Session 2: Remittances and Household Investments

Presenters
Akira Murata
JICA Research Institute, Japan
Alvin Ang
Ateneo de Manila University, Philippines

Jeremaiah Opiniano
University of Santo Tomas, Philippines

Structure of presentations
1. Remittances and Household Finances
(Findings from previous studies)
2. Remittance Investment Climate Analysis in
Rural Hometowns (RICART) in the Philippines
3. JICAs New Research on Remittances and HH
Finances in the Philippines and Tajikistan

Session 2: Remittances and Household Investments

1. Remittances and Household Finances

Akira Murata
JICA Research Institute, Japan
Email: Murata.Akira@jica.go.jp

Not straightforward to measure the effect of

remittances on consumption/investment
(Murata, 2011)
Remittances are..
Fungible and difficult to separate
remittances from other sources of income.
Difficult to be divided into the amount of
each expenditure item.

Using HH expenditure surveys would be

appropriate to investigate the effect of
remittances on changes in HH expenditure
patterns.

Findings from Previous Studies based on HH

expenditure surveys.
Author(s)

Country Findings about overseas remittance

receiving HHs consumption and
investment patterns

Zarate-Hoyos (2004)

Mexico

Adams (2005)

Guatema spend more on education, health and

la
housing, while less on food, consumer
goods, and durables.

Taylor & Mora (2006)

Mexico

have higher marginal budget shares for

investment, health and durables, while
smaller shares for food and housing.

Castaldo & Reilly (2007)

Albania

spend, on average, a lower share of

their expenditure on food and a higher
share on durables.

Ang, Jha, & Sugiyarto

(2009)

Philippin
es

have higher marginal budget share for

food, while no significant influence on
education and health care.

Murata (2011)

Philippin
es

have higher marginal budget share for

education.

have
higher
investment.

budget

shares

for

Migration can affect HH financial

decisions through
3 channels
(Clemens & Tiongson,
Migration
can
2014):
1.
Alleviate borrowing constrains.
(by receiving remittances)
2. Reduce non-remittance income.
(by changing the home production technology
or
by reducing labor supply by non-migrants)
3. Change HH financial decisions.
(by changing who makes such decisions)

However, the net effect of migration on

consumption, savings, and investment is
ambiguous.

Do remittances increase borrowing?

(Ambrosius and Cuecuecha, 2014)
Using Mexican Family Life Survey in 2002 &
2005
7,572 HHs from 149 municipalities
Concerned selection bias & reverse causality
Investigated whether the receipt of remittances
facilitates taking up loans from formal or
informal sources.

Positive & statistically significant effects of remitt

on borrowing and on debts.

Remittances facilitates taking up loans

through
2 effects (Ambrosius and Cuecuecha,
2014)

Demand-driven effect
HHs have a lower risk-aversion because they
may depend on remittances to pay their debts.
Supply-driven effect
Lenders may accept remittances as collateral for
loans or consider HHs to be more creditworthy
because they have an additional and relatively
stable source of income.

Can you help someone become

financially capable?
A Meta-Analysis of the Literature
(Miller, Reichelstein, Salas, & Zia, 2014)
Reviewed 188 papers on financial education
interventions, designed to increase consumers
financial knowledge (i.e. financial literacy) or
skills, attitudes, and behaviors (i.e. financial
capability).

Financial education can have a positive impact

savings and record keeping.

What is the most effective policy to

improve access to finance among lowincome borrowers?
Important!

Responses from the 2012 Survey of the Financial Development Barometer

Source: 2014 Global Financial Development Report

Savings by and for the poor: a research

review and agenda
(Karlan,
Zinman,
2014) and finance
SavingsRatan,
help HHs&smooth
consumption
productive investments in human and business
capital.
However, the following five categories of barriers to
saving exist for many, particularly the worlds poor:
(1)
(2)
(3)
(4)
(5)

Transaction costs (e.g. account opening fees)

Lack of trust and regulatory barriers (e.g. identity registries)
Information and knowledge gaps (e.g. low financial literacy)
Social constraints (e.g. intra/inter-HH bargaining and sharing)
Behavioral biases (e.g. live for today, commitment, inertia)

Despite these barriers, the poor have substant

(latent) demand for savings .

