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Leveraging Remittances for Development and Poverty Alleviation Mr. Diwa C. Guinigundo Deputy Governor Bangko Sentral ng Pilipinas International Forum on Remittances 2007 Washington D.C. 18-19 October 2007. Global trends in migration and remittances Development perspective on remittances

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  1. Leveraging Remittances for Development and Poverty AlleviationMr. Diwa C. GuinigundoDeputy GovernorBangko Sentral ng PilipinasInternational Forum on Remittances 2007Washington D.C.18-19 October 2007

  2. Global trends in migration and remittances Development perspective on remittances The Philippines experience with remittances and its impact on development and poverty alleviation Policy thrust of the BSP to harness remittances for development Outline of Presentation

  3. Global Flows on International Migrant Remittances(US$ billion) Source: Migration and Development Brief 2, World Bank Development Prospects Group

  4. Remittance-Receiving Countries By Region (2006) Source: World Bank Global Development Prospects 2006

  5. Development Perspective on Remittances • Macroeconomic impact • Strengthen BOP position • Raise international reserves • Increase domestic consumption • Contribute to Financial sector development Remittances • Household impact • Alleviate poverty • Higher Human capital investment • Improve living conditions

  6. An estimated 8.2 million Filipinos are now working or living abroad Philippines receive large remittance inflows from overseas Filipinos (OFs) Migration and Remittances: The Philippine Case

  7. Top Remittance-receiving Countries, 2006(in US$ billions) Source: World Bank Global Development Prospects 2006

  8. Growth in OF Remittances • Average annual growth rate of 11.7 percent between 2000 and 2006 • Expected growth rate of 10 percent in 2007 Source: Bangko Sentral ng Pilipinas

  9. Macroeconomic Impact of OF Remittances 1/ Cash remittances coursed through the banks 9

  10. Food, utilities and other expenses for household operations Education, medical/health care expenses Consumer durables Improving or building housing; buying real estate Loan repayments (including loans to pay for migration costs) Income-generating or livelihood activities; Savings Allocation of remittance income

  11. Empirical Evidence on the Impact of Remittances on Poverty in the Philippines • Household surveys show that a 10 percent increase in remittances: • reduces poverty rate by 2.8 percent; • increase school attendance by 1.7 percent; • decrease child labor per household per week by 0.35 hour; and • raise entrepreneurial activities by 2 percent.

  12. Empirical Evidence on the Impact of Remittances on Poverty in the Philippines (contd) • Remittances positively affect the well-being of the poorest households (bottom 20 percent; 1st quintile); • Magnitude of the impact of remittances rises with the income quintiles (2nd-4th quintiles); • Effect of remittances becomes insignificant for the richest 20 percent of families.

  13. Principles to Improve the Remittance Environment • Enhance transparency and promote competition in the remittance market • Improve access to financial services 13

  14. What the BSP Has Done • Promoted competition and transparency • Required banks and non-banks to post remittance charges and other relevant information in institutions’ premises and websites • Launched the OFW web portal linking to banks’ relevant web pages on remittance services and products, branches and remittance centers, services fees/rates 14

  15. Survey of Remittance Charges 15

  16. What the BSP Has Done (contd) • Improved payment and settlement systems and access to financial services • Authorized rural banks to accept foreign currency deposits • Approved interconnection of 3 ATM networks (Megalink,Bancnet, Expressnet) • Approved use of alternative modes of remittances, e.g., internet, short messaging system • Clarified the acceptable IDs for financial transactions particularly for OFs’ beneficiaries in remote areas 16

  17. Procyclicality of OF remittances Remittances cannot be treated as buffer for macroeconomic shocks OFs motive for remitting is predominantly profit-driven or investment related Channeling Remittances to Productive Uses

  18. Channeling Remittances to Productive Uses (contd) • Promoted financial learning • Conducted Financial Learning Campaigns (FLCs) in 13 major cities around the country since February 2006, with 2 more in 2007 18

  19. Microfinance advocacy Assist in the channeling of remittances to productive uses in rural areas Facilitate access to basic financial services Channeling Remittances to Productive Uses (contd)

  20. Website: www.bsp.gov.phE-mail: bspmail@bsp.gov.ph

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