Spenders to Entrepreneurs

Spenders to Entrepreneurs

By Miriam Grace A. Go
Newsbreak Assistant Managing Editor

FOR MOST of Michael Vidamo’s youth--12 years to be exact—his father Ismael was working as a trailer driver in various countries in the Middle East. “Tatay was earning US$700 a month at the time, and we were able to build a house, buy a passenger jeepney, and start a small piggery and poultry farm,” he says. His mother stayed home to take care of the young Michael and his sister.

Now 33 and married, Michael remembers all this with a tinge of regret. The house is still there, but the jeepney and the farm in Dasmariñas, Cavite, had been sold years ago. Not earning enough from these livelihood sources, his parents, and later his sister, migrated to the United States to look for better-paying jobs

Left behind to raise his own family, Michael eventually worked as a stainglass technician in Riyadh, Saudi Arabia, from 2000 to 2001. His wife was left with their three kids so Michael could “earn P4,000 more than what I used to earn here.” His salary of about $250 a month barely yielded savings so he decided to come home. He is now working as a driver and part-time construction aide.

Michael and his father were among the many overseas Filipino workers (OFWs), now numbering about 8 million, whose hard-earned dollars failed to secure for them stable livelihood when they returned home. During their stints overseas, there were no known efforts by the government, private sector, or civil society groups here to train OFWs in managing their finances or starting small businesses that could sustain them when they could no longer work abroad. If there were such programs, these were not carried out in earnest and did not reach many OFWs.

The Philippines started sending contract workers abroad in the mid-1970s, and their earnings have buoyed the country’s economy. Last year, they sent home $8.55 billion, an amount larger than the combined foreign aid and foreign direct investment that the country received, according to officials from the Asian Development Bank (ADB).

But efforts to help them invest their monies wisely back home are just beginning—a bit late for a country that is the recipient of the third largest amount of remittances worldwide.

Enter NGOs

“The realization [to do this] kept building up in the last 10 years,” said Ildefonso Bagasao, president of the Economic Resource Center for Overseas Filipinos (Ercof) Philippines Inc. Ercof is a non-profit organization that assists mainly OFWs from Europe in planning their finances, specifically to start rural-based enterprises, get health insurance for their families, and legal counseling when buying real property.

Only in the last three years have concrete steps been taken to channel OFW remittances to long-term investments. And the efforts are coming mostly from non-government organizations (NGOs), rural banks, and cooperatives.

Bagasao explained that “civil society groups are the ones working at the grassroots, so they are the ones who see the gap” between what the OFWs contribute to the economy and how this could be enhanced and sustained.

Specifically, OFWs are encouraged to go beyond saving in local banks and buying their own houses and lots, but to start small businesses to support their families and develop the economies of their communities as well. This way, their remittances are used to ease poverty in their hometowns. After all, two-thirds of all OFWs come from the countryside.

In December 2004, the ADB published a study, “Enhancing the Efficiency of Overseas Filipino Workers’ Remittances.” From the data gathered, it appears that about 75 percent of what OFWs remit are spent by families on necessities (such as food, rent, and health-related expenses) and on so-called safe investments, such as life insurance, education, and savings in banks.

A fourth of their remittances are spent by families on unproductive items, such as lending to relatives and friends; throwing parties during birthdays, fiestas, and other occasions; and shopping and dining out. In an article in the magazine CFO Asia last August, Jose Sio of SM Prime, developer of the SM chain of malls, estimated that half of SM’s 1.5 million daily buyers are relatives of OFWs.

Strong Dependence

“Akala ng mga kamag-anak, napipitas lang sa puno ang pera (Relatives think that the OFWs are just picking money off trees). They don’t seem to appreciate how difficult it is for the OFWs to earn those dollars,” said Andres Panganiban, an international banker for many years before he put up the New Rural Bank of San Leonardo (NRBSL) in Nueva Ecija. His bank is a pioneer in giving realistic investment options to OFWs.

“They [OFW families] have developed a strong dependency on the remittances that even if they have enough for their basic needs, they still ask additional money from their relatives working abroad,” Panganiban added.

Estrella Dizon Añonuevo, executive director of Atikha-Kooperatiba Balikabayani, confirms this unfortunate fact, going by her experience with OFW families in communities in Laguna, Batangas, and Quezon—all in Southern Tagalog, the region with the biggest OFW population next to Metro Manila.

“In 70 percent of the cases, when a family member gets employed abroad, all other household members who used to work just stop working and depend on the OFW. Then they use up the remittances on consumption. They don’t have a long-term plan [for the remittances],” she said.

Bagasao, who was also the lead consultant for the ADB study, said that the ADB statistics on OFW savings and investments in businesses should not mislead. The study shows that “68 percent of the beneficiaries are able to save, and 87 percent of them keep their savings in a bank.” The figures also show that 19.6 percent of remittances have been used or are intended for investment in business.

