Feasibility Study for OFWs Financial Welfare

Dion Banua Alcantara

Denver Axel J. Marbida

Earon Rivera

Jhon Verniele

Eleana De Ungria

Patricia Lorraine Matienzo

Cyrus Jacob Magpantay

Arenz Ramos

STI College Tanay

General Mathematics

Mrs. Shaina Mae D. Iposada

October 28, 2022

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 Table of Contents

Title Page …………………………………………………………………………………… 1

Table of Contents ……………………………………………………………………………2

Introduction ………………………………………………………………………………….3

Background ………………………………………………………………………………….3

Objectives ……………………………………………………………………………………5

Market Analysis ……………………………………………………………………………..5

a. Security Bank …………………………………………………………………5

b. BDO …………………………………………………………………………..9

c. RCBC ………………………………………………………………………...15

Recommendation ……………………………………………………………………………19

Conclusion …………………………………………………………………………………..19

References …………………………………………………………………………………...20

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 Introduction

The Overseas Filipino Workers (OFW) lean on working abroad to support their

family’s basic needs. Since they have kids to put to school, elderly parents to look after, and

their obligations. OFWs may only do so much to support their family members back home.

On top of that, OFW also feel required to take care of their relatives as well as their

neighbours. Filipinos are recognized for having strong family ties, which can occasionally

lead to them receiving financial assistance, particularly if a close family member is employed

abroad. Therefore, it should not be shocking that OFWs are likely to approach a lending

company in order to borrow money (pinoy-ofw, 2019). This study aims to identify some

lending companies that provide favourable conditions to all OFWs. In addition to that, the

researchers will provide the best recommendations to OFWs on where to lend or invest

money for them to maximize the returns they may expect to see when financing the needs of

their families.

Background

According to a study from Junjun Amparo (2022), the Philippines is considered as one

of the major sources of labor supply worldwide. The number of Overseas Filipino Workers

(OFWs) during the period of april to september 2020 was estimated at 1.77 million, said by

the Philippines Statistics Authority. One common misconception about OFWs is that once

they start their employment abroad, they are free from debt mainly because they receive

better wages, or start investing to maximize their income (pinoy-ofw, 2019). However, the

ultimate challenge for most OFWs is how to handle their finances. For instance, a study by

Social Enterprise Development Partnerships Inc. (SEDPI) revealed that one out of 10 OFWs

is financially broke. Eight out of 10 of those who return to the Philippines have no savings .

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Additionally, the reason why most OFWs have no savings is because of common money

management mistakes (Rapisura, 2011; Junjun, 2022). To many Filipinos, going abroad is not

just a risk, it’s also an investment. That’s because they not only give up their time with the

family, they also need to set aside money to process their job application. This includes cost

of medical exams, preparation of documents, visa fees, government fees and, in many

occasions, airfares to their destination (pinoy-ofw, 2019). With millions of OFWs across the

globe, the purpose of working abroad is to help their loved ones, to pay for their children's

education, to be able to have a house or property, to put up their own business, and to save on

their retirement (bpi-aia, 2017).

Moreover, the lack of job opportunities to increase their sources of income in their

own home or country is the primary reason why Filipinos work overseas, especially those

aged 15 to 35-years old (Hasnan, 2019 ; Junjun, 2022). When it comes to financial problems,

lending companies contributes to granting financial assistance that can help OFWs' families

with their needs. According to the Securities and Exchange Commision of the Philippines,

lending companies are corporations engaged in granting loans with such amounts and

reasonable interest rates or charges that will be agreed upon between the lending company

and the debtor. As stated by Julia Kagan, a personal finance editor for Investopedia, in 2019,

when borrowing in this kind of institution, funds are transferred to the borrower in

consideration for repayment of the loan's principal as well as the interest. Additionally, the

lender will consider a prospective borrower's income, credit score, and debt levels before

deciding to offer them a loan. Given the above discussion, the researchers argues that giving

the OFWs the best recommendations on where to lend or invest money is the main step in

addressing the problem . With the right lending institutions , OFWs can break out from the

vicious debt cycle that could determine the success or failure of their career abroad.

