Archive

Archive for the ‘Financial Literacy’ Category

Migrant Workers Profit from Financial Literacy, Research Shows

September 7, 2011 6 comments

Click for Pdf copy: Effects of Financial Literacy Among OFWs in Seoul

Effects of Financial Education among Overseas Filipino Workers (OFWs) in Seoul, Korea:

Evidence from a Survey 

Juan “Jed” E. Dayang, Jr.

(Supervised by the University of Oklahoma)

A survey conducted by the Philippine Embassy in South Korea in 2008 showed that financial education plays a very important role in increasing the financial literacy of overseas Filipino migrant workers and encouraging specific behaviours among them.

The study aimed at evaluating the effectiveness of the Embassy’s Financial Literacy Program (FLP) demonstrated that the scores of participants improved by 47% after attending a two-hour seminar, from an average score of 3.06 to 4.5 out of a possible perfect score of 7.  See Figure 1.  At the same time, most of the participants expressed interest in initiating some form of personal financial planning and persuading their families back in the Philippines to adopt the same method.

The Financial Literacy Program (FLP) was specially designed to address the unique circumstances of Filipino migrant workers in Korea and the savings culture among Filipinos. (Please see related blog articles .)  

The Survey

The Embassy administered a survey composed of standard open and close-ended questions  to participants before and after the seminar. The pretest survey was divided into three main sections: the first part examined the participant’s general behaviour or attitude regarding financial planning; the second part tested the participant’s knowledge about financial concepts, while the last one focused on demographic information.

Behaviours promoted in the campaign were: setting short and long-term financial goals; saving money regularly; making a written budget for expenses; comparing actual expenses to the budget; paying bills on time; reviewing bills for accuracy; and comparison-shopping before making purchases. The seven questions in the second part highlighted key concepts in financial planning, namely budgets, savings, compound interest, inflation rate, risk, liquidity and insurance. The post-test, meanwhile, explored changes in the participants’ behaviour and knowledge using the same indicators.

The Respondents

More than 200 participants volunteered to take part in the survey. Forty-eight respondents successfully completed the forms, which the researcher used as the sample size of the population.    Majority of the respondents were between 26 to 35 years old, are married with children, have a college degree, earn between US$1,000 and US$1,500 per month, and have been in Korea for less than three years. Of the total respondents, 27 were men and 21 were women.

The Results

Figure 2 shows that, as a result of the seminar, respondents agreed on the need to adopt the program’s intended behaviours. The program appeared to be most effective in promoting the importance of budgets and of regularly saving. (Respondents who were undecided or who have already been practicing the intended behaviours get a score of “0”). Respondents were also asked when they intend to practice what they learned the seminar.


Figure 2.
As a result of the program, participants
believe that they should:
Average Score
Rank
Short- and Long-Term Financial Goals
1
5
Save Money Regularly
1.19
2
Make a Written Budget for My Expenses
1.33
1
Compare My Actual Expenses to My Budget
1.17
3
Pay My Bills on Time
0.9
7
Review My Bills For Accuracy
0.92
6
Comparison-shop Before Making Purchases       
1.02
4
Average
1.07
Scoring:

(2)  Strongly Agree
(1)  Agree
(0)  Undecided /Already Doing This
(-1)  Disagree
(-2)  Strongly Disagree


Figure 3 shows the urgency with which the respondents regard the changes. Respondents stated that they will begin using budgets within the following month. Comparing actual expenses to the budget, among the top attitudes which respondents also agreed was necessary, also scored high.

Figure 3.
As a result of the program, the participants will implement their learning:
Average Score
Rank
Short- and Long-Term Financial Goals
2.73
3
Save Money Regularly
2.71
4
Make a Written Budget for My Expenses
3.04
1
Compare My Actual Expenses to My Budget
2.79
2
Pay My Bills on Time
2.48
6
Review My Bills For Accuracy
2.33
7
Comparison-shop Before Making Purchases       
2.69
5
Average
2.68
Scoring:
(4)     This Month
(3)     Next Month
(2)     In 2 to 3 Months
(1)     In 6 months
(0)     Will not Do/Already doing this

The Embassy considered the willingness of the participants to share their learning with their family as an important indicator of the success of the program, since migrant workers tend to send all remittances to their families back home. The families, therefore, have direct control over the finances.  See Figure 4.

