For this post, we get back to the OFW bank issue by offering a sort of brief rebuttal to the first two (2) objections of Bangko Sentral and the Department of Finance on the proposal of Vice-President Jejomar Binay for the formation of an OFW bank way back in 2010.
We recall that Vice-President Binay, way back on November 22, 2010, sent a formal letter to President Benigno Aquino III recommending the establishment of an OFW bank which “will provide an alternative yet viable economic financial and remittance institution for our kababayans at the local and international levels”.
As reports go, the Bangko Sentral and Department of Finance “had advised the Palace against the scheme, citing issues of cost, redundancy, administrative and regulatory unwieldiness, and sending signals that discourage current private-sector competition which, they claimed, already benefits OFWs by way of driving down transaction costs.”
President Aquino then, upholding the position of government regulators, did not approve the OFW bank proposal.
Vice-President Binay, despite the disapproval, vowed to work on with the OFW bank initiative “to encourage savings and investment among OFWs”.
It is presumably in this light that the Vice-President commissioned the Technical Working Group (as I mentioned in previous posts) to prepare a study for the establishment of an OFW Development Bank.
For purposes of this post, I assume that the recommendation of Vice-President Binay is for an OFW bank along the same lines as the following report from dailies:
“The OFW Bank project was first conceptualized in 2006 to consolidate the financial assets and operational capabilities of government financial institutions like the Land Bank of the Philippines (LBP), Development Bank of the Philippines (DBP), Overseas Workers Welfare Administration (OWWA), and the Philippine Postal Corporation (PPC), and the Philippine Postal Corporation (PPC), together with its subsidiary Philippine Postal Savings Bank (PPSB), as lead entities towards the creation of a financial institution for overseas Filipinos that is less expensive and more focused in its direction and services.”
Now for the brief general rebuttal on the first two (2) points raised by the government regulators (We shall take up the rest of the objections in a future post).
The Issue of Cost
Forget about the previous (2006) proposal involving Land Bank, DBP, Philippine Postal Corporation and the Philippine Postal Savings Bank. The solution is simply to buy an existing savings or thrift bank to jumpstart and start the OFW bank rolling. This is not a big deal as I am sure it is not difficult to find a small bank up for sale which should be based in Metro Manila or nearby.
And why should they worry about costs? OFWs bring in $20 billion in foreign exchange earnings annually. OWWA has billions of funds in trust for the OFWs which I think can be used for seed money for the bank, i.e. if the Administration is determined enough and creative enough to face whatever technical hurdles that lie in the way. As the saying goes, “if you are determined, you will do whatever it takes”.
The Issue of Redundancy
The problem with most proposals for establishing an OFW bank is that they dwell so much about “remittance” issue as if this is all there is to the whole OFW bank issue. They want to reduce the cost of remittance to this or to that, etc. They want to reduce something that has long been reduced to the bare bones.
Yes, the remittance issue is redundant. This has long been taken cared of and the private sector has more than amply provided for this.
Remittance is never the problem that elicits the need for an OFW bank. The insistence on remittance as the lead reason for establishing an OFW bank is a product of a shallow thinking on what ails the OFW on the economic side.
This is a product of thinking by OFW bank proponents who are either not OFWs themselves or who have only a very superficial view of the OFW economic problem which is massive. I can only surmise that the prime stakeholders on this issue – the OFWs themselves- were either totally left out or not properly consulted in drafting the OFW bank proposal.
First Pacific/PLDT Group tycoon Manny V. Pangilinan recently said a line about mining which has become famous: ”Mining is not the enemy, poverty is”. Well, paraphrasing MVP: “Remittance is not the enemy, economic reintegration of returning OFWs is”.
Economic reintegration of returning OFWs – this is where an OFW bank is so badly needed. An OFW just returns home for good after years of toil in a foreign land and wants to put up a business. But he has nowhere to turn to for guidance, assistance and additional capital.
Come to think about it, we have POEA -an institution taking care of departing OFWs and we have OWWA which has welfare officers at worksites. But for returning reintegrating OFWs needing financial guidance and assistance, is there any institution taking care of this?
None, nada. Forget OWWA, it’s never in its mandate to handle economic reintegration.
We are very good and efficient at sending OFWs abroad and yet we are very rude and irresponsible to them by not having an institution that takes care of them when they come back.
It is as if OFWs have outlived their usefulness when they return and they are now left to fend for themselves. “Pagkatapos pinakinabangan, basta na lang pabayaan.”
There is no telling how many billions of pesos of resources of returning OFWs are lost annually to scammers, Ponzi schemers, credit card induced overspending, non-paying borrowers, and outright business failures.
Needless to say, if these billions of resources are intelligently tapped through government help via an OFW bank, who knows the economic multiplier effect thereof?
I have talked about this at length in “Two Wheels for the Reintegration Cart, a Concept Paper on OFW Economic Reintegration”.
It is in this dire need for an institution to take care and help returning/reintegrating OFWs that an OFW bank can provide and fill in the necessary gap. It is not a complete solution but it’s a good start.
They need economic guidance, the OFW bank should provide seminars and one-on one financial counseling; they want to know where they should put their savings, the OFW bank should have higher-yield savings/time deposit programs for that; they need a loan for a business, the OFW bank should be able to guide them on which businesses to go into and should provide the loan with minimal requirements. And so on.
In fact the OFW bank should have a program for every conceivable situation that relates to OFW economic reintegration: savings generation; investment/business literacy; higher-yielding savings/time deposits; low-interest loans for micro-business; livelihood loans; soft bridge-loans for distressed workers wanting to go back abroad.
The focus should be on economic reintegration of OFWs, not on the redundant issue of remittance.
Having said that, it does not necessarily mean that OFW bank will not get into remittance business at a later time. Let there be an OFW bank first, then we can talk about remittance business.
My point is to forget about remittance issue in the meantime because this is not what is most relevant. Furthermore, this remittance issue will never sell at this early stage and insisting on it will only strengthen or magnify opposition.
And where should the seed money come from? OWWA. The capital should come from OWWA and the bulk of OWWA funds should be deposited thereof, providing either low-cost or non-interest-bearing deposits.
“Render unto Ceasar what belongs to Ceasar and render unto OFWs what belong to OFWs” (with due apologies for taking liberties with a Biblical passage).
OWWA funds belong to OFWs so what’s the big deal in putting these in an OFW bank to primarily serve OFWs?