The Phl remittance industry (part 2)

According to the Institute for Development and Econometric Analysis, Inc. (IDEA), latest Industry Trends, a regular publication produced by IDEA, remittances accrued to Filipino households, as was stated earlier, have been climbing significantly: a phenomenon which leads to an increase in the demand for remittance firms. This growth comes mostly from land?based OFWs who have contracts for a year or more as well as from sea based OFWs and Overseas Contract Workers.

Likewise, according to the POEA, from January to October 2012, the number of processed contracts for work in other countries was 1.74 million, higher by 8.6 percent from the 1.6 million recorded in the same period of the preceding year. Although banks do remain as the top choice of the remitters on where to course their funds, the boom has led to the development of nonbank agencies which also cater to the demands of the remitters. Based on BSP data, remittance centers, correspondent banks, and tie?ups in other countries of local commercial banks rose to 4,750 in 2012 from  the 4,723 in 2011.

Also, according to the report by the BSP, the largest share of remittances for the 2012 came from the following countries: US (42.6 percent), Canada (9.2 percent), Saudi Arabia (8.1 percent), the United Kingdom (5 percent), Japan (4.7 percent), the United Arab Emirates (4.5 percent), and Singapore (4.1 percent).

Furthermore, the Asian Bankers Association (ABA) has urged the central banks across the Asian region to impose stricter rules and penalties on illegal remittance agents and provide incentives for the remitters to adopt legitimate remittance channels. This coalition of bankers across the region has lamented the growing black market for the money transfers, citing that about 30 to 40 percent of the total remittances across the region were coursed through backdoor channels.

In the Philippines, it was surmised that a big portion of foreign exchange were coursed to the country through illegal remittance agencies. The reduction of illegal remittance agents will likewise decrease the prevalence of fraudulent transactions in the industry. ABA chairperson of the advocacy committee Dilshan Rodrigo said, “At the moment, the illegal channels are much bigger than the legal channels for money transmission. Regulators are called to strengthen mechanisms (against informal channels) and make it difficult for illegal money transfers to take place” per same published report.

Overall, with the inflow of remittances rising at 6.3 percent year?on?year to US$21.39 billion during 2012, HSBC expects the Bangko Sentral ng Pilipinas to keep rates at 3.5 percent on the first meeting of the BSP officials for the year 2013. Moreover, HSBC, as well as Metrobank, forecasts robust remittance inflows this year, increasing by 6 to 7 percent, due to the predicted improvement of global economic conditions, particularly the fiscal easing of Japan, and healthier domestic demand in the US. Finally, HSBC predicts that the Philippines will have its credit rating upgraded to investment grade in the second half of year 2013, according to IDEA.

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