Recipients of remittances in the Philippines run out of money because of poor financial planning and expenses made on non-essential luxury items, according to UniTeller, a US-based international payment company.
UniTeller said in a report titled “Both Sides of the Coin: The Receiver’s Story” that a big part of remittances received by Filipino households were used for day-to-day family needs (25 percent) and bill and loan repayments (25 percent).
“Also, much smaller sums are being apportioned to areas that may further economic progress, including education [13 percent] and savings [13 percent], and relatively high amounts are spent on non-essential luxury items [7 percent],” it said.
“This poor financial planning is exacerbated by almost one-in-five [19 percent] of remittance recipients in the Philippines saying they regularly run out of money,” it said.
UniTeller said the value of monthly remittances from family and friends working abroad averaged more than 2.5 times the monthly incomes of recipients.
The report is the first installment of UniTeller’s research into the behavior and attitudes of low-income remittance recipients in the Philippines, India, Indonesia, and Vietnam regularly receiving money from senders in Hong Kong, Singapore, and the United States.
It said the average monthly remittance value sent back by low-income overseas Filipino migrants was about $446, compared to their receiver’s average monthly household income of $175. The Philippines is the fourth largest remittance destination in the world with $34 billion of inflows in 2018.
“With global mobility increasing, remittances are playing a more important role in the livelihoods of low-income families and communities. As the reliance on remittances grows, a key challenge is ensuring this income translates to building sustainable wealth,” said UniTeller chief executive Alberto Guerra.
Nearly three-quarters or 72 percent of Filipino recipients said they would reach out to the sender when they run out of the money they receive, with 53 percent saying they would ultimately have to forgo day-to-day needs if this happened.
“The survey further finds that a reliance on remittances may also be placing increasing stress on the relationship between senders and receivers. Two-in-five [41 percent] report that the expectation of receiving remittance places emotional stress on their family and over half [54 percent] say that it impacts their relationship with the sender,” it said.
When it comes to who calls the shots on financial planning, 82 percent of receivers said they have the final say on how remittance funds are allocated.
“This suggests a considerable level of trust in the decision-making capabilities of the recipients. This view is supported by the survey result that 93 percent of recipients kept a close track of their savings and expenses,” it said.
Although the report highlighted that receivers do not allocate enough of the remittances to savings, there are untapped opportunities to increase their capacity in building sustainable wealth. Three-quarters (75 percent) of regular remittance recipients in the Philippines said they were extremely eager to learn and cultivate good financial habits.
