World Bank: Manila Ponders Securitization Of Remittances.

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World Bank: Manila Ponders Securitization Of Remittances.

The Philippine government is looking to use securitization to tap into the billions of dollars of foreign currency sent home each year by the 7.5 million Filipinos living or working overseas, The Asian Wall Street Journal reports.

Among the ideas being touted by foreign and local banks, as well as supranational bodies such as the Manila-based Asian Development Bank and the World Bank, is securitization whereby future remittance flows would provide the assets behind a bond issue. The structure has been used successfully in places such as Mexico, Brazil and Turkey, but never before in Asia -- surprising, perhaps, since India and the Philippines are the world's largest recipients of remittances after Mexico.

In February, Filipinos working outside