An Independent View
FOR MANY families, remittances from overseas are vital in avoiding poverty. Over the years, remittances have shown a study increase. It is projected that in 2018, remittances from overseas Filipino workers (OFWs) will amount to US $35 billion. This is approximately 10 percent of our Gross Domestic Product (GDP).
The Philippines is the third largest remittance-receiving nation. India, $69 billion and China, $64 billion, both with a population in excess of ten times that of the Philippines, are the two largest remittance-receiving countries.
A cause for concern is the level of charges imposed by financial institutions on remittances. These charges are an average of seven percent of the amount remitted. In the case of the Philippines, this means that those who facilitate money transfers obtain $2.45 billion annually. Since remittances are sent to those households which are at or near the poverty line, $2.45 billion (approximately P127 billion) has a significant impact on financially-straitened families.
The United Nations (UN) defines absolute poverty as existing when a family’s per capita income is less that $1.90 (P100) per person per day.
Bank charges of P127 billion annually, therefore, represent the equivalent of 3.5 million people without any income being able to live at the subsistence level.
In other words, if there were not bank charges on remittances, our poverty level would be greatly reduced.
No-one accuses banks of altruism, so to expect them to waive charges on remittances is unrealistic. Nevertheless one of the UN’s Sustainable Development Goals relating to reducing inequalities is for the charges on remittances to be reduced from seven to three percent. If this reduction were to be achieved, the additional funds accruing to families in the Philippines who receive remittances would be increased by $1.4 billion (P74 billion). A tidy sum.
UN goals relating to poverty have not been achieved by the Philippines.
In 2000 the UN’s Millennium Development Goal was to reduce the poverty level 50 percent by 2015. In the case of the Philippines, this meant reducing our poverty level from 33 percent of the population in 2000 to 16.5 percent in 2015. A subsequent UN goal is to reduced the poverty level by a further 50 percent by 2030. To achieve this target our poverty rate would have to be 8.25 percent or lower. Our poverty level is currently around 20 percent.
We are indeed reducing poverty through not by as much as successive governments would wish. A current cause for concern is the increasing rate of inflation with the price of fish leading the way.
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Can banks be persuaded to reduce their charges? I doubt it. The UN needs to persuade the central banks of its member states to recognize the importance of remittances to a financially-challenged segment of the population of developing nations. In turn, central banks need to instruct relevant financial institutions to reduce charges on remittances. Can this be done? Unlikely. The central bank in many countries, including the Philippines, does not obtain compliance from the financial sector.
We need a strongman./PN