 HHs surveys indicate that the poor do have some surplus

that they use for non-essential expenditures (Banerjee
and Duflo, 2007).
Similarly, detailed financial diary studies document
complexity in poor HHs financial portfolios and highlight
the demand for small irregular flows to be aggregated
into lump sums for HH or business investment
(Rutherford, 2000; Collins et al., 2009).
Without available or affordable formal savings, the poor
often save under mattresses, in informal groups, and/or
in livestock (Karlan, Ratan, & Zinman, 2014).
MFIs are broadening their initial focus on microcredit to
now include microsavings. There are 72 million
microsavings clients to date, while 94 million microcredit
clients (Microfinance Information Exchange, 2012).

Way forward:
First, need a sufficiently deep understanding
of remitters and HHs finances and their
decision-making, local market functioning,
and potential barriers to saving/investment.

Then, develop and test predictions around

heterogeneous responses to interventions,
particularly
about
gender,
intra-HH
bargaining power, risk preferences, and
behavioral factors.

Some ideas for developing innovative

financial products to leverage HH and
community remittance investments
(1) Reducing transaction costs
Subsidizing the costs of opening formal savings accounts
(Dupas and Robinson, 2013a in rural Kenya; Prina, 2013 in
Nepal).
A deposit collection service to micro-savers of a rural
bank (Ashraf et al., 2006b in PH).
(2) Removing regulatory barriers
Providing assistance and a fee waiver to obtain a formal
ID card (Chin et al., 2011 in Mexico).
(3) Narrowing information and knowledge gaps
Using RCTs to measure the effect of financial literacy
trainings, e.g. a video-based financial education program
(Carpena et al., 2011 in India).

Some ideas for developing innovative

financial products (continued)
(4) Understanding social constraints
Taking into consideration gender preferences, e.g. female
participation in ROSCA (Anderson and Baland, 2002 in
Kenya).
(5) Incorporating behavioral biases
Offering a commitment savings account (Ashraf et al.,
2010 in PH).
Customizing new products and features, e.g. an option to
pay for next seasons fertilizer input at harvest time (Duflo
et al., 2011) and delaying CCT payment until school fees
are due (Barrera-Osorio et al., 2011).
Using messaging to encourage savings, e.g. reminders to
save (Karlan et al., 2012 in Bolivia, Peru, and PH).

Remittance Investment Climate

Analysis in Rural Hometowns (RICART)
Institute for Migration and
Development Issues (IMDI)
http://almanac.ofwphilanthropy.org

Dr. Alvin Ang

Ateneo de Manila University

Mr. Jeremaiah Opiniano

University of Santo Tomas

Background to the
study

RICART: stands for Remittance Investment

Climate Analysis in Rural Hometowns
A mixed methods research tool intended to
determine the conduciveness of the rural
hometowns of overseas migrants (found in
origin countries) for investment.
Born in 2011 (Bogota, Colombia): RICART won
first prize (Japanese Award for Outstanding
Research in Development category)
of the
2010 Global Awards and Medals Competition,
organized by the Global Development Network
(GDN, www.gdn.int).
Ministry of Finance

An Anonymous
Catholic donor

PHL overseas
migration
An emerging
and
development
economy for the
last six years

US$billion

Questions

Anything left with

the diasporic

What about rural areas

where 2/3s of Filipinos

Annual
growth
rates

Context: Migrant
money
and the rural
hometown

Remittances are a type of financing

rooted on people and institutions
that have links with origin
communities (Ang and Opiniano)
Bridge the disconnection
Investment needs for development and
poverty alleviation in the rural hometowns;
Stakeholders' agenda; and
Hometown empathy of overseas Filipinos.

RICARTs central question

How remittances
of overseas
Filipinos from rural
hometowns can be
best directed for
investment and
development
finance?