Figure 4.
As a result of the program, participants believe that they should share and encourage their families to adopt the following behaviours:
Average Score
Rank
Short- and Long-Term Financial Goals
1.23
2
Save Money Regularly
1.35
1
Make a Written Budget for My Expenses
1.13
5
Compare My Actual Expenses to My Budget
1.19
3
Pay My Bills on Time
0.02
7
Review My Bills For Accuracy
0.06
6
Comparison-shop Before Making Purchases       
1.15
4
Average
1.07
Scoring:

(2)  Strongly Agree
(1)  Agree
(0)  Undecided /Already Doing This
(-1)  Disagree
(-2)  Strongly Disagree

In this regard, the seminar convinced the respondents to encourage their families to adopt the intended behaviours, particularly in saving, setting short- and long-term financial goals, and comparing actual expenses to the budget.

Based on the results of the basic financial literacy test, respondents became more knowledgeable about basic financial management concepts. Figure 1 shows that the modal score increased from 3 to 6 out of a possible perfect score of 7. From an average of 43.75%, performance increased to 64.29%. See Figure 5.

This is clearly evident in Figure 6, which shows that the bulk of respondents scored low before the seminar but reversed the trend after. Most respondents have a college degree; the seminar therefore helped in at least reminding the respondents of concepts they learned in high school and college.

Figure 7 looks at the scores in detail. Prior to the seminar, the weakest area was in liquidity test and only 18.75% of the respondents got the correct answer. Insurance, the weakest area after the seminar, was at 45.83%. Respondents displayed consistent strength in the areas of compound interest, saving and budgeting. The greatest improvement was in liquidity score, which doubled from 18.75% to 50%.

Respondents rated the overall program between “helpful” and “very helpful.”  The instructor received the top score with 1.70, followed by content at 1.67 out of the maximum score of 2.

Conclusion  

The survey showed that financial education is effective in increasing the knowledge base of migrant workers and encouraging specific behaviours. It may be noted that although certain scores or behaviours rank lower than others, the overall impact was positive. The next research stage is to follow-up from the same respondents whether they actually changed their behaviours and what actions they did to improve their financial status. The longitudinal study can be done by getting the same respondents around six months or beyond from the program and monitoring their progress. Currently, the Philippine Embassy which started the program in 2008 have monitored the progress of the respondents through personal interviews recorded on video. The seminars laid the foundation; future programs will build on the consciousness raised by the financial literacy campaign. The survey also provided invaluable feedback which gave the Embassy an idea which concepts or behaviors needed more focus—for instance, respondents do not seem to be persuaded of the need to convince their families to pay bills on time—and, through the written assessments of the respondents, revealed the inclination of participants in terms of current difficulties and future projects.

Note:  Prof. Aimee Franklin, Director of the Public Administration Program, Department of Political Science of the University of Oklahoma supervised the study as part of the author’s Masters of Public Administration (MPA) degree research paper in 2009. Initial results of the survey were published by the Embassy News (2008).  He acknowledges the assistance of  Consul Arnel Talisayon and the support of the Philippine Ambassador Luis Cruz in conducting the survey.  He also thanks  Labor Attaché Delmer Cruz , Welfare Officer Esperanza Cobarrubias and Commercial Counselor Edgardo Garcia for their support of the FLP. The study may be reproduced and circulated with citations. A copy of the MPA paper may viewed upon request.

Advocating Financial Literacy to Overseas Filipino Workers (OFWs)


 by Juan “Jed” E. Dayang, Jr.*


During my diplomatic and consular posting at the Philippine Embassy in South Korea,  my interest in personal financial management skills development slowly intensified as my six-year tour of duty was about to end.