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 Objectives

Perform a research on lending institutions, investment opportunities, and the terms

offered by each; present the findings to a panel of officials from the Department of Labor and

Employment (DOLE) and the Overseas Workers Welfare Administration (OWWA); and be

able to come up with wise recommendations for OFWs on where to lend or invest money.

Market Analysis

After gathering data about few lending companies, we were able to summarize the

details of all three (3) lending companies. Here are some lending companies in the

Philippines that offers great assistance to OFWs:

Security Bank

It was first known as the Security Bank and Trust Company when it was founded on

June 18, 1951. Security Bank has a long history of excellence in financial management. It has

developed a track record of stability and steady profitability through an efficient, astute, and

forward-thinking management approach. The bank continues to be one of the top 10 domestic

private banks in the Philippines in terms of assets, deposits, capital, and return on equity.

Security Bank has a total network of 316 branches and 789 ATMs (including Cash

Acceptance Machines) as of June 30 2021.As a full-service universal bank, Security Bank

has subsidiaries and affiliates that provide specialized financial services. The bank is known

among investors for its superior financial results. Prior to the strategic partnership and capital

investment by MUFG in 2016, in particular during the years 2007-2012, and 2014,2015

Security Bank ranked 1st in return on shareholders’equilty (ROE), 1ST in return on assets

(ROE), 1ST cost-to income ratio,1st in assets quality (having the lowest non-performing loans

ratio) and 1st in NPL reserve cover ratio among private domestic universal banks. For

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Filipinos who have lived overseas for two years or longer, the Security Bank has created

financing options. Earnings levels for home loans must be at least 40,000 PHP, and for auto

loans, 50,000 PHP.(SecurityBank, 2017; ThePinoyOFW, 2022)

Types of loans offered by Security Bank:

• Security Bank Personal Loan

They can apply for the loan that's best for them online easily and securely, and they could

receive it in as little as five (5) banking days.

• Security Bank Home Loan

OFWs can purchase the homes they’ve always wanted with a home loan from Security Bank.

They can finally spend the night in the home they've always desired thanks to their flexible

financing.

• Security Bank Car Loan

OFWs can easily purchase a new car with the Security Bank's flexible loan. OFWs can find

the car they want thanks to their accommodating financing choices.

• Corporate Salary Loan

These loans can be used for a number of things, including education, health and wellness, and

even the purchase of a vehicle or a piece of real estate.

Security bank personal loan features:

• Loan tenors from 12 ,18, 24, and 36 months.

• Flexible loan amounts, from PHP 30,000 to PHP 2,000,000.

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• Monthly add-on rate from 1.89% per month.

• Annual percentage rate begins at 39.53% and the estimated APR at 36 months is 37.53%.

Benefits of Security Bank Personal Loan:

• Re-availment of loan is allowed as long as you paid at least half of your original loan

amount.

• Processing of loan application is up to five working days.

Eligibility

• At least 21 years old at the time of application but not more than 65 years old upon loan

maturity.

• Must be a Filipino Citizen

• Must have an office or residence landline.

If Employed

• Minimum gross monthly income:

a. For Metro Manila: PHP15,000

b. For outside Metro Manila: PHP12,000

If Self-employed:

• For Self-Employed or Self-Employed Professionals, borrower must be the owner or a

majority owner with at least 40% stake and the business has been operating profitably for at

least 2 years with at least 1 trade reference.

