Transnational financial education for Filipino migrant workers

Introduction

The Employment Permit System (EPS) of Korea, an immigration policy scheme for low-skilled migrant workers, does not permit them to settle permanently in Korea. Therefore, under the EPS, migrant workers are treated as sojourners who should return to their home country when their granted period is over. Also, it is not allowed for them to sponsor their family members to live in Korea, which results in the formation of transnational families, with workers based in Korea while their family members are in the home country. Most EPS workers or E-9 visa holders (E-9 workers, hereafter) send remittances to their families in the home countries and engage in transnational financial management.

Managing family finances transnationally is not an easy task. While in Korea, E-9 workers may be unfamiliar with the financial systems and culture in Korea. With migrants and their families straddling both countries, merely having more financial resources is insufficient for E-9 workers and their families to deal with financial issues and secure a financially stable future.

The Organisation for Economic Co-operation and Development (OECD, 2017: 13) defines financial literacy—or financial capacity according to the World Bank (2015: 1)—as a concept that encompasses the knowledge of financial concepts, the skills required to make sound financial decisions in financial circumstances and attitudes making prudent financial decisions. Through the pre-departure orientation seminar that E-9 workers receive prior to migrating to Korea, workers may have received some advice on finance-related matters, which may not be enough. They may need more information and education on managing their finances while they are overseas, including information on the financial system of destination countries. Therefore, providing transnational and continuing financial education programs is needed not only before migration but also while migrants are overseas and upon migrants’ return to their home countries. This study is an initial step of an envisaged multifaceted, multi-year project of the Migration Research and Training Centre (MRTC) to enhance the financial literacy of E-9 workers and their families through transnational financial education, leading to their financial empowerment. This study aims to identify the relevant topics for financial education programs for E-9 workers in Korea, focusing on Filipino workers as a target population. The Philippine government has actively established various support programs for its overseas workers at all stages of the migration cycle. According to the Korean Statistics Information Service, in 2018, there were approximately 25,000 Filipino E-9 workers in Korea, and total remittances sent from Korea to the Philippines reached about USD 248 million in 2017 (World Bank, 2017). The efficient utilization of remittances and income earned in Korea is crucial for the financial sustainability of the families of E-9 workers.

This study sought to understand the financial attitudes and behaviors of Filipino E-9 workers, which can be used as a basis for developing a transnational financial education for them, with the cooperation of the Philippine Overseas Labor Office (POLO) in Korea. There were three specific aims of the study: (1) to synthesize the literature on transnational financial management and the effect of financial education for migrant workers and their families, (2) to gather information about present and past financial education programs for migrant workers, and (3) to foster the financial literacy of Filipino E-9 workers in Korea based on the understanding of their financial attitudes and behaviors. To meet these objectives, the study conducted surveys and focus group interviews, searched information about existing financial education programs in Korea and the Philippines and organized a forum about transnational financial education. These data collection activities were conducted in 2019. Several informal interviews with financial educators from the Financial Supervisory Service (FSS) and migrant counselors from the Philippine Embassy and Filipino communities were also conducted in 2018 and 2019. Further details of these research activities are described in each section.

Literature review

Financial literacy programs can be divided into two types: remittance-based and non-remittance-based programs (Durana, 2016). The purpose of remittance-based programs is to deliver information about remittance sending channels and costs, while non-remittance-based programs encompass a range of financial topics, from budgeting to entrepreneurial training (Durana, 2016; Murata and Sioson, 2018).

Information asymmetry between migrant workers and their families is a common issue in transnational family financial management. Although having day-to-day conversations and sharing information have become easier due to advanced information and communication technologies (ICT), having conversations about financial management using ICT is not always easy for transnational families. There could be conflicts over how families utilize remittances in the home country or how the migrant worker manages income in the host country (Seshan and Yang, 2012) or financial goals each family member tries to achieve (Murata and Sioson, 2018).

Providing financial education programs to migrants contributes to enhancing their financial knowledge and information-seeking behavior (Gibson et al., 2012) and encourages better management of their finances (Seshan and Yang, 2014). Introducing migrant workers to information about financial institutions is important because financial institutions in a foreign country could be considered unreliable or inaccessible.

Findings from surveys and other activities

Two data sets were used to investigate the financial practices and attitudes/confidence of Filipino E-9 workers in Korea: (a) the 2017 Survey on Immigrants’ Living Conditions and Labour Force (Statistics Korea and the Ministry of Justice) and (b) data collected by MRTC in collaboration with POLO Korea in 2019.

The 2017 Survey on Immigrants’ Living Conditions and Labour Force had information on 169 Filipino E-9 workers regarding their financial practices. There were more male E-9 respondents (92.3 percent) than female respondents (7.7 percent), and more than half of respondents were in their 30s (52.1 percent), followed by those in their 20s (36.1 percent).

