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Monday, October 31, 2005
OFW coops, state banks to lower remittance costs
The Overseas Workers Welfare Administration and the Cooperative Development Authority should encourage families of overseas Filipino workers (OFWs) to band themselves into community-based credit cooperatives that may then get into the remittance trade, Rep. Eduardo Gullas (Cebu, 1st) said.
“Studies have shown that cooperatives have contributed significantly to driving down remittance transaction costs in Mexico,” said Gullas, who has been pushing for the rollback of “excessive” money transfer charges.
The average remittance transaction cost of migrant Mexican workers is now down to only seven percent, or about half the 13.5 percent cost of the money transfers of Filipino workers, according to an International Monetary Fund study.
Mexico and the Philippines are the world’s second and third largest recipients of remittances, respectively. India is the largest.
Gullas also said government financial institutions such as the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) should establish special windows abroad for the bulk remittances of OFWs.
Lower
“A local OFW-based credit cooperative getting remittances at least once a month can negotiate for lower charges with the LBP or the DBP, which have existing remittance infrastructure abroad,” Gullas point-ed out.
“This is simple economies of scale. If an OFW, on his own, sends money home, he will most likely end up paying the 13.5 percent average transaction cost,” Gullas said.
“However, if there are 100 of them in a cooperative that remit regularly and exclusively through a special LBP or DBP window, then they can bargain for lower charges,” Gullas pointed out.
Members may then agree to contribute to the cooperative a small portion of whatever savings they may have realized from the cheaper remittance char-ges, Gullas added.
He also said the cooperative may then use the contributions to provide livelihood support to OFW member-families.
“In the process, our OFWs not only get more value for their remittances, they also get to contribute to a cooperative that can actually help their families engage in more productive economic activities,” he added.
OFW remittances soared to record $7 billion from January to August this year, 28 percent higher than the $5.5 billion reported in the same period last year. (PR)
(October 31, 2005 issue)
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