How to Utilize OFW Remittances for Long-Term Growth

Strategies for Utilizing OFW Remittances for Long-Term Growth

According to new data from Bangko Sentral ng Pilipinas (BSP), the Philippines saw its highest-ever cash remittances in 2023. Though its growth rate is quite slower than expectations, money sent to banks amounted to $33.491 billion when 2023 closed.

These inflows are mostly from Overseas Filipino Workers or OFWs, which remain among the top sources of foreign exchange remittances in the country. In fact, OFW remittances are sizeable enough to buoy the Philippine economy during the worst parts of the pandemic.

With all this money coming in, one might ask where all these go. More importantly, how can Filipinos use these remittances for their long-term advantage?

How to Utilize OFW Remittances for Long-Term Growth?

Overseas remittances from migrant workers often come in big, but they are not infinite. OFWs, especially those working under a contract, recognize this. Since their family depends on this income, there is a need for a backup plan that could bring in income in the long run.

Business ventures

One of the most promising avenues for OFWs to channel their hard-earned remittances is through investments in business ventures. Instead of relying on traditional savings, OFWs can consider leveraging their financial resources to start entrepreneurial endeavors.

By using their remittances to fund business opportunities, OFWs can harness the potential for substantial and sustainable growth. This is especially true for businesses in sectors with high demand and growth potential.

Moreover, businesses do not only diversify their financial portfolio but also contribute to the local economy. As such, this provides OFWs the opportunity to increase their wealth over time and foster economic development within their communities.

Mutual Funds

Another avenue for OFWs to maximize the potential of their remittances is by exploring mutual funds. Investing in mutual funds offers a professionally managed and diversified approach to wealth accumulation. OFWs can allocate a portion of their remittances into mutual funds that are managed by financial experts.

This provides a level of diversification that lowers risks associated with individual investments. Moreover, mutual funds often invest in a mix of stocks, bonds, and other securities, allowing OFWs to benefit from a broad spectrum of assets.

Mutual funds can bring in capital appreciation and regular dividends for long-term investment growth as mutual funds are managed by experienced managers. This way, OFWs do not need to navigate the complexities of the financial markets by themselves.

In other words, they can earn even if they lack extensive investment knowledge. As such, it also allows OFWs to invest in many industries and markets for a more secure financial future.

Stocks

To diversify their investment portfolio, OFWs can strategically position their remittances in the stock market. By allocating funds to carefully selected stocks, OFWs have the potential to benefit from the appreciation of share values over time.

For this, investing in reputable companies with strong growth prospects is the prudent strategy. While the stock market has inherent risks, it also offers the opportunity for substantial returns.

For instance, OFWs can consider a buy-and-hold approach. Under this approach, OFWs can bank on short-term market fluctuations to buy and later capitalize on the long-term upward trajectory of well-performing stocks.

Additionally, there are dividend-paying stocks that provide an avenue for a steady income stream and enhance overall returns. As such, staying informed about market trends and seeking professional advice can empower OFWs to make these informed decisions.

Real Estate Investments

Investing in real estate presents OFWs with a tangible and resilient avenue for long-term growth. By directing their remittances toward real estate ventures, OFWs can secure a stable and appreciating asset to weather inflation.

One approach is to consider purchasing residential or commercial properties in locations with potential for development and increasing property values. Properties offered by Camella, for instance, are located in key cities and municipalities in the Philippines, where OFWs are positioned to earn more than the money they initially invested.

Moreover, residential real estate investments offer the dual benefit of potential capital appreciation and regular rental income. OFWs can opt for rental properties, providing a consistent stream of passive income. Alternatively, they can also explore the potential for property value appreciation over time.

Additionally, investing in real estate development projects or in real estate investment trusts (REITs) can diversify their portfolio and provide entry to different segments of the real estate market.

The enduring nature of real estate, coupled with the growing demand for housing and commercial spaces, positions it as a solid choice for OFWs. With careful research, due diligence, and consultation with real estate professionals, OFWs can make informed decisions and maximize the potential returns on their real estate investments.

Where do most of OFW remittances go?

The life of OFWs abroad is often not as glamorous as people make it seem. As such, every cent of their remittances must be spent strategically. From the maintenance of a household to funding education, here is where the expenditure of OFW remittances goes in the country.

Basic needs

Data from recent years reveal that the majority of Filipino families who received OFW remittances spent a huge chunk of these funds on basic needs. Rent, food, and other daily goods and services are among the top expenditures for the households back home of OFW workers abroad. Since the consumption of these basic needs is non-negotiable, it is also a non-adjustable portion of the monthly expenses.

Education

Many OFW families allocate a considerable portion of their remittances to funding their children’s education. These funds are often earmarked for tuition fees, educational materials, and other essential expenses. This emphasis on education underscores the prioritization of long-term benefits and future opportunities not only for the OFWs but for their children as well.

Homebuilding

A notable trend among OFW families is the allocation of remittances towards home building and development. Many use these funds to invest in constructing or improving their homes, reflecting a commitment to enhancing living conditions and securing a stable home environment for the long term. This focus on home development suggests the need to secure their family’s well-being and the sustainable growth of their households.