Remittances as Avenue for Encouraging Household Entrepreneurial Activities

By Rivera, John Paolo R.; Reyes, Paolo O. | Journal of International Business Research, January 1, 2011 | Go to article overview

Remittances as Avenue for Encouraging Household Entrepreneurial Activities


Rivera, John Paolo R., Reyes, Paolo O., Journal of International Business Research


ABSTRACT

Temporary labour migration has become a fixture in the Philippines affecting the economic make-up of Filipino households through the significant amount of remittances being sent on a regular basis. This stimulated the economy and improved the well-being of household members through enhanced expenditures in various family sustenance activities. This study highlights how the Overseas Filipino Worker (OFW)-dependent households use the remittances they received in terms of business creation. Human capital and entrepreneurial ideas are accumulated when working overseas, which can be used for business creation such as micro-stores or a more complex business model. Engaging in business further augments household income of OFW households and for most, serve as the incentive for going into business further. By using a qualitative response model approach, this study estimated the effects of remittances on the decision of OFW-dependent households to engage in entrepreneurial activities; and analyzed their behaviour toward business creation. Results provided a framework on their decision-making process regarding the productive use of their remittances. Instead of just spending the money entirely on consumption goods, they could actually use the money to invest in more sustainable income generating activities. Moreover, they will have a better idea on how to go about the creation of income generating opportunities. On the other hand, the government would also have a better idea on how to provide support by helping them manage and grow their earned money.

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

The Philippines is regarded as a manpower exporting economy registering 10 percent of its 90 million people, as of 2009, living and working in at least 200 destinations worldwide as doctors, engineers, nurses, teachers, technicians, production workers, caregivers, entertainers, and domestic workers to name a few. Limited domestic employment opportunities and the high compensation package relative to the Philippines attract many workers, particularly the educated workers, to seek overseas employment. In most cases, according to Macaraeg (2005), Filipino workers are in demand abroad because of their proficiency in English, their training in Western standards of education, their reputation of being hardworking, resourceful, adaptable, and patient employees with a willingness to accept a lower compensation, and as a value added to some employers, their adherence to some Christian values.

Temporary labour migration has become a fixture in the country affecting the social, economic and cultural make-up of Filipinos. The magnitude of Overseas Filipino Workers (OFWs) is not only the reason for its socio-cultural and economic significance but likewise the huge amount of remittances that they sent to their families on a regular basis. According to the Bangko Sentral ng Pilipinas (BSP), remittance inflows reached over USD 17 billion in 2009 that stimulated the economy and improved the well-being of household members through enhanced expenditures in various family sustenance activities.

OFW remittances contribute so much to the economy's growth on a macroeconomic level since it promotes competitiveness in terms of the exchange rate. On a microeconomic level however, the effects vary. Typically, OFWs are forced to work abroad in order to augment family income. Hence, remittances affect a household's consumption patterns, which results to more expenditure on food, education, and leisure. It also enhances the household's propensity to save. Accumulated earnings allow investments that would not have otherwise been made due to credit constraints and large capital requirements (Yang, 2008). The vast opportunities abroad stimulate the desire of Filipinos to earn more. This international migration continues to be an important component of Philippine development especially among households with migrant workers, the proportion of which is steadily increasing (Orbeta, 2008).

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