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• Minimum gross monthly income: PHP100,000

Requirements

For Employed Applicants

• Valid government-issued photo ID Company ID

• Latest one-month pay slip

• Certificate of Employment and Compensation (issued within the past six months) or latest

Income Tax Return (ITR)

For Self-Employed Applicants

• Valid government-issued photo ID

• Latest 1-year Audited Financial Statement for the previous year and DTI Certificate/SEC

Registration

• Business Permit/Mayor's Permit

• Bank statements for the last three months

• Latest General Information Sheet (If corporation)

Sample Computation

Formula for calculating the payment amount:

Α=¿ P r ¿ ¿

Where:

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A = payment amount per period

P = initial principal(loan amount)

r = interest rate per period

n = total number of payments or periods

37.53 %
Α=¿(50,000) ¿¿
12

0.031275(3.030272134)
= (50,000)
3.030272134−1

0.09477176
= (50,000)
2.030272134

= (50,000)(0.046679338)

A =PHP2,333.97

This means that the monthly payment for PHP 50,000 loan payable for 36 months is

PHP 2,333.97.

BDO(Banco de Oro Universal Bank)

Prior to Metro Manila's formation, BDO Unibank was founded on January 2, 1968, as

Acme Savings Bank, a thrift institution with only two branches nearby. Acme was purchased

by the SM Group, a collection of businesses owned by Henry Sy, a retail entrepreneur, in

November 1976, and changed its name to Banco de Oro Savings and Mortgage Bank. BDO

was renamed Banco de Oro Commercial Bank in December 1994, marking its transformation

into a commercial bank. BDO changed its name to the current Banco de Oro Universal Bank

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in September 1996 after it became a universal bank (BDO Unibank). The Asenso Kabayan

Program, one of BDO's specialized initiatives, provides alternatives for Home, Auto, and

Personal OFW Loans. The OFW must have worked overseas for at least two years and have a

monthly income of P50,000 for the Auto Loan and P10,000 for all other OFW loan types in

order to be eligible for any of these loan alternatives. Additionally, at the time of loan

maturity, borrowers must be at least 25 years old but not older than 65.(Wikipedia, 2022;

ThePinoyOFW, 2022)

Types of loans offered by BDO:

BDO Kabayan Personal Loans

• This is a specific BDO personal loans for OFWs who want to get loans in the simplest way

possible. You can use it to finance any of your personal demands, such as house renovation,

tuition payment, purchasing furniture, home appliances, gadgets, travel or debt repayments.

There are two types of loans under this program:

• BDO Kabayan Personal Loan Unsecured

This provides OFWS with a loan of up to PHP 500,000 based on their wages. Under this

category, an OFW with more than three years of employment can get a loan worth twice their

monthly salary.

• BDO Kabayan Personal Loan Secured

This loan is supported by the deposits in the borrowers' BDO accounts. The interest rates on

this loan make it a more advantageous choice than an unsecured personal loan.

BDO Personal Loan Features:

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• Flexible loan amounts

OFWs can borrow anywhere between PHP10,000 and PHP1,000,000, depending on their

monthly income and financial requirements.

• Loan Term

Provides flexible payment terms where people can choose from 6, 12, 18, 24 and 36

months(Unsecured and secured).

• Interest Rates

For BDO Kabayan Program Unsecured

Tenor Interest Rates

6 months 40.05%

12 months 41.71%,

18 months 41.51%,

24 months 40.89%

36 months 39.43%

For BDO Kabayan Program Secured

Tenor Interest Rates

6 months 17.08%

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 12 months 17.07%

18 months 17.06%

24 months 17.06%

36 months 17.06%

• Flexible repayment options

OFWs can have the option of paying their monthly loan repayments by check or automatic

debit. Payments can also be made in-branch, online, over the phone, or at an SM bills

payment center.

• Fast approval

Applications for loans are typically approved within ten days.

Benefits of BDO personal loan

• Loan Amount

Depending on the bank’s permission, cash can be received for as low as P10,000 or as much

as P1,000,000.

• Loan Availability

Loan proceeds can be credited to the client’s BDO Savings / Current Account or paid through

a BDO Manager's Check.

