Asian central banks to stop illegal remittances by overseas workers

Manila: Asian central banks have called for lower bank rates, better incentives to recipients of overseas remittances, and better regulatory system from regional central banks to encourage overseas workers to stop sending their money to relatives back home through illegal remittance agencies, a local paper said.

About 30 to 40 per cent of overseas Filipino workers (OFWs), for example, are using illegal remittance agencies other than banks and legitimate remittance centres to send money to their relatives in the Philippines.

“The illegal channels are much bigger than the legal channels for money transmission,” Dilshan Rodrigo, chair of the Asian Bankers Association (ABA) advocacy committee, told the Inquirer at the end of a two-day ABA meet in Manila.

Since illegal remittance centres are not registered, they escape regulation, and could expand black market for money transfers.

In response, Asian central banks must slap tougher penalties on illegal centres or strengthen mechanism to make it difficult for them to operate, said Rodrigo, adding that Asian Central Banks must do more to encourage the growth of legitimate remittance channels.

At the same time, Asian banks across the region must provide incentives to sending-clients by reducing remittance facilitation, in order to get more clients and to corner the remittance market, said Rodrigo.

Moreover, Asian banks must also offer investment opportunities and more financial products to clients who receive remittances from abroad, said Rodrigo.

“If [overseas] funds come through banks, there should be more opportunities for (that) money to be used for productive purposes. Recipients of remittances should be encouraged to avail themselves of savings and investment products of banks or to engage in entrepreneurship,” argued Rodrigo.

The Philippine government has been developing programmes to help private families channel their overseas money for business activities.

Remittance of OFWs is expected to rise to more than $21 billion by end of 2012, five percent higher than the $20 billion sent to their relatives in the Philippines in 2011, the Philippine Central Bank said.

The amount of remittance could be higher since 30 to 40 per cent of OFWs still use illegal remittance centres, ABA said.

The Philippines is the fourth biggest recipient of remittances in the world after China, India, and Mexico. The money sent from abroad has kept Philippine economy afloat.

More than 10 million OFWs are based worldwide.