But, he told NEWSBREAK, most of the savings accounts are “like payroll accounts so it’s easier for the OFWs to send money, but the money is immediately withdrawn and only the required minimum deposit is left.”

Thinking that their families would be less dependent on them if there were small businesses to tend, OFWs eagerly send home the capital for businesses that their relatives suggest but fail to sustain later, according to NGO workers interviewed by NEWSBREAK.

Most of the time what they suggest are enterprises or services that neighborhoods are already saturated with, like sari-sari stores and tricycles or passenger vans; enterprises that they don’t have the skills to manage properly, like small poultry farms; or those with promises of big, quick returns, such as fraudulent pyramid marketing schemes.

“A lot of times, the OFW would send money to buy a tricycle. When she comes home, what is left of it is a bicycle. She sends money to start a piggery. When the town fiesta comes, the family wants to celebrate in a grand way, so they slaughter the pigs and have lechon,” Panganiban said.

There are no formal studies on this phenomenon, but Bagasao said there are “hundreds of anecdotes” about failed businesses run by OFW relatives.

“Whether remittances pass through banking channels or not, they eventually end up in the country of origin with family members, who often have much discretion on how these amounts are spent. Relatives who lack the proper business attitude or appreciation for the hard-earned income often are asked to manage small enterprises, which eventually fail,” the ADB study noted.

Pooled Investments

The strategy that NGOs, rural banks, and cooperatives have adopted is to pool the money of OFWs into feasible enterprises that involve several households without making them compete with each other. The investments can range from P30,000 to P500,000. These groups identify the market for goods to be produced, then train the families of investing OFWs and turn them into suppliers to big buyers.

“You have to make it easy for OFWs to venture into an enterprise,” said Añonuevo. Otherwise, they will remain in this perpetual cycle of financing poorly identified businesses that their untrained families will mismanage.

Atikha-Balikabayani, for example, subscribes to the trade and industry department’s one-town-one-product program. It has made OFW families from San Pablo City in Laguna invest in manufacturing coconut-based products, such as virgin coconut oil, handmade paper, and nata de coco. Its client-community in Mabini, Batangas, is into bamboo craft. It also makes soaps and lotions from natural ingredients, to complement the local tourism industry. The community in Candelaria, Quezon, is preparing to start its organic farming business.

Panganiban said that another key factor for OFW investments to succeed is to entrust their management to financial experts and cooperatives, and to the OFWs themselves when they return home—not with their families who have been spending their remittances on consumer items.

“Put the money where they cannot immediately be withdrawn, like pension funds, or in [pooled] businesses that are managed by cooperatives,” he said.

Panganiban’s NRBSL is about to start helping OFW families in Samar raise and market crabs, prawns, and other seafood. For a capital of P80,000, which a family can recover in two months’ time, they will have a sure income of P20,000 per pond every month after that.

OFWs can also put their money in rural banks that extend credit to small entrepreneurs, advised Bagasao. “The theoretical computation is that every P100,000 used for micro-finance creates 20 enterprises in one year.”

Unfortunately, the groups that offer these services don’t have enough funds to reach more OFWs, while “the government, which has the funds, doesn’t use them judiciously,” Bagasao said. The government has given a negligible push to this campaign.

Sense of Security

There is no single program from which the agencies serving OFWs get direction to achieve this goal. The labor department only gives pre-departure orientation seminars to overseas workers, where basic information on financial instruments and possible business ventures are among the topics discussed. Some OFWs attest that investment opportunities are not discussed in these government-sponsored seminars.

Panganiban said: “The government should send financial advisers to OFWs to orient them about investment opportunities in specific provinces. The information they will get will make them strive harder to save.”

“Most banks still look at OFWs as dollars, as markets for their products,” Bagasao said, and have yet to offer products and services to help OFWs start small businesses.

So far, Planters Development Bank has a program that introduces migrant workers to franchised businesses. The Land Bank of the Philippines in September opened an OFW Center in its building in Makati, where it gives OFWs and families orientation seminars similar to the pre-departure lectures provided by the labor department. It gives information on investment opportunities, although it’s not clear who will provide the training for interested parties.

Although “there’s great promise” in the still very young civil society-private sector partnership in turning OFWs into successful entrepreneurs, Bagasao said “it will take some time and a lot of experimenting” to maximize this.

But it’s a challenge—in fact, a requirement—that needs to be addressed immediately. The OFWs, called “bagong bayani” or new heroes, for their dollar remittances that keep the Philippine economy afloat, do not intend to grow old in foreign lands. Give them a sense of security that their years of hard work abroad can pay off here, Panganiban said, “so they can come home for good.”

From latest edition of Newsbreak