Financial
literacy
of
migrants and their families
Remittance behavior (i.e.
sending of remittances)
and remittance use
Impacts of remittances on
households,
the
hometown,
and
rural
economic activities
Rural income generating
activities
Rural investment climate
Financial intermediation in
rural hometowns

RICART round 1
Magarao
in
Camarine
s Sur
province
(fifth-class
Maribojoc in
income
Bohol
town)
province
(fourth-class
income town)

RICART rounds 2 & 3

Pandi in
Bulacan
province
secondclass
income
town)
Guiguinto
in Bulacan
province
(first-class
income
town)

To be presented today

Findings from Pandi, Bulacan

Select findings from surveys (remitters and
migrant households) in three municipalities
Local economic competitiveness of Pandi
Limitations: Limited number of remitterrespondents even if seasonality issues for

Framework: Remittance
Investment Climate (ReIC)

Methodology
QUAN + QUAL simultaneous design, meaning both
quantitative and qualitative methods were simultaneously
employed [Teddlie and Tashakkori, 2009: 143] and data
analysis is on equal footing.
QUAN (quantitative): Survey of migrant remitters, migrant
families and non-migrant families who should be physically
present in the rural hometown.
QUAL (qualitative): Rapid rural appraisal (RRA), looking at
the hometowns socio-economic and business/investment
conditions (key informant interviews, secondary data
collection within and outside of the hometown, focus group
discussions, field visits); Guided by a framework on local
economic competitiveness done by the PHL government

Global
Competitiveness
National Economic Development
And Competitiveness
Regional Economic Development
And Competitiveness

QL Processing
of RRA data:
Philippine
framework on
local
economic
competiveness

Regional
Local Economic
Development

RICART-Pandi: Number of
income earners in the
households

Household with migrants tend to have more

working people

28

RICART-Pandi: Monthly family

income

Average income is
about 8,000 to
15,000
Nonmigrant
families

Migrant
Families
Migrants
29

RICART-Pandi: Level of education

Migrant families have more
education

RICART-Pandi: Occupations
of townmates overseas

31

Some contextualizing:
Survey on Overseas Filipinos
(SOF)

Some contextualizing:
Survey on Overseas Filipinos
(SOF)

RICART-Pandi: Average remittances

34

RICART in three
municipalities:
Financial literacy test

RICART in three
municipalities:
Financial literacy test

Basic
finance
Concepts
Interest
rate
Inflation

Migrant families (%) Migrant remitters (%)

Magara Mariboj Pandi Magara Maribojo Pandi
o
oc
o
c
63.3
40.5

61.3
33.9

62.5
60.4

68.1
72.5
45.0

81.8
27.3

66.0

Back to RICART-Pandi: What

affects your financial
decisions?

Migrant
families

%
Changes in the prices of
houses / lots / properties
Changes in the prices of land
Changes of interest rates on
deposits
Changes of interest rates on
loans
Changes in the inflation rate
Changes in the level of public
pensions, benefits and tax

Remitter Nons
migra
nt
famili
es
%
%

9.0

6.9

5.8

7.2

6.9

5.0

4.8

5.6

2.2

13.2

11.1

15.8

21.6

22.2

19.4

3.0

1.4

4.3

RICART-Pandi: Where do you

get ideas about handling
money?

38

RICART-Pandi: Do you need help

in handling money?

39

RICART-Pandi: How do you

assess your skills in handling
money?

40

RICART in three towns:

Savings
Respondent group

% of total
Average
respondent savings (PhP)
s who
answered
Remitters
75.0
17,126.28
Migrant families
49.4
5,075.74
Non-migrant families
43.5
3,974.29

Comparison of average Remitters

Migrant
savings, in PhP
families
(RICART rounds 1 and
2)
Magarao, Camarines
19,337.87
13,293.88
Sur
Maribojoc, Bohol
11,939.07
3,312.93
Pandi, Bulacan
17,126.28
5,075.74

RICART-Pandi:
The financially-included

Pandi, Bulacan has three rural banks and 17

RICART-Pandi: If you have extra

for investments, where to put it?

RICART-Pandi: Financial
services wanting to know
more of

Overseas Remitters

Migrant Families

Non-Migrant Families

RICART-Pandi: Those who have

businesses in the hometown

60
%

58.2
%

56.5
%

RICART-Pandi: Current businesses

in the rural hometown

Business tax collections

Who performs better?

RICART-Pandi: Perceptions
of hometowns investment
climate constraints
MIGRAN
T
FAMILIE
S
Cost of road
access
Access to power
Possibility of
borrowing from
family, friends,
etc.

