One of the problems that most OFWs have encountered over the years would be having a hard time to return to the Philippines from what they originally planned. Most of them usually stay abroad over an extended period of time. The reason behind this longer stay abroad lies in the fact that most OFWs cannot seem to manage their financial resources properly. They do not accumulate enough savings. On top of that, many OFWs are overindebted. All these are pressing issues that prevent our fellow OFWs from coming home to the Philippines and be with their loved ones, even after staying abroad for more than 10 or 20 years.
To address these problems experienced by the OFWs, SEDPI developed a financial literacy program. This program aims to equip OFWs with the necessary knowledge to become financially independent individuals who are capable of realizing their financial goals both for themselves and their families. This is achieved by teaching them the importance of saving and investing, and the proper financial management techniques for them to achieve financial stability. SEDPI envisions this program to help the OFWs increase their savings, obtain health insurance for unforeseen circumstances, pay off their non-productive debts, invest their money and set up their own businesses after accumulating three to six months’ salaries worth of emergency fund.
This service provided by SEDPI is undeniably valuable to the OFWs and their families. Our study shows that after attending SEDPI’s financial literacy program, each OFW saves around PHP 3,850 more every month or about PHP 46,000 more savings every year; each also pays off an average of PHP 49,000 worth of debt each year, which translates to around PHP 7,000 of savings in interest per year; each also invests an average of PHP 87,500 per year in various investment vehicles, which leads us to an average earnings of around PHP 6,500 per year. Furthermore, each OFW provides around PHP 15,000 of salaries to employees per year by giving them jobs. These represent the social benefits that SEDPI’s financial literacy program provides to each OFW. This adds up to an average of around PHP 74,500 per year worth of benefits per OFW who participates in the program.
However, not all PHP 74,500 of benefits per participant is attributable to SEDPI. This is because there are other factors that might influence the behavior of these participants such as other seminars they may have attended. In the study, each participant is asked how much of each benefit can be attributed to SEDPI’s financial literacy program on a rating scale of 1-10 (with 1 being the lowest attribution to SEDPI and 10 the highest) After taking this into consideration, the average resulting benefits per participant are as follows: PHP 42,000 increase in savings per year, PHP 5,000 of interest saved per year from earlier debt payments, PHP 4,200 gained per year from investments made, and around PHP 3,000 worth of salaries generated per year, which translate a total of around PHP 54,200 worth of benefits per participant per year. If we multiply that by around 120 OFWs that SEDPI trains every year, we would end up would around PHP 6,500,000 worth of benefits per year that the financial literacy program provides to the OFWs and to society. If SEDPI maintains this number of participants for the next 5 years, it will generate PHP 32,500,000 worth of benefits, which translates to a present value of around PHP 27,800,000 after discounting it using a rate of 5.5%.
The result above is quite encouraging, and if the investments (around PHP 1.3 million) made for the program is taken into account, we can see that the financial literacy program is promising, as it yields us a social return on investment (SROI) of around 21 over the next five years (27.8 million worth of social benefit divided by 1.3 million of investment). This means that for every peso invested in the financial literacy program, it generates a social return of around 21 pesos in the next five years.
However, this SROI ratio is still low as compared to what the program really generates. This ratio just gives us a conservative estimate or the least amount of social benefit the program will generate. This is because there are still many other benefits that the OFWs get which was not included in the computations of the study. For example, if the OFWs are able to send their children to school because of the additional 42,000 pesos per year, it would have an even greater impact. Or, because the OFWs are now paying off their debts earlier, they experience less stress and less sleepless nights—this clearly is also a benefit for the OFWs. Furthermore, the OFWs are now able to invest their own money, which will probably be used when they retire. This stable retirement that can be brought about by these investment funds is also a benefit for them. Lastly, OFW participants are taught to avail of health and life insurances so that their savings will not be wiped out in case there are unforeseen events, which surely also has a benefit for the OFWs. All these benefits are not included in the study because they are quite difficult to monetize and the limited time that was given to the researchers. No matter, it cannot be denied that these benefits, if monetized, can greatly increase the SROI ratio that has been shown above.
With regards to the financial aspect of the program, the study took into consideration the cash flow related to the program. Cash flow is divided into two parts, cash inflows and cash outflows. When computing the cash inflow, training fees for the program and the indirect cash flow from the net income that the Sustainable Investment Fund (SIF, this is where some OFWs invest in). Cash outflows on the other hand are comprised of the cost of travel, cost of living of the trainers, etc. The values for these cash flows are the projected over the next five years. The study ended up with the net financial loss of about PHP 3,400,000, which is quite insignificant compared to the 27.8 million worth of benefits the OFWs receive.
Even though it seems that SEDPI is conducting the financial literacy program at a financial loss, this is still acceptable for the company as long as the social impacts are experienced by the OFWs. SEDPI generates financial income from the OFWs when the OFWs are ready to invest in SEDPI. This takes 18 months to two years. The OFW investment in SEDPI is leveraged with loans from commercial banks. For every peso that OFWs invest in SEDPI, SEDPI can borrow an additional four to five pesos. This increase the available funds for SEDPI to reinvest in microfinance institutions and social enterprises. Thus, even if the financial literacy operates at a financial loss in the short term, SEDPI greatly benefits in the long run.
Based from the study conducted, it can be seen that the financial literacy program indeed serves as a give back to the society. Amidst the losses, SEDPI still chooses to run the program because of the many endless possibilities for creating impact and its ability to touch people’s lives.
Service Learning Program Group (ACC 35, 2 BS ME)
Perry Ang
Jeanel Co
Annika Chua
Carolyn Ramis
Kyle Velasco