The 2017 Survey on Immigrants’ Living Conditions and Labour Force included questions about Filipino E-9 workers’ expenditures in Korea. The average percentage of income used for living expenses was 20.5 percent. The largest portion was for wire transfers to families (57.7 percent), 13.1 percent for savings, 7.2 percent for other expenses and 1.5 percent for housing. The majority of the Filipino E-9 respondents (85.6 percent) remitted 12 or more times per year. Among the respondents with monthly income between one to two million Korean won (KRW; approximately USD 1,000 to 2,000), about 48 percent sent KRW 10 to 15 million (approximately USD 9,000 to 16,000, depending on the exchange rates) per year.

Filipino workers in their 40s tended to remit a higher proportion of their income (67.8 percent) compared to younger counterparts. On the other hand, younger Filipino workers allocated a higher proportion of their income to savings or other financial products in Korea (12.3 percent for those in their 20s and 15.1 percent for those in their 30s). Filipino workers with a spouse or children living in the Philippines sent remittances more frequently and with a higher proportion of their income than did single Filipino workers.

The second data set was collected through a collaboration between POLO Korea and MRTC. POLO Korea organized financial education workshops for the Filipino migrant workers, and MRTC constructed a survey questionnaire to measure (a) financial attitudes and practices, (b) experiences of financial education programs, (c) financial literacy and (d) financial-related topics that were of interest to workers. Participation in the survey was voluntary.

There were two rounds of data collection. The first round was conducted at a workshop, “Basic Financial Literacy,” organized by the Filipino EPS Workers Association and POLO Korea. The second round of data collection was conducted at a seminar introducing investment and entrepreneurial options in the Philippines organized by the Embassy of the Philippines in Korea. There were 116 participants in total. The majority were males (72.4 percent); about one-third of participants were in their 20s, 38.8 percent in their 30s and the rest were in their 40s or older. About half of participants were unmarried (51.7 percent). The proportions of participants without children (48.3 percent) and with at least one child (46.6 percent) were similar. The majority of participants (62.9 percent) had been staying in Korea for less than four years and ten months, the maximum duration of the EPS period. The first-time E-9 holders comprised more than half of participants (56.0 percent), 16.4 percent were sincere workers (i.e., workers who did not change employers during their first EPS assignment and were allowed to re-enter Korea) and the rest held other types of visas. About 38 percent of participants were the sole earners in their families. The majority (80.2 percent) were planning to return to the Philippines and start their own business. The main survey findings are described below.

In this data set, the majority of participants (94.8 percent) were sending remittances to their families or relatives living in the Philippines. Remitting six to 12 times per year was the most common (81.1 percent). Those who sent remittances less frequently (i.e., less than six times per year) remitted a larger amount each time.

Respondents were asked how often they engaged in the following ten activities (with responses ranging from 1 = never to 5 = always): (a) tracking monthly expenses (Mean = 3.79), (b) having plans for spending money (Mean = 4.09), (c) spending within budget (Mean = 4.01), (d) looking for best prices for things they bought (Mean = 4.35), (e) paying bills on time each month (Mean = 4.71, the highest), (f) paying off credit balances in full each month (Mean = 4.10), (g) saving money regularly (Mean = 4.24), (h) setting aside money for emergencies (Mean = 3.93), (i) contributing to an investment or retirement account except national pension (Mean = 3.58, the lowest), and (j) discussing money matters with family (Mean = 3.92). Among unmarried participants, the lowest-scored activity was discussing money matters with family, while participants whose spouses were living in the Philippines scored 4.38. The score for discussing money matters with family was not as high as for other behavioral items, even for those with a spouse in the Philippines. In general, participants with a spouse or children in the Philippines reported better financial practices. Sole earners tended to discuss money matters with their families more frequently (Mean = 4.05) than those who were not sole earners (the means were 3.58 for families with two earners and 3.78 for families with multiple earners).

Financial attitudes and confidence were measured by respondents’ agreement with the following statements: (a) “I am very disciplined when it comes to managing money,” (b) “I always get information or advice when I make an important financial decision,”(c) “I feel confident about making financial decisions in the Philippines,” and (d) “I feel confident about making financial decisions in Korea.” Responses ranged from 1 (strongly disagree) to 5 (strongly agree). About 68 percent of participants reported always getting information or advice when making important financial decisions. Also, more than 60 percent of participants thought they were disciplined in money management. Participants revealed more confidence in making financial decisions in Korea than in the Philippines (Mean = 3.96 and 3.89, respectively), which could be due to a lack of information about available financial services in Korea or fewer opportunities for making complicated financial decisions in Korea.

