The Remittance Protection Bill in review


Overseas remittances are important for the Philippines. In April 2019 the Philippine House of Representatives passed what was known as the OFW Remittance Protection Bill. Here is a quick review of some of the causes and effects of this landmark development.

Remittances are worth protecting

In 2019 the Philippines received more than $35 billion in international remittances. Despite its relatively small size the Philippines ranks among the top 5 remittance receiving countries. Remittances make up 10.2% of the country’s GDP, and they continue to grow year on year.

The Philippine government has long been cognizant of the vital importance of remittances for the country’s economy. The new bill is merely another step in a coordinated long term effort to make remittances faster, simpler, and cheaper.

Terms of the bill

Remittance fees to the Philippines are already among the lowest in the Asia-Pacific region. However, remittances from GCC countries cost substantially higher. The Remittance Protection Bill seeks to improve these. It has many interesting features. According to information provided by the Philippine government’s Press and Public Affairs Bureau, the bill makes OFWs eligible for a ‘mandatory discount’ of 10% – 50% on the transfer fees. Smaller transfers are eligible for higher discounts than larger transfers. This is aimed to help the maximum number of OFWs, since most remittance transfers to the Philippines are small amounts. To protect remittance service providers from the cost of discounts the bill introduced tax deductions. Remittance intermediaries can claim these deductions based on the volume of incoming remittances they process.

The boldest clause of the bill was to set an upper limit to remittance fees. No bank, intermediary, or service provider can charge a higher fee to OFWs for remittance transfers than stipulated in the bill. Bangko Sentral ng Pilipinas (BSP), Philippines’ central bank, will be the institution to enforce it. Violators of the mandate are punishable with fines, sanctions, and imprisonment.

The bill also addressed the other side of the stakeholder equation. Several formal bodies were mandated to provide financial education to OFWs and their families. These are the BSP, Department of Finance (DOF), and Philippine Overseas Employment Administration (POEA). The training would primarily focus on financial literacy, and also encompass concepts such as investments, loans, budgeting, and so on.

In summary the bill was designed to save hundreds of millions of dollars in transfer fees, and put this money into the hands of remittance recipients.

The growing OFW community

According to the Philippine Statistics Authority more than 2.3 million Overseas Filipino Workers (OFWs) live and work outside the country. In 2019 the Philippines-US migration corridor was among the 10 largest in the Americas. The Philippines-Australia corridor is the 4th largest in Oceania. Significant populations of OFWs work in GCC countries, and in other prosperous economies within Asia. In 2018 the Philippine government signed a bilateral agreement with China. This deal will allow 300,000 OFWs to work in China.

Migration is big business in the Philippines. Significant numbers of educational and vocational training institutions are oriented toward emigration. They offer the skills and knowledge that Filipinos require to become OFWs. There are notably more women OFWs worldwide than men. The top 10 countries where OFWs live and work (in descending order) are the United States, Saudi Arabia, United Arab Emirates, Canada, Malaysia, Australia, Japan, Kuwait, Qatar, and Italy. The number of OFWs worldwide continues to grow. There is also a slow shift toward skilled migration into higher paying jobs.

Other legislations

The Remittance Protection Bill is one of many formal measures by the Philippine Government to protect OFWs and promote incoming remittances. In 2011 the country formed an Overseas Preparedness and Response Team which is a collaboration of several ministries. This team protects OFWs from exploitation and mistreatment by overseas employers. It also supports OFWs during crises. The Philippines has bilateral arrangements with several countries. These deals guarantee the continued employment of OFWs, while also ensuring their fair treatment.