Economics #2 - Cashing in on remittance centres

Published Date: 07 August 2006 By Gabriel Chen, gabrielc@sph.com.sg

FILIPINO maid Elena Salvador, 44, received a call one afternoon from her younger sister in Abra Province, about 200km north of Manila. Magelyn, 35, was in a mess, crying over the phone about how her wallet had been stolen. What made it so heart-wrenching was that she had been planning to buy their niece a birthday present.

VITAL SERVICE: Many foreign workers depend on the remittance firms as a convenient financial lifeline to help their families.
Photo by -- CHEW SENG KIM

Ms Salvador, who has been working here since 1992, told her sister: 'Don't cry, I'll send you some money.' Her employer gave her some time off, and she headed for the Western Union Financial Services' branch at Lucky Plaza, presented her loyalty card and signed a receipt to send 10,000 pesos (S$305) to the Philippines. Waiting at a Western Union branch at the other end, Magelyn received the cash in just 15 minutes. Every month, Ms Salvador, who is single, goes to Western Union, which has over 60 outlets here, to send money to her family back home.

She is among the growing number of foreign workers who depend on the services of remittance firms as a convenient, vital financial lifeline to pay their children's school fees, household expenses, and sometimes even the gambling debts of family members.

Remittance is big business here. Around $13.1 billion flowed out of Singapore last year through licensed remittance agents, up from nearly $8 billion in 2000, according to figures from the Monetary Authority of Singapore (MAS), which oversees this business. There are 95 licensed remittance companies here, with branches across the island and especially in areas popular with foreign workers, such as Orchard Road, Beach Road, Chinatown, Little India and Geylang. For the estimated 400,000 to 500,000 foreigners here on work permits, sending money overseas via a remittance agent is a cheaper option than going to a bank.

The remittance companies offer a better exchange rate, and their handling charges are lower. Most charge between $10 and $12 for transactions to Thailand, compared to around $20 charged by most banks. Foreign workers who use their days off to send their precious pay packets to their hometowns in the Philippines, India, China, Thailand or Bangladesh like the convenience these firms provide, as they usually stay open seven days a week. Adding to the appeal is that the counter staff are usually of their own nationality and communication is no problem. In Lucky Plaza on a weekend, there are lots of women, mainly maids waiting in the Western Union branch, chattering in Tagalog with ringing, merry voices, clinging to their bags, waiting for their turn at the counter.

Filipina Minda Domio, 37, said: 'It helps that the cashiers are also Filipinos and can explain to me in my language.' Over at Golden Mile, it is mainly Thai men who are the customers, and all the signs are in Thai. Contemporary Thai music fills the air, as shops lay out a relaxed charm to draw in the crowd. Similarly, Little India has remittance companies that cater to Indians, Bangladeshis and Sri Lankans. Meanwhile, in Chinatown, People's Park Complex is the sweet spot for China nationals who want to remit money home.

Typical transactions could involve anything from a few hundred dollars to $500, though groups of Chinese nationals are known to remit thousands of dollars at a go, as they pool their funds to save on handling charges. While each firm may have its own way of operating, typically it will have a company or a bank overseas to accept wire transfers from Singapore and forward the cash into the account of the recipient.

Things can go wrong, and the remittance industry's reputation took a knock in 2002, after at least one high-profile case of a company that embezzled its clients' money. A moneychanger and partner in a Geylang-based firm which also remitted money swindled 1,153 Chinese workers of $8.8 million of their home-bound earnings over a seven-month period. The cheat, Lam Chen Fong, was sentenced to 22 years in jail.

To restore confidence in remittance companies, the MAS came up new and stricter conditions these firms must comply with. Among other things, they must ensure the remitted sum reaches the recipient within 14 days, whereas previously they had more than a month. Also, they have to submit a financial statement to the MAS every three months, and include information such as the outstanding amount of money yet to reach intended recipients. Then last year, the central bank pushed up entry requirements by requiring the holder of a remittance licence to be incorporated as a company with a minimum paid-up capital of $100,000.

Industry players complain that their operating costs have gone up as a result. They say it also explains why, as at Jan 1 this year, the number of remittance licences renewed was 95, down from 109 in 2003. Still, nobody denies that business is brisk, and companies have stepped up efforts to win their customers' loyalty. For example, Western Union - a US-based company with a network of over 270,000 locations worldwide - came up with a scheme to give out education grants of $500 each to 10 Indian workers and maids and 25 Filipino maids. It also organises and sponsors beauty contests for Filipino customers, and soccer competitions for migrant workers in Little India. 'We create activities to entertain them, and they like it,' said the company's regional vice-president (South-east Asia), Mr Sunil Balagopal.

At Golden Mile Complex in Beach Road - Singapore's Little Thailand - Thai Malaysian Boon Com, 32, is a branch supervisor at the BKK Forex remittance company. He says this is a place where human drama sometimes unfolds, when workers sometimes plead all sorts of reasons why they need help to send money home. Ms Amorn Tharika, 34, who works at the counter of GPL Remittance, also at Golden Mile, has had customers who get nasty or shout expletives when they are asked to show proper identification, and others who are grateful for help rendered. 'One customer struck 4D, winning $16,000. I showed him how to remit the money home, and he gave me a hongbao. I opened it, and he had bought 4D for me,' she said.