Remittance costs eat up 5% of OFW incomes -- BSP

By Des Ferriols
The Philippine Star 02/03/2006

Sending money to their families cost overseas Filipino workers (OFWs) between 1.31 and 4.4 percent of their income, equivalent to a total of about $154.5 million to $519 million that are paid to banks out of the projected $11.8 billion worth of remittances this year.

According to an estimate made by the Bangko Sentral ng Pilipinas (BSP), the cost of sending money is even higher if OFWs send their earnings through non-bank channels such as door-to-door delivery services which cost up to almost five percent of their income.

BSP Deputy Governor Diwa Guinigundo said yesterday that remittance fees vary depending on whether the remittance is coming through banks or money transfer agents and whether the money is being directly credited to the account of beneficiaries, other local banks or door-to-door delivery.

According to Guinigundo, the cost is also affected by the origin and destination of the remittance as well as the mode of payment, whether in pesos or in US dollars.

"Based on information we have gathered, the cheapest remittance fee would involve direct deposit of remittance in pesos to an account maintained with the remitting bank," Guinigundo said.

The most expensive, on the other hand, is the door-to-door delivery of foreign exchange remittance. Additional fee is also charged for delivery made outside Metro Manila.

Guinigundo said a study made by the BSP indicated that bank remittance fees range between 1.31 percent and 4.4 percent of the amount of remittances.

He said these fees include the transfer cost as well as the cost of foreign exchange conversion.

"That’s why promoting competition among the different service providers would help bring down the remittance fees," Guinigundo said. "We’re also working to remove barriers that tend to increase remittance charges and to improve payment and settlement systems to make it more efficient to lower remittance costs."

The BSP official added there is also a serious need to educate OFWs and their families in channeling part of their remittances to savings and other micro-enterprises.

In time, Guinigundo said OFWs invariably return to the country and saving up part of their income would help them reintegrate to the economy.