Utang in America and beyond: Debt and Overseas Filipinos

SAN FRANCISCO—My column on indebtedness and U.S. Filipinos prompted this blunt assertion from a reader based in Saudi Arabia.

“OFW’s are not mayabang, unlike FilAms who portray themselves as mayaman, but in fact, they are rich in debt and cursed to debt to sustain their rich-like lifestyle.”

A range of responses naturally followed, including this from another reader, who also worked in Saudi Arabia, but is now based in the U.S.

“Para sa akin, working in Saudi Arabia deserves our appreciation dahil mahirap talaga ang mangibang-bayan, at tumira rin ako ng matagal sa bansang yan—it’s really hard to leave one’s country. Pero ang ayaw ko lang ay [what I don’t want is] to call us all FilAms as ‘mayabang’? That’s very unfair.”

A fair, sensible response in what was in fact was a pointless dispute. (How in the world do you measure “yabang” anyway?)

But the mini-debate does open up an opportunity to talk about such issues as money, personal finance, debt and what an increasingly gloomy global economy means for overseas Filipinos most of whom left home for a key reason: To provide for their families in the Philippines.

It’s also a chance to drill down deeper into the subject of utang and its role in the expanding world of overseas Filipinos.

As we all know, the role they play is critical.

In 2010 alone, overseas Pinoys sent roughly $19 billion, making the Philippines the fourth largest recipient of remittance funds after India, China and Mexico, according to Philippine and World Bank data.

A big chunk of that money comes from U.S. Filipinos. But the rash of bad news — the downgrade, the market freefall, high unemployment — is bad news for that money flow.

“Increasing joblessness and prolonged recession will decrease the amount of remittances as past experience shows,” my friend Richard Cavosora, a social entrepreneur and an officer at Remit4Change.

For that’s what happened in the last market slump.

When the U.S. economy hit the skids in 2008, the rate of growth of U.S. Filipino remittances fell to three percent from 16 percent the previous year, Richard said citing data from the Central Bank of the Philippines.

With the U.S. economy still struggling, remittances fell six percent, or roughly $500 million, in 2009. When the economic outlook improved, they went back up. With another downturn looming, another decline is likely.

However, Richard points to one interesting data point: When remittances from the U.S. took a hit in 2009, Pinoy remittances from other countries actually went up.

“In short, the loss from the US was made up with gains of from all other countries,” he said.

The reason is clear: the Filipino Diaspora has expanded so dramatically over the past 25 years. The Pinoy money flow has gone global!

And the flow is being fuelled by a powerful motivator.

Richard cites an academic who in a 2008 survey of Pinoy remitters here in the Bay Area, concluded Filipinos tend to have “two homes and two hearts.” That is, they live in the U.S., but still are linked, emotionally and even financially, to their hometowns.

Nearly all of those surveyed in that study — 92 percent — said they work “to earn, save, and help kin.” In fact, as I noted in a previous column, when times are tough, and their paychecks aren’t big enough, Filipinos in the U.S. even borrow just to be able to send money home.

It’s a reality that Charito Basa, who moved to Italy to work as domestic helper and then became an advocate for overseas Filipinos, has seen in Italy and other parts of Europe. It’s also a reality she finds troubling.

“I’m very alarmed on this issue, because majority of the cases we confront here are about utang!” she told me.

“Migrants save and do a lot of sacrifices,” she added. And she shares a striking insight from her interviews with community leaders in different European cities:  90 percent of their members owe money to banks, lending companies and loan sharks.

And the push to send funds back home is so great, she said, “that many domestic workers here are sending and spending more than their capacity to earn.”

It’s a troubling trend, especially in a time of grave global economic crisis.

In her work and personal life, Charito says, she has met Filipinos “who are very worried also because nakalubog na sila sa utang” — they are buried in debt.

The people Charito quotes in a 2004 study of migrant Pinoys also complain of how their hard-earned money sometimes going to waste.

“They don’t know how hard it is to earn money here,” one says.

“When I send money to my parents, I always tell them to spend it wisely because it’s not that easy to earn money here,” says another.

Charito affirmed the view that “big spending or borrowing on education is in fact investment” and so are the funds used for health care expenditures for families in the Philippines.

But there are times, she stressed, when overseas Filipinos simply take on unnecessary debt burden.  In some cases, it’s an odd, even destructive, form of yabang, she said.

“Kaya daw sila nagkakautang (the reason they go into debt) is because of the high expectations back home,” she said. ” Isinusumpa sila (they’ll be denounced) if they don’t give!”

She was speaking from experience.

In her years as an expat, she helped a brother set up an auto mechanic shop, and bought a fishing boat for another brother, and land for the family. The business ventures failed for various reasons, including neglect and mismanagement.

That was when she became interested in such issues as financial literacy and education for OFWs. Overseas Filipinos, she now believes, must set limits, must have clear, realistic goals based on how much money they can earn.

And just as important, she argues, they must also take care of themselves.

There came a point when she became so frustrated with yet another story of funds sent home by an OFW that ended up going to waste, that she told a kumadre in Rome, “That’s enough, don’t send them anything anymore. More money will go into waste! Mag-ipon ka na lang muna. Save the money first.”

But overall, her focus is for her fellow OFWs to be exposed to more financial literacy and planning.

I know others are focused on that goal too. It is a subject worth exploring in depth. If you have ideas on this subject, send me an e-mail at [email protected].

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