• Payment Channels

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Capability to pay monthly installments at any BDO branch nationwide via Automatic Debit

Arrangement (ADA) or Over-the-Counter (OTC).

Eligibility (General)

• At least 25 years old at the time of loan application and not more than 65 years old at the

time of loan maturity

• Former Filipinos with or without dual citizenship; Filipinos married to foreigners; Filipinos

based abroad/OFW and their Beneficiaries

• Must have at least two (2) years continuous employment contract

• Must have at least one (1) landline phone at either residence or employment/business

• Gross monthly income must be at least P20,000 or its US$ equivalent

• With good credit history

Eligibility (Seaman/ Domestic Helpers)

• At least 25 years old at the time of loan application and not more than 65 years old at the

time of loan maturity

• Must be Filipino citizen

• Has good credit standing

• Must have at least 3 years continuous employment contract

• Must have at least 1 landline phone at either residence or employment/business

• Gross monthly income must be at least P20,000 or its US$ equivalent

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Requirements

For BDO Kabayan - Secured:

• Application Form and Deed of Assignment

• Special Power of Attorney

• Auto-Debit Arrangement

• Beneficiary Information Form

For BDO Kabayan - Unsecured:

• Application Form

• Authorization Form

• Auto-Debit Arrangement Form

• Beneficiary Information Form

Sample Computation(BDO Kabayan Program Unsecured)

Α=¿ P r ¿ ¿

39.43 %
Α=¿50,000) ¿¿
12

0.0328583333(3.20233847)
= (80,000)
3.20233847−1

0.105223505
= (50,000)
2.20233847

= (50,000)(0.0477780806)

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A =PHP2,388.90

This means that the monthly payment for PHP 50,000 loan payable for 36 months is

PHP 2,388.90.

Sample Computation(BDO Kabayan Program Secured)

Α=¿ P r ¿ ¿

17.06 %
Α=¿(50,000) ¿¿
12

0.0142166667(1.66229003)
= (50,000)
1.66229003−1

0.0236322233
= (50,000)
0.66229003

= (50,000)(0.0356825895)

A =PHP1,784.13

This means that the monthly payment for PHP 50,000 loan payable for 36 months is

PHP 1,784.13.

Rizal Commercial Banking Corporation(RCBC)

The Rizal Commercial Banking Corporation was first established in 1960 as a modest

development bank in the Rizal province. It began conducting business under its current name

in January 1963 after receiving permission from the Central Bank to function as a

commercial bank in December 1962. RCBC made history by opening its mother office at 219

Buendia Avenue, which was then in Rizal, making it the first commercial bank to ever have

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its headquarters in that province. Furthermore, RCBC provides a variety of loan options and

they even provide flexible terms to make payments less complicated and less time-consuming

(bmap, 2017, ThePinoyOFW, 2022).

Types of loans offered by RCBC:

• RCBC Personal loan

RCBC My Cash Personal loan is a flexible lending product that may be used for a variety of

purposes such as credit card payments and medical bills. OFWs are permitted to borrow up to

PHP 1 million from a range of up to 50,000 with this loan.

• RCBC Auto loan

It has down payment options that are as low as 20%, RCBC can help you finance a new or

used car. It also offers a variety of terms and terms for both new and used cars.

• RCBC Home loan

OFWs can buy a lot, house & lot, condominium unit, or townhouse , construct and renovate

their house and can benefit from this because they offer reimbursement/refinance of house

expenses. In this type of loan, RCBC requires that a person applying for a loan for the

purchase of a condominium must have at least 25 square meters of land and a minimum of 50

square meters for land improvement.

RCBC Personal Loan Features

• Depending on the credit rating and the amount of money they can borrow, OFWs can

borrow up to PHP1,000,000. It also has a fixed interest rate of 1.3%.

• Has a payment term ranging from 6 to 36 months.

