Significance of OFWs to the Philippine Economy
According to the latest release of the Philippine Statistics Authority, the estimated number of Filipino workers abroad as of 2020 is 1.77 million. 96.4% of the total number is composed of Overseas Contract Workers. The 3.6% comprises Filipinos who work full time but are not working visa holders. Also, statistics released by PSA from April to December 2020, indicate that the total remittance sent by the OFW reached 134.77 billion pesos.
With the figures shown above, the participation of the OFWs in supporting our economy’s GDP has always been significant. That being said, it is only right that financial institutions and government agencies of our country offer them financing products to help them start or support their existing businesses.
Business Loans Available for OFWs
There are many options OFWs may choose to acquire additional money to put up their dream business. They can apply to private financial institutions such as Banks and Non-bank financial intermediaries. Even programs created by government agencies to support business enterprises.
LandBank OFW Reintegration Program
Landbank of the Philippines has partnered with the Overseas Workers Welfare Administration (OWWA) to give business opportunities to OFWs. The loan applied for can be used for additional working capital or for the purchase of a fixed asset.
Eligibility Requirements
The OFW must be a member of OWWA and a certificate holder of the capacity-building program and must be having a business that falls under the eligible projects of LandBank such as those that belong to the following industries: Franchising, Agri and non-Agri production, Marketing, Construction, Rental, Service, Trading, and Transportation, or the project could also be a contract tie-up with top 1,000 corporations.
Loan Features
Loan Amount: ₱100,000 to ₱2 Million for Sole Proprietors and ₱5 Million for Group of OFWs (partnership, corporation, or cooperative)
Interest Rate: 7.5% per annum
Loan Term:
- Short-term – up to 1 year
- Term Loan – not to exceed 7 years including a two year grace period on the principal
Asialink Finance Corporation
Asialink Finance Corporation is a private lending company that created a loan product specifically for OFWs. They offer secured and unsecured types of loans which can be used for different purposes, including starting a business.
Eligibility Criteria
To qualify for the business loan, the OFW must meet the following criteria:
- Current overseas worker and holder of an active employment contract
- Returning OFWs
- First-time OFWs
- Must be between 21-59 years old
- Earns a minimum salary of ₱20,000
- If over 60 years old, a Special Power of Attorney is required
- Co-borrowers age: 21-49 years old (only if it is applicable for the loan applied for)
Documentary Requirements
- Completely filled out the application form.
- Proof of employment for at least two years
- Validated payslip or employment contract by the Philippine Embassy or Consulate
- Valid Passport
- Copy of working visa
- Valid Government-issued ID
- Proof of billing (for proof of residency)
- Co-borrower must also submit proof of income (if applicable)
OWWA Business Loan
There are currently two loan programs under the OWWA Business Loan program. They are the following: Balik Pinas! Balik-Hanapbuhay Program and the Overseas Filipino Worker – Enterprise Development and Loan Program (OFW- EDLP).
Balik Pinas! Balik-Hanapbuhay Program
Loan Amount: ₱20,000
Requirements:
- Filled out application form.
- Entrepreneurial Development Training Certificate
- Business Plan or Business Proposal
- Proof of Return to the Philippines (stamped passport and air ticket)
Overseas Filipino Worker – Enterprise Development and Loan Program (OFW- EDLP)
Loan Amount:
- Single Proprietor: ₱100,000 to ₱2 Million
- Partnerships, Corporations, or Cooperatives: ₱100,000 to ₱5 Million
Interest Rate: 7.5% per annum
Requirements:
- Active or Non-active OWWA member
- Complete the Enhanced Entrepreneurial Development Training
- Business Plan
Challenges that OFWs face
People think that if you are working abroad, you’re already living the best life. It may apply to others, but it will not always be the case for some. Here are a few challenges OFWs face even when they have secured a contract abroad:
Lack of Savings
Most OFWs have nothing left in their pocket because they remit all of their earnings to their families in the Philippines. Almost, if not all OFWs support their entire families. As much as they want to save some for themselves, it is impossible to do so. This situation encourages OFWs to borrow additional funds from financial institutions.
Lack of Another Source of Income Upon Contract Expiry
One of the challenges OFWs face when their contract ends is that they don’t have any other sources of income owing to the fact that they only relied upon their employment abroad which only lasts as long as the contract is active and is renewed when it expires. When the employer no longer wishes to renew, they go back home with no Plan B.
Overspending
Some OFWs spend as if there will be no tomorrow. Everybody deserves a treat after working so hard. But sometimes, their manner of spending is far greater than their ability to earn. There are also cases where they spend extravagantly to show off to their friends. This bad habit can lead to acquiring unnecessary debt.
Lack of Business
A few may have the means, but they don’t have the appetite to take the risk and eventually lose the opportunity to create another revenue-generating source.
Conclusion
OFWs have many options to choose from should they wish to borrow money. For those who do not have enough savings to start a business, the other obvious choice to finance their business endeavor is to apply for financing.