Power costs, loan repayment hamper rural business, says OFW families

MANILA—Families receiving overseas remittances, and who are running micro and small enterprises in their rural birthplaces, find rising power costs and ability to repay loans as major constraints in doing business.

That was what a study by the University of Santo Tomas on investing remittances in two rural hometowns found, with increased electricity costs the biggest constraint to doing business there.

The Philippines is among the top Asian countries that charge the highest electricity rates, with rates as high as US$0.20 (some P8) per kWh.

The UST study titled Remittance Investment Climate Analysis in Rural Hometowns (RICART), done in Magarao, Camarines Sur and in Maribojoc, Bohol, found that some 55 percent of migrant families in Magarao and 31 percent in Maribojoc are currently doing business in their hometowns.

Overseas migrant families from Magarao found electricity costs, land ownership, bank loan procedures and the ability to pay loan installments to be major problems in the fifth-income town’s business climate.

Counterpart migrant families from Maribojoc, on the other hand, say that power rates, costs associated with local road access, and loan repayment through installment are the major constraints in their local business climate.

Typical low-income rural municipalities such as Magarao and Maribojoc thrive on agriculture and retail trade, as there is also low business activity. In the case of these two towns, overseas remittances are the leading sources of household incomes: P43.874 million for Magarao (coming from some 300 overseas Magaraoenos), and about P40.548 million for Maribojoc from nearly 900 townmates abroad.

At least 55 percent of migrant families in Magarao, and 31 percent of counterpart households in Maribojoc, currently run enterprises in their birthplaces. But RICART authors Alvin Ang and Jeremaiah Opiniano estimated using statistical tools that remittances may induce migrant families, as well as migrant remitters, to do business back home.

RICART found that those who receive regular remittances, who own a savings account and who have a higher assessment of their financial literacy will likely invest and do business in their hometowns.

On the part of migrant remitters, RICART found that the longer overseas migrants are working abroad, the higher the probability that they will open up a business in the rural hometown.

Some 69 migrant remitters and 158 migrant families from the two municipalities were surveyed by the RICART project, conducted with support from the Japan government’s Ministry of Finance and the New Delhi-headquartered Global Development Network (GDN).

Ang and Opiniano said that it will be helpful if local government units initiate business climate reforms, like what Maribojoc had done in recent years, to support the creation of more enterprises in rural localities.

“Since remittance senders and recipients are thinking of having a business or of investing in their hometowns, these prospective migrant entrepreneurs should be targeted and assisted with business advisory assistance and financial intermediation,” the authors said.#