Books on wealth management, wealth creation, and making the most of one’s money and resources were some of the staple reading materials I studied.

In my college days, I did well, out of sheer interest, in business, finance, and accounting subjects.  The practical understanding of finances made it easier for me to make informed and effective decisions. My interest in business and finance was reignited when I was tasked to initiate the Financial Literacy Program for Overseas Filipino Workers (OFWs) in South Korea.

One of the most valuable lessons of savings and investments is having a mindset of “paying yourself first.”  It’s a simple trick.  Before spending for anything, set aside a portion for savings. Using principles of compound interest over periods of time, $1 today could be $100 tomorrow. But one has to start saving and investing today.

I also learned from the book “The Millionaire Next Door” by Stanley and Danko that America’s wealthiest were also among the most frugal people.  These wealthy Americans built their riches through simple living. They also  generated assets through active and passive incomes, the latter being generally referred to as “making your money work for you.”

As I educated myself on personal financial management, I also felt the urge to share this newly acquired knowledge to OFWs.  I thought that they would benefit immensely from financial literacy knowledge and money management skills.  They could earn active and passive incomes that could  sustain them and their families financial even when they have decided to return to the Philippines “for good.”

My initial and informal survey of Filipino workers in Seoul to find out about their saving patterns revealed that many of them will return home without savings nor sound investments. I spoke with  Natty (not her real name), who intimated that despite working for five years as a nanny, she has not managed to set-aside her own savings. The reason was that she sent all her earnings back home to help her family and relatives. She also lamented that her hard-earned income were spent on consumer goods and “unnecessary expenses” instead of investments.

The tale of Natty  is not surprising.   The Philippines has one of the lowest savings rates in Asia,  Iestimated at 19-23% of the GDP. Its neighbours Malaysia, Singapore, and Vietnam posted savings rates from to 34-40%  of GDP.  In terms of financial literacy, Filipino scored low according to the latest Citi Financial Quotient (Fin-Q) survey by Citi Bank.   In 2011, the average score was 48.9%, slightly lower than last year’s 49% but higher than 46.6% in 2008 and the 47.8% baseline score in 2007.[1]  In addition, based on a survey cited by Sun Life, “out of 100 Filipinos, 90 percent have little or no savings at all. Out of 100 Filipinos who get sick, 95 percent sacrifice their savings, out of 100 Filipino children, only 10 percent will graduate from college. Out of 100 Filipinos aged 65, 45 percent are dependent on relatives.”[2]  These results show the need for more aggressive financial literacy education programs to help Filipinos attain financial management skills.

In 2008, when Ambassador Luis T. Cruz, thought of initiating a savers’ club in South Korea, I jumped at the opportunity to take the lead in conceiving the FLP for OFWs in South Korea.   With the backing of the Ambassador, I worked with the Overseas Workers Welfare Administration (OWWA), which just launched a “return and reintegration program” for OFWs, and with the Philippine Trade and Investment Centre (PTIC).   OWWA provided funding support and assisted in preparing the training program, while PTIC promoted the “one town-one product” concept to promote OFW investments in their hometowns. With the FLP in motion, the Philippine Embassy in Seoul was the first to implement the financial literacy seminars among Embassies scattered around the globe.

The FLP, which started on March 30, 2008  was introduced to OFWs in Seoul and later to other parts of South Korea. With the help of Filipino community groups,  the Embassy was able to initiate more than a dozen seminars to more than 400 participants in less than a year.  Based on a study conducted by the author using a pre-test, post-test survey[3], the FLP improved the participants’ financial literacy and money management skills. The respondents also showed keen interest in applying their newly acquired knowledge and to share them with their families. The program has demonstrated its relevance, effectiveness and replicability.  For the past three years, the Embassy has been conducting FLPs as well as training in entrepreneurship to OFWs in South Korea.

The objectives of FLP vary from maximizing the potentials of remittances to poverty-alleviation and development in the  Philippines to forming values of thrift to OFWs.   The FLP also provides the government an opportunity to engage with Filipino communities overseas productively.