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• They can easily repay their loan payments through various means, such as online banking,

cash, cheque, or ATM transfers.

• The online application process only takes a few minutes to complete. Once all the required

information has been submitted, approval will be given within five(5) to seven(7) working

days.

Eligibility

• With owned (2 years) or rented (3 years) residence

• At most 65 years old if employed or 70 years old if self-employed upon loan maturity

• Current holder of Philippine-issued credit cards for at least 2 years

If employed:

• At least of middle management

• Regularly employed for at least 2 years

• Employer among top 10,000 corporations or a legitimate company operating for at least 5

years

• Business must be at least 3 years in operation

• Accomplished Application Form

• Valid Government IDs

• Certificate of Employment and Compensation or latest 2 months Payslip or ITR

• TIN (Tax Identification Number)

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• 1-month latest Utility Bill

If Self-Employed:

• Business must be at least 5 years in operation

• Profitable for the last 2 years

• Accomplished Application Form

and copy of last 2 years ITR (Income Tax Return)

• Latest 2 years Financial Statements

• Business registration/permits

and list of suppliers and customers

• Valid Government IDs

• 1-month latest Utility Bill

Sample Computation

Α=¿ P r ¿ ¿

1.3 %
Α=¿(50,000) ¿¿
12

0.00108333333(1.03974841)
= (50,000)
1.03974841−1

0.00112639411
= (50,000)
0.03974841

= (50,000)(0.0283380923)

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A =PHP1,416.90

This means that the monthly payment for PHP 50,000 loan payable for 36 months is

PHP 1,416.90.

Recommendation

OFWs are well-known breadwinners who supplement their families' income. As a

result, a large number of OFWs are struggling financially. When meeting financial

obligations, it is necessary to take out loans. Financial independence can be a difficult goal

for OFWs to achieve, but making the right financial decisions can make a big difference,

therefore, choosing the best bank is essential, particularly when taking out loans. Based on

the study, the researchers argue that Security Bank provides the best opportunities for

debtors. Its comprehensiveness, ease of access, and effective security attract debtors to take

out loans and give OFWs a big step towards financial freedom.. It is worth noting the bank's

positive financial outcomes combined with a lot of opportunities that help manage your

finances. The bank's appeal stems from offering the best financial outcomes for debtors,

numerous opportunities, and relaxed policies. It is an excellent bank in which to invest,

deposit, and raise capital.

Conclusion

The study reveals there are multiple factors when choosing a bank to take out loans

from. Firstly, the number of branches means accessibility, second is the number of options to

choose from when getting loans, third is the eligibility, fourth are the interest rates because

they are linked to consumer spending and lastly is security. Financial security is essential

when it comes to loan repayment. Thus, Security Bank is the most viable option.

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 References

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Loans. News. Retrieved from https://www.pinoy-ofw.com/news/41954-ofw-need-loans.html

13 Best OFW Loans in the Philippines (Banks and Government Agencies). (2022b, May 3).

The Pinoy OFW. Retrieved from https://thepinoyofw.com/ofw-loans-philippines/

Montero, M. (2022, June 15). OFW loan requirements: amounts, conditions, terms, online

calculator. AllTheBestLoans. Retrieved from https://allthebestloans.com/ofw-loan/

SecurityBank (2017, April 26). Retrieved from

https://www.securitybank,com/personal/loans/personal-loan/

What Is a Loan? (2021, April 19). Investopedia. Retrieved from

https://www.investopedia.com/terms/l/loan.asp

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Exchange Commission. Retrieved from https://www.sec.gov.ph/lending-companies-and-

financing-companies-2/lending-companies-and-financing-companies/

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working-abroad.html

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https://en.m.wikipedia.org/wiki/Banco_de_Oro

Personal Loans. (n.d.). Retrieved from https://www.rcbc.com/personal-loans

BDO. (n.d.) Retrieved from https://www.bdo.com.ph/personal/loans/personal-loan/overview

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