Informal Remittances Sank to Seven-year Low

By Jeremaiah M. Opiniano

MANILA–PADALA, or the money brought home by vacationing overseas Filipinos here, is on its seven-year low, based on data from the Philippines’s central bank.

Migration and remittances experts call these cash —$506 million in 2007— as “informal remittances.” This includes money that did not pass through “formal” banking channels.

Usually, informal remittances are sent through door-to-door companies, in particular those without partner banks, and courier services. Increasingly, some Filipino-run money transfer organizations with door-to-door services have partnered with commercial banks.

That 2007 figure was the lowest since the BSP, following the fifth edition of the Balance of Payments manual of the International Monetary Fund (IMF), started computing the amount of informal remittances in 2001 when the total volume was $1.69 billion.

But the diminished volumes of informal remittances have been evident since 2004. From $1.71 billion that year, informal remittances went down to $1.603 billion in 2005, and $1.276 billion in 2006 (see Table 1).

The Bangko Sentral’s multiple-year data showed that the 2007 total of formal and informal cash remittances from overseas Filipinos was $14.956 billion, broken down into $14.45 billion of formal remittances and the $506 million of informal remittances.

That combined total is a seven-year high as well, as informal remittances make up 3.38 percent of the 2007 total.

That 2007 percentage of informal remittances to the total cash remittances is also the lowest. In 2001, when the combined formal and informal cash remittances reached $7.721 billion, the $1.690 billion of informal remittances made up 21.83 percent.

From 2002 to 2007, the percentage share of informal remittances to the combined total remittances dropped further (see Table 1).

The seven-year total informal remittances of $10.02 billion makes up 13.01 percent of that same period’s total formal and informal remittances, worth $76.967 billion.

In 2005, when the BSP started adopting the BOP 5 Manual of the IMF, informal remittances showed it “mitigated the downward effect of adjustment in goods imports”.

Using that same BOP 5 manual, Bangko Sentral data (see http://www.bsp.gov.ph/statistics/sdds/boprevs/imp99-07.htm) showed that total imports also had a seven-year high with $57.527 billion (from $43.827 billion in 2000).

Director Iluminada Sicat told the OFW Journalism Consortium in 2005 that BSP estimates the volume of informal remittances every time the National Statistics Office comes up with the results of the annual Survey on Overseas Filipinos so that it may determine “an under-coverage ratio” to determine the volume of these informal flows.

Indications
MELINDA dela Cruz, a migrant worker in Paris, France, told the OFW Journalism Consortium newer remittance channels run by Filipino banks and financial institutions in the last five years has made remitting easier.

Now a supervisor at a Paris shopping mall, Melinda has been in Paris for 28 years.

She recently came home for a short vacation.

Undocumented Filipinos in that city usually send money through informal channels because to their irregular status. France alone is home to some 39,000 undocumented or irregular Filipinos, the largest in Europe, says 2007 Philippine government data.

But the country has no restrictions for undocumented migrants wishing to send money home, says Filipina Lea Munnecom, who handles the outlet of Bank of the Philippine Islands and correspondent French bank Banque d’Escompte that serves some 1,000 Filipino customers monthly.

And since Filipinos in host countries like France have started queuing to new remittance companies that have partner banks in the Philippines and in the host country, Filipinos in France, says another set of data from the BSP, have remitted an eight-year-high of $54.48 million in 2007 (from $15.42 million in 2000).

Banco de Oro, BPI, Philippine National Bank (which just re-opened in 2006), Allied Bank, and Metrobank are the Philippine banks that serve Filipinos in Paris.

Remittance charges, Philippine ambassador in Paris Jose Abeto Zaide told the OFW Journalism Consortium, are among the reasons why Filipinos send through informal channels.

Remittance charges of banks in 2006 were €15 “and the three-Euro reduction this year was news,” Zaide said.

Melinda says she only sends through padala whenever she and her daughter Abby go to the Philippines every July while avoiding the summer heat of Europe.

But when Melinda’s back in her home located in a district just outside of Paris, “I have no choice but go to the bank.”

That makes her siblings here and executives of a Philippine bank’s branch in Paris, happy every month.

Table 1: Overseas Filipinos’ cash remittances and their channels, 200-2007 (in million US dollars)

Year	Thru Banks 1/	Non-Banks	Global 2/	% of non-banks to total 3/
2000	6,050	0 */	6,050	--
2001	6,031	1,690	7,721	21.88
2002	6,886	1,721	8,607	19.99
2003	7,579	1,514	9,093	16.65
2004	8,551	1,710	10,261	16.66
2005	10,689	1,603	12,292	13.04
2006	12,761	1,276	14,037	9.09
2007 p/	14,450	506	14,956	3.38