Financial literacy education to OFWs as well as to other disadvantaged sectors (for example youth and women) is timely as the world is experiencing the global financial crisis.  These days with the recession in the United States and the economic gloom in Europe, we are facing an “increasingly perilous financial world.”[4]  During these uncertain times, it becomes even more imperative to promote financial literacy and learn the value of savings, creating passive income, diversifying investments, planning for the long-term, setting-up an emergency fund or having insurance, and saving for the future by practicing frugality—concepts every individual must be aware of in good economic times or bad, with or without the current financial crunch.

Achieving financial freedom is one of the ways human beings could live a more dignified and fruitful life. By learning personal financial management skills and by sharing it to others even to just one disadvantaged person, we could help eradicate poverty.

 

 

 

 

*Jed, an advocate of financial literacy to OFWs,  initiated and coordinated the Financial Literacy Program of the Philippine Embassy in Seoul, South Korea in 2008. He made a study on the “Effects of Financial Education to OFWs in Seoul: Evidence from a Survey” supervised by the Political Science Department of the University of Oklahoma in 2009. He has continued his advocacy by conducting seminars on a pro-bono basis and recently started a blog titled “Tips on Saving Time, Money and the Planet” (http://savetimemoneyearth.wordpress.com/).


[1]Doris C. Dumlao, “Filipinos upbeat about financial future,” Philippine Daily Inquirer, June 3 2011.

[2] Patricia Esteves, “To raise Pinoys’ financial literacy is Sun Life’s advocacy ” The Philippine Star, August 15 2011.

[3] See “Effects of Financial Literacy Program to OFWs in Seoul: Evidence from a Survey,” thesis of Juan E. Dayang, Jr., Masters of Public Administration,University of Oklahoma, Norman.

[4] Elizabeth Johnson and Margareth Sherraden, “From Financial Literacy to Financial Capability Among Youth,” Journal of Sociology and Social Welfare 24, no. 3 (2007).

Financial Literacy Campaign and the Philippine Government


by Juan E. Dayang, Jr and Arnel G. Talisayon

President Benigno Aquino III, who promotes job creation rather than emigration, confers with Vice President Jejomar Binay during the 2010 Model OFW Family of the Year Awards rites in Manila (photo: Ryan Lim, GMA News).

Government Promotes  “Culture of Savings” to OFWs[*]

The number of Overseas Filipino Workers  (OFWs) has reached more than 10% of the Philippine population. The Philippines is among the top  receiver of remittances in 2010 with approximately $18.76-billion total. The remittances of Overseas Filipinos substantially help the Philippine economy and provide enough buffer for the country to weather financial  shortfalls.

This phenomenon of labour migration has become so widespread that one out  of every ten Filipinos is a migrant worker. Almost half of the total Filipino population depends in some way on the earnings of a migrant worker relative. The Philippine Government has therefore made it a point to safeguard the basic rights of the Filipino OFWs and to promote their welfare.

Nevertheless, the sustainability of this reliance on foreign remittances has been criticized time and again. Among other reasons, there appears to be a phenomenon where OFWs and their families left back home fail to improve their quality of life in the long-term, giving rise to a so-called temporary middle-class: while one member of the family works abroad, the rest of the family members enjoy substantial material comforts. This sense of sufficiency and security immediately stops as soon as the OFW finishes one’s contract and returns home.

The family then regresses to square one—at least until another family member packs and leaves to work abroad.  According to Overseas Workers Welfare Administration (OWWA) Officer Esperanza Cobarrubias, a glaring similarity in many cases is the wanton lack of savings as the remittances are used up for material acquisitions (expensive mobile phones, cars or entertainment systems) in keeping with the newfound middle class status.

Due to this phenomenon, the Philippine government had launched a financial literacy campaign to help educate OFWs on the proper way to invest their dollars and become Overseas Filipino Investors or OFIs—a positive retake on OFWs. This campaign emphasizes sound financial management in order to become better decision makers, the first step towards which is increasing awareness about setting aside  portion of one’s income for future use or, in other words, saving.

