Overseas Remittances and Rural Home Town Investing in Two Philippine Municipalities: Towards an Understanding of the Migration-and-Local Development Nexus

Abstract

This thesis investigates the household, institutional and locational factors influencing the productive use of overseas remittances in two rural municipalities in the Philippines: San Nicolas (Ilocos Norte province) and Moncada (Tarlac province). Set a year prior to the COVID-19 pandemic, this mixed methods research provides a baseline of how different rural origin communities of overseas migrants maximise remittance inflows for local development. This research also tests an exploratory theoretical framework, the Behavioural Economics of Remittances, to determine what processes migrant households undergo when dealing with local people and institutions as they use their remittances productively. Migrant and non-migrant household surveys (N=905) were implemented households in the two home towns. A rapid qualitative inquiry (RQI) was also conducted, under which key informant interviews (N=163), object-centred interviews (N=59), secondary data collection and participant observation were executed. The study found that migrant households from San Nicolas invested, ran enterprises and owned savings accounts within their home town more than migrant households from Moncada. San Nicolas is balancing agriculture with urbanisation, with the town having a shopping mall in its premises. Moncada is predominantly an agricultural municipality, but has not much available land for commercial spaces. San Nicolas also has more financial institutions (especially commercial banks) than Moncada, though the latter has a decades-long history of cooperativism and houses the two biggest cooperatives of its province. San Nicolas and Moncada are also run by municipal governments that were recognised for “good local governance” by the national government. This recognition has led to reforms in public services, including services for the local business and investment climate. It is also easy to do business in both municipalities in terms of procedures to get business and occupational permits. As a result, San Nicolas had more registered business than Moncada, with the former also getting increased local revenues over the past 17 years to 2019. Moncada, for its part, is part of a province that runs pro-active financial inclusion programs that benefit farmers, cooperatives and local entrepreneurs. The Behavioural Economics of Remittances is a multi-level theoretical model that sees remittances interact with the people, social structures and institutions which are directly and indirectly affected by these monetary flows. Remittance usage under these circumstances is bounded by the make-up of a place where people, institutions and remittance owners meet. This model has three zones where involved players interact with each other: the sanguinity zone (members of the migrant household), the estimation zone (the migrant household and local entrepreneurs and financial institutions), and the affinity zone (the migrant household and the community’s organised institutions, residents and local norms and practices). In applying the theoretical model to this study, involved players in each zone make financial decisions and use measures to mitigate risks when transacting with each other (such as remittances, family relationships, regulations, etc.). Processes happening under the Behavioural Economics of Remittances help explain the different outcomes of remittances that were saved, invested and used as business capital in overseas migrants’ communities of origin. These outcomes are even rooted in geography. To facilitate overseas migrant households and their rural home towns to optimise the productive outcomes from foreign remittances, this study suggests the pressing need of: financial education programs for rural residents (including remittance owners); improvements in the rural home towns’ investment climates, overall public services, and financial products and services; and achievement of sound relationships between and among remittance owners and the people and institutions in rural home towns. These efforts also become relevant as the world hopes to move forward from the ongoing COVID-19 pandemic.