NON-OVERSEAS
FAMILIES

Cost of
electricity
Nearness
of Pandi
to target
markets

Cost of labor
Rules by banks in
lending money
Interest rates
Possibility of
borrowing money
from financial
institutions

(Gender) Means test - Pandi

Variable
OFW main occupation
OWWA1 member
Household income
Length of time receiving remittance (years)
Age
Current status of OFW in the migrant country
Mode of remittance
No. of times receiving remittance
Who decided on the remittance channel
Average remittance received
OFW Education (as told by respondent)
Savings account (as told by respondent)
Total household monthly expenditure
If household saves monthly
Total household size
No. of income earners in the household
Household with business enterprise
Where unspent money is placed?
What to do if money runs out?
Monthly payments
Rent expenditures
No. of observations

Mean (male)
4.978723
1.489362
2.73913
5
39.021
1.212766
4.1555
4.27659
1.8723
17,954.55
10.744
1.468085
18,154.41
1.425532
4.44680
2.08510
1.617
4.294
4.12766
1,344
0.000
47

Mean (Female)
4.709677
1.90625
2.40625
4.53125
40.25
1.1875
4.1
4.3125
1.9375
10,320
6.781
1.6875
21,633.77
1.625
5.34375
2.1875
1.531
2.7037
3.40625
458
210.9
32

T-value
0.3950
-1.9749*
1.0908
0.9203
-0.4987
0.1970
0.0706
-0.1559
-0.3853
2.5255**
1.4305
-1.9749*
-0.8205
-1.7579*
-1.3306
-0.4235
0.7474
2.2026**
0.9636
1.9229*
-1.8960*

(Gender) Means test - Maribojoc

Limitations / Insights
As expected: Limited number of respondents
who are overseas remitters even if the
seasonality issue in surveys had been
addressed.
Community-level phobia to financial scams thus
it proved difficult to get as many respondents.
Possibilities
from
blending
quantitative
(households) and qualitative (municipality) data.

Key messages from

RICART (e.g., in Pandi)
There is a huge market that needs insurance and
social protection
Amid presence of financial institutions, financial
inclusion is low. There is a weak link between
peoples levels of financial literacy and the
municipalitys provision of financial products and
services.
There is a need to support financial information and
literacy to spread to a broader segment of the
market.
Develop group type of funding
Pandi is an entrepreneurial town, though nearby
areas have better entrepreneurial performance.

Next steps
Further improving the methodology.
Bringing messages from research findings into
local-level policy making that may have to be
context-specific
(e.g.,
financial
inclusion,
business licensing, local investment promotion,
product development by rural financial
institutions).
As to national policy: Make national policies
understand local conditions.
Testing RICART in another origin country of
overseas migrants.

Session 2: Remittances and Household Investments

3. JICAs New Research on

Remittances and HH Finances
in the Philippines and Tajikistan
Akira Murata
JICA Research Institute, Japan
Email: Murata.Akira@jica.go.jp

Main Research Aim

To deepen our understandings of the role of
remittance on HH finances among rural HHs in the
Philippines and Tajikistan, taking into account both
formal and informal transactions based on the
detailed financial diary datasets.
Develop and test interventions (e.g. financial
literacy; provision of information on local
markets).
To provide possible policy implications for
developing innovative financial products, which
will lead to rural development, job creation, and
graduation from remittance dependent rural
economy in the long run.

Research Sites in the Philippines

Dingras in
Ilocos
Norte
province
(secondclass town)
Bansalan
in Davao
del Sur
province
(first-class
town)

Research Sites in Tajikistan

Dangara
district in
Khatlon
Oblast
(high-income
municipality)

Vakshsh
district in
Khatlon
Oblast
(low-income
municipality)

Research Framework

General Structure of the Surveys

Quantitative Methods
Household Survey (Mig HHs and Non-Mig HHs)
Migrant Survey
Qualitative Methods
Local Key Informant Interviews about financial
inclusion and local business/investment climate
(e.g. local government officials, rural financial institutions,
cooperatives, migrant associations, microfinance institutions,
etc.).

Will use Financial Diary Method

Will design the RCT for possibly effective
interventions