In response, the Central Bank of the Philippines (BSP) has undertaken a nationwide “Financial Literacy Campaign.” Since February 2006, the BSP has been providing resource persons and other logistics requirements to teach entrepreneurship and investments in different financial instruments and has extended this campaign to 24 cities and provinces.

The BSP has in fact launched the first of its international road shows in Hong Kong on September 14, 2008. According to the BSP, the whole-day forum underscores the importance of savings and informs participants of alternative opportunities for their remittances, such as placements in financial instruments and investments in business ventures.

“Financial education is key to unlocking the potential of remittances as a tool for development in countries like the Philippines with a large segment of the population employed overseas,” said BSP Governor Amando M. Tetangco, Jr. The program also hopes to prepare Overseas Filipinos for their eventual reintegration into the country. The BSP continues to bring its campaign to countries with a large concentration of overseas Filipinos, such as Singapore, Japan, Italy and Saudi Arabia.

The Philippine government, under President Benigno C. Aquino III, continues to underscore the need for financial education among overseas Filipinos. Thankful for the invaluable contributions of OFWs to the Philippine economy yet aware of the challenges of migration, it has consistently emphasized financial literacy as a key component in shoring up the economy and mitigating the social impacts of migration.

Note:

The Financial Literacy Campaign  of the Philippine Embassy in South Korea was initiated in 2008 by then Consul and Second Secretary Juan “Jed” Dayang, Jr. with the Philippine Overseas Labour Office-OWWA’s then Welfare Officer Esperanza Cobarrubias and  Commercial Counsellor Edgardo Garcia.   Arnel,  consul and second secretary at Embassy in Seoul  coordinates  the Financial Literacy Campaign (FLC)  to OFWs in South Korea. The FLC remains the flagship project of the Embassy under leadership of Ambassador Luis Cruz.


[*] Updated by Jed from the co-authored original publication by  Jed Dayang and  Arnel G. Talisayon, “Financial Literacy Campaign and the Philippine Government,” Embassy News(2008), http://www.philembassy-seoul.com/forms/Vol_1_Special_Issue.pdf.

For more details on the program of BSP, see: Financial Education Master Plan (FEP) Vision – Financial Education: Building Block for a Stronger Economyat: http://www.financial-education.org/document/3/0,3746,en_39665975_39667065_40280579_1_1_1_1,00.html

Financial Literacy Campaign and Overseas Filipino Workers (OFWs)

August 17, 2011 1 comment

by Arnel G. Talisayon*

Human Dimensions of Financial Education[1]

A Filipino who desires to work abroad typically gives only one answer when asked why he or she is willing to leave the family for a potentially difficult and lonely job outside the country: “Paramaka-ipon.” (“To save.”)

Abroad, five years later, with a take-home  pay amounting to more than the equivalent  salary of a highly skilled professional working  in Manila, the response to the same question is ominous. Still bereft of savings, and without a fallback career in the Philippines, the worker is forced to remain abroad while waiting for an apparently elusive financial stability.

The social cost of migration is hard to ascertain, especially when migration is seen  as an economic need, not a career option. Migration has been around for as long as humanity existed; in modern times, and in the context of the Philippines, migration generally assumes the form of at least one member of the family working abroad to provide financial support to those back home. Sadly, the breaking up of families becomes an inevitable consequence of migration as any of the father, mother, son or daughter becomes part of a foreign nation’s workforce for an indefinite period of time, or until the worker has “saved enough.”

The implications of this setup are manifold. Therefore, for any Financial Literacy Campaign to be effective in the Philippines,  it must take into account the real social impacts of migration and the cultural defaults of Filipino families as at least one of their members depart for work abroad. For instance:

•  Because of unsound financial management, many Filipinos have no savings even after their contracts abroad have expired. Many decide to stay in the foreign country illegally and work odd jobs. Since they do not have the legal protection guaranteed by proper visas, they are prone to abuse, their welfare is often compromised for a lower-than average pay, and they live in constant uncertainty for fear of being rounded up by immigration authorities. Some undocumented workers enter the foreign country as tourists.

•  Underemployment among Filipino workers is prevalent.  Majority of Filipino factory workers in South Korea, for instance, are college degree holders. Some are professionals—engineers, teachers, writers—who decide to engage in blue collar jobs because of the lure of a higher salary. Brain drain in the Philippines is a recurring issue.

•  Overseas Filipino Workers (OFWs) often complain that, in the end, it is the bond of the family that suffers. Stories about children growing up with an absentee father or mother abound. Because children grow up materially satisfied and accustomed to the idea of migrant jobs, they form a new generation of individuals whose end goal is to leave the country for greener pasture abroad, hence creating a cycle and mindset of foreign-work dependency.

•  Studies by the International Monetary Fund reveal that many of the families left behind in the Philippines refuse to find work of their own and rely merely on remittances. Perhaps because of guilt for being away from their families, workers also tend to acquiesce to the material requests of their relatives, from top-of-the-line mobile phones to entertainment systems. A so-called temporary middle class is thereby created. Once the migrant worker returns home, the main source of income vanishes, and the material acquisitions are sold below cost. The family languishes in uncertainty, until the same, or another, family member goes abroad again.

•  There is a tendency for migrant workers to support not only their respective families, but their extended families as well. A tightly knit clan—an indispensable feature of Filipino culture—becomes a breeding ground for dependency as several families rely on one or two main breadwinners to support their utility bills, schooling, house construction, hobbies, and other expenses.

•  Somehow, remittances, no matter how big, are never enough. Domestic spats can revolve around one sentence: “Where did the money go?”

A successful Financial Literacy Campaign, therefore, needs to address not only literacy levels but, more importantly, the mindsets of the workers and their families. This is easier said than done and will require constant coordination with the workers and their families. Mindsets are deeply ingrained and paradigm shifts challenging to come by. Yet the seeds of changing behaviors are already planted in the minds of foreign workers—they themselves know, every time they work long hours and miss their families, that change is necessary. They simply need guidance in enabling change.

Of course, no financial literacy campaign will succeed without national financial infrastructures and support mechanisms in place. The Philippine Government, through agencies such as the Central Bank of the Philippines, the Overseas Workers Welfare Administration, the Philippine Deposit Insurance Corporation and the Department of Foreign Affairs, has come up with programs specifically catered to OFWs. These include hedging facilities to help protect against the fluctuations of the exchange rate, attractive insurance packages, support systems for start-up SMEs, entrepreneurship courses, a greater selection of remittance options, unit investment trust funds and other investment schemes.

Ultimately, the Financial Literacy Campaign must be aware of the very human dimension of financial issues. It must understand the cultural defaults of the nation, and work through these parameters to effect change. The Financial Literacy Campaign is not so much about the money, as it is about the integrity and pursuit of a better life of the individual and his or her family.

Note: Arnel is a Foreign Service Officers II, assigned as Consul and Second Secretary at the Philippine Embassy in Seoul and coordinates the Financial Literacy Campaign (FLC)  to OFWs in South Korea. The FLC was initiated in 2008 by then Consul and Second Secretary Juan “Jed” Dayang, Jr. with the Philippine Overseas Labor Office-OWWA’s then Welfare Officer Esperanza Cobarrubias and  retired Commercial Counsellor Edgardo Garcia.  The FLC continues to be the flagship project of the Embassy under leadership of Ambassador Luis Cruz. 


[1]  See original publication at:   Arnel G. Talisayon, “Financial Literacy Campaign and the Filipino People,” Embassy News(2008), http://www.philembassy-seoul.com/forms/Vol_1_Special_Issue.pdf.

Photo Credit: http://finlittv.com/2011/05/financial-literacy-program-for-ofw-families-crucial/

%d bloggers like this: