The value of workers' remittances<\/p>\n
Paul Sutaryono, Jakarta<\/p>\n
There is a business opportunity besides tragedy in illegal
\nmigrant workers. Every month most migrant workers send money to
\ntheir spouses or relatives in Indonesia. In banking terminology,
\nsuch a transaction is called remittances. How are the national
\nbanks competing to win the handling of those remittances?<\/p>\n
Today, there are some five million Indonesian migrant workers
\nabroad (mostly in the Asia Pacific and the Middle East), each
\nreceiving an average monthly salary of US$250. This means
\nremittances of about $1,25 billion per month or about $15 billion
\n(Rp 135 trillion) per year. Obviously, this means huge foreign
\nexchange earnings for the state.<\/p>\n
The remittances are today the focus of national banking. Why?
\nThe remittances are pleasant and attractive earnings.<\/p>\n
If we look at both the trend and progress of international
\nbanking carefully, retail banking is the prime model for
\nachieving operational income. The question is what exactly is
\nretail banking.<\/p>\n
Retail banking is a subset of commercial banking. Retail
\nbanking refers to the provision of banking services for
\nindividuals. This includes deposit taking, consumer lending for
\nhome, car and other purchases, credit card services, transaction
\nservices and even insurance and investment management services
\nfor individual clients.<\/p>\n
Retail banking brings operational revenue for banks. National
\nbanks also enjoy such an income. It is called fee-based income.<\/p>\n
The point is that the fee-based income is meant to offset the
\ncompetitive decline in traditional corporate lending services.<\/p>\n
In fact, remittances are one of the retail banking businesses.
\nSo what's the story? Indonesia is the biggest source of migrant
\nworkers throughout the world. Indonesia sends them to Malaysia,
\nSingapore, Brunei Darussalam, Taiwan, Japan, Thailand, Hong Kong,
\nKuwait, Bahrain, Qatar, Saudi Arabia, Oman, Jordan, Greece,
\nYemen, Cyprus and United Arab Emirates (UAE).<\/p>\n
The remittances sent by Indonesian migrant workers are usually
\nin U.S. dollars. The question which will follow is how the
\nnational banks can earn the remarkable income?<\/p>\n
Firstly, charges. When the relatives of Indonesian migrant
\nworkers take the funds through the national banks, they will be
\nsubject to administrative charges. This is one of the various
\nincomes for the national banks. The charge is relatively small.
\nIt, however, will form a mound. It can be said that Malaysia
\nranks second as the source of remittances following Saudi Arabia.<\/p>\n
Secondly, the difference in exchange rates. The remittances
\nare mostly sent in U.S. dollars. So, when their relatives take
\nthe funds in rupiah, they will be charged in lieu of exchange.
\nWhat does it mean? This means they are regarded as selling the
\nU.S. dollar and buying rupiah. They will receive the exchange
\nrate of the U.S. dollar against the rupiah in line with valid
\nboard rates. The difference in the exchange rates is relatively
\ntiny in the beginning. But it will grow bigger and bigger. The
\nkey word is that it will increase in size to become attractive
\nrevenue for national banks.<\/p>\n
Unfortunately, the Malaysian ringgit (MYR) is not allowed to
\ngo out of Malaysia. This policy has made Malaysian banks send
\nremittances to Indonesia in rupiah.<\/p>\n
Thirdly, the growth of funds. National banks also enjoy the
\nfunds of the remittances that go directly to their saving
\naccounts.<\/p>\n
There are few banks involved in handling the remittances. Let
\nus take Bank Mandiri, BCA, BNI, Bank BRI, Bank Danamon, BII, Bank
\nPermata and Bank Niaga as concrete examples.<\/p>\n
Bank Niaga is one of the interesting examples to pay close
\nattention to. The majority of Bank Niaga's shares or 52.82
\npercent are owned by Commerce Asset-Holding Berhad, Malaysia as a
\nholding company. Thus, Bank Niaga as their sister company in
\nIndonesia will receive a lot of the remittances sent by
\nBumiputraComerce, Malaysia one of commercial banks of the holding
\ncompany.<\/p>\n
The same step was also taken by Malayan Banking Berhad
\n(MayBank), Malaysia, which owns 91.2 percent shares of a
\nsubsidiary in Jakarta, PT Bank Maybank Indocorp. Such a business
\nrelationship is a windfall. It was followed by BNI and PT Pos
\nIndonesia (Posindo) that agreed to work toward cooperation in
\nhandling remittances. This step is very strategic in
\nstrengthening future cooperation.<\/p>\n
The bank can increase their market share in remittances. Why?
\nBecause Posindo has about 3,500 offices scattered in Indonesia.
\nPosindo exists in all villages. By having a channel of
\ndistribution, the bank will be able to compete more in
\nremittances.<\/p>\n
In sending the remittances to remote areas in Indonesia,
\nforeign banks called correspondent banks are often confused. Let
\nus take Bank BRI, which has thousands of village units throughout
\nIndonesia, as an example. The village units are under a branch.
\nUsually, Indonesian migrant workers who are going to send money
\nonly know their villages close to the Bank BRI Village Unit --
\nwithout mentioning the names of either the city or regency. Such
\ndata may result in a delay in the payment of remittances.<\/p>\n
Here, the correspondent banks need staff members who know
\nthose areas well. The staff members are called remittance
\nrepresentatives. They are basically the employees of national
\nbanks who are placed in their correspondent banks. Principally,
\nthey are responsible for marketing this remittance transaction
\nabroad.<\/p>\n
Fundamentally, the national banks not only place remittance
\nrepresentatives in their correspondent banks abroad, but they can
\nsend relationship managers as well. The latter, of course, will
\nhave more responsibilities than remittance representatives.<\/p>\n
These strategies are potent and effective weapons to win the
\ncompetition in gaining the remittances, which is growing fiercer
\nand sharper. However, it does not end there. The more important
\nthing is how to build the value of Indonesian migrant workers in
\nthe future?<\/p>\n
The manpower ministry and one state-owned bank, BNI, have
\nagreed to work together in posting, protecting and empowering
\nthem. The agreement was signed on May 26, 2004. It will enable
\nIndonesian migrant workers to monitor their own funds opened in
\nthe bank.<\/p>\n
Each of them is obliged to open a saving account at the bank
\nbefore leaving Indonesia for abroad. By having the account, the
\nmoney they send will go into the account concerned or straight
\nthrough processing (STP) as mentioned above. The funds are
\nexpected to grow for a longer time to earn interest.<\/p>\n
The main objective in the long run is that when the holders of
\nthe accounts have returned home they will have enough savings to
\nbe used as capital to start a business. Such a scheme is hoped to
\nbe able to create a better quality of life.<\/p>\n
The Indonesian government through the bank intends to have a
\none-stop banking system in managing the funds sent by Indonesian
\nmigrant workers. The main point of this is to improve their
\nwelfare and the safety of their funds; improving their value to
\nbe able to enjoy a brighter future.<\/p>\n
The writer is a banking analyst.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/the-value-of-workers-remittances-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }