency for another job stint abroad.

OFWs vs. returnees

“If the OFW is still working outside the country,” she said, the chances of repayment are high.

But in the case of OFW returnees, the family will now have to depend solely on the business for income, so most often, some of the money intended for the business is used for the living expenses of the family instead.

Enriquez said borrowers who had gone to college had higher repayment rates than those who had finished high school only.

Gerry Gonzales, Visayas regional coordinator of the Catholic Bishops’ Conference of the Philippines-Episcopal Commission for the Pastoral Care of Migrants and Itinerant People, said the group encountered similar problems with delinquencies in its livelihood loans conducted in partnership with the DTI, Tesda and the Cooperative Development Authority.

Employee mindset

There are many livelihood and training opportunities available, but some OFWs do not make use of them.

Kenneth Carredo, a former OFW and now a successful businessman, said many OFWs are not aware of Tesda’s scholarship programs.

But the BSP’s Guinigundo said an Owwa study showed that “given a choice, majority of displaced OFWs prefer to return to work abroad rather than start a small livelihood business in the Philippines.”

The POEA’s Durato blamed the lack of an entrepreneurial mindset on the schools, whose orientation, she said, was for the students to get good jobs after graduation.

She also blamed media, saying that while Korean telenovelas portrayed executives as young, Philippine telenovelas showed old executives, giving the impression that only the old could become businessmen.

However, Jay Aldeguer, in charge of the Go Negosyo two-year advocacy for Cebu on entrepreneurship, said some progress had been made as various groups push entrepreneurship. Over the years, he said, more people, especially the youth, had gone into business.

“In the past, they would be embarrassed to admit it, referring to it as a racket or sideline. But now they’re becoming proud of it,” he said.

More than money

The experiences of OFWs show that it is not enough to give Filipinos money—whether through jobs or loans. OFWs have to be taught how to keep it as well.

More education is needed—both in values, starting with the youth, and in technical education for the business minded.

Enriquez said Victo-VCF had asked Owwa to provide management skills to OFWs struggling in their businesses, but after one training session, no more followed, as Owwa said it would still have to look for money to fund the training.