Financial literacy questions utilized the questionnaire of the 2014 World Bank Survey on Enhancing the Financial Capability and Inclusion in the Philippines. They were about (a) solving simple numeracy tasks, (b) inflation impacts on price, (c) simple interest, (d) compound interest, (e) sales discounts, (f) purpose of insurance, and (g) stock risk diversification. About 47 percent of Filipino respondents in Korea correctly answered five or more questions, which was higher than the results of the 2014 World Bank Survey. The percentages of correct answers were as follows: simple numeracy tasks (87.1 percent), sales discounts (80.5 percent), stock risk diversification (70.5 percent), the purpose of insurance (54.5 percent), simple interest (50.9 percent), compound interest (49.1 percent) and inflation impacts on price (45.9 percent). Although knowing the concepts of simple and compound interest and the impact of inflation is essential for making sound financial decisions, only about half or less than half of the participants answered these items correctly.

Less than 38 percent of participants reported that they had ever taken a financial seminar in the Philippines; 29.7 percent of E-9 first-timers and 47.9 percent of other visa holders (sincere workers and others) reported so. The providers of the seminar were mostly the Philippine government offices (39.0 percent) or NGOs (31.7 percent). More participants (60.9 percent) reported that they had taken a financial education seminar in Korea, mainly provided at the Philippine government office (i.e., the Embassy of the Philippines, Seoul).

The three most interesting financial topics for participants to learn about were investments (68.5 percent), launching a business in the Philippines (60.2 percent) and savings (49.1 percent). The least interesting topic for them was how to obtain a loan (5.6 percent). Requests for information about financial services available in the Philippines and Korea (23.2 percent and 14.8 percent, respectively) did not score as high as the requests for other topics. Males and those in their 20s were likely to be interested more in investments than females and those in other age groups. Females tended to be more interested in savings than males. Those in their 30s were more interested in savings than their counterparts in other age groups.

Toward a transnational financial education program for Filipino workers in Korea

About 20 experts—academics, financial educators, Korean and Filipino migrant counselors and government officers of the Philippines and other origin countries of EPS workers—were invited to participate in a forum organized by MRTC on 3 July 2019. The forum was conducted to share the findings of the study and to discuss these findings in developing a transnational financial education program for EPS workers.

The expert-participants noted that the low interest rates of Korean banks may have discouraged Filipino migrant workers from saving while they were in Korea, and instead Filipino workers would look for investment products in Korea. However, having poor Korean ability would deter them from getting related information and making an investment. As a result, they would send remittances and rely on their families in the Philippines to manage their finances. In addition to enhancing the financial literacy of Filipino workers in Korea, it is also crucial to promote the financial literacy of family members in the Philippines through financial education and identify obstacles to prudent financial decision-making.

In response to Filipino workers’ unfamiliarity with financial services in Korea, providing opportunities for hands-on experiences in financial activities or financial institutions could help enhance the workers’ knowledge of financial management. Also, establishing regular and continuous financial education would be necessary to enhance Filipino workers’ financial capacity and prepare them for a successful return and reintegration in the Philippines. Delivering financial education through online and offline materials would be helpful in reaching more Filipino workers from the pre-departure phase to the post-return period.

Promoting financial literacy among overseas workers needs to be migration corridor-specific. Hence, cooperation between the Philippines and Korea is needed to develop financial education programs introducing each country’s financial systems and explaining investment options and how workers can maximize the financial benefits of migration.

Discussion and implications

In Korea, there are not many financial education programs for migrant workers to access easily. Moreover, most financial education programs tend to target migrants fluent in Korean and, consequently, newly-arrived migrant workers or migrants with limited Korean language proficiency are likely to be excluded from the programs. Providing financial education programs customized for E-9 workers across the different migration phases could motivate them to achieve their financial goals and prepare for their return.

Equipping Filipino counselors with knowledge of the Korean financial systems could be an alternative way to deliver the information to Filipino migrant workers efficiently. The information could also be implemented as part of the financial education programs provided by the Philippine government.

It was revealed that Filipino migrant workers do not often communicate with their families about financial management. As such, there is limited opportunity for migrant workers and their families to set common financial goals and plans, which consequently leads to failure to achieve long-term financial stability and to family conflicts over financial matters. To enhance transnational family communication about money matters, there should be coordination between existing financial education programs for families in the Philippines and programs targeting overseas workers in destination countries.

Implementing transnational financial education requires cooperation between the Philippines and Korea that addresses how to reduce financial risks and empower migrant workers and their families. It is not about whether the financial services in one country are superior to the other; rather, it pursues international collaboration to maximize the outcomes of labor migration and, consequently, promote sustainable development.