CASH remittances sent by overseas Filipino workers (OFWs) in the first three quarters of 2024 reached $25.23 billion, up 3 percent from the $24.49 billion sent home in the same period last year. Analysts say these remittances remain a bright spot in the economy because they boost consumer spending, which accounts for more than 70 percent of the domestic economy's output. They also strengthen the current account and support the peso.

A recent study by the Philippine Institute for Development Studies (PIDS), however, urges policymakers to look beyond the dollar amounts and address other issues, such as the overreliance on remittances, which could create dependency, discourage local labor participation and even fuel inequality.

That study, "Long-Term Effects of Labor Migration in the Philippines: 'Napakasakit, Kuya Eddie!'" by PIDS research fellows Jose Ramon G. Albert, Aubrey D. Tabuga and co-authors, notes that family fragmentation emerges as a stark consequence of labor migration, which is further amplified by the lack of systemic financial literacy support available to young OFWs dreaming of early retirement.

"Promoting financial literacy initiatives that teach them to manage their income, savings and investments is crucial to ease their transition back into the Philippine labor market upon retirement or contract termination," the authors said.

Without such financial knowledge and appreciation, money transfers from OFW bread earners are all too often easily depleted and consumed by their families back home.

The House of Representatives' passage on third and final reading of House Bill (HB) 10914, or the Free OFW Financial Education Act, is a step in the right direction in addressing this problem. If approved, the bill will require OFWs to undergo continuously updated financial education or literacy training seminars as part of their predeparture orientation seminars and post-arrival training seminars.

It also provides overseas Filipino seafarers the option to attend these seminars at their respective points of hire or within a reasonable time after returning to the country.

Families of OFWs will also be equipped with financial education through online seminars and other feasible means.

Under HB 10914, the Department of Migrant Workers and other government agencies will be tasked to educate OFWs and their families on the topics of consumer protection, protection on mortgaged properties, avoidance of exorbitant interest on loans or debts, and credit information on micro- and small-scale enterprises to prospective lenders.

The program will also orient them about obligations and contracts, credit transactions, interests, pledges, mortgages, guarantees, and knowledge of financial products like stocks, bonds, insurance and mutual funds.

After the bill's passage in the House, Speaker Martin Romualdez said the legislation would equip OFWs with the knowledge and tools they need to secure their financial future.

"Through mandatory financial literacy training integrated into predeparture and post-arrival seminars, along with online resources for OFW families, we are creating a support system that will help OFWs maximize their hard-earned income and protect them from financial scams and pitfalls," he said.

A similar bill, Senate Bill 2792, or An Act Enhancing the Financial Literacy of Overseas Filipino Workers, is pending on second reading after it was filed in August and approved at the committee level.

In his co-sponsorship speech in September, Sen. Bong Revilla said financial literacy was a powerful tool that would keep OFWs protected, equipping them with the necessary knowledge and skills to manage their earnings, resources, investments and remittances.

In 2015, an Asian Development Bank (ADB) forum discussed how governments can make better use of cash remittances to create domestic job opportunities.

Remittances can contribute to economic growth if the receiving household saves or puts the money into the formal financial system, which would channel the money into public and private investments.

Households spend most of the remittances they receive.

Among the forum's takeaways were:

Remittances can contribute to economic growth if the receiving household saves or puts the money into the formal financial system which would channel the money into public and private investments.

Households spend most of the remittances they receive. Only a small fraction is saved, mainly due to transaction costs such as fees to open a bank account, lack of trust in financial institutions, and regulatory barriers like official identification documents that many poor people lack. The ADB noted that studies suggest more financial education helps households to save more.

The forum identified three potential areas of support: improved financial education, expanding digital finance and promoting remittance-linked capital market instruments.

It is encouraging that the bill passed by the House and similar legislation gaining support in the Senate squarely address the first of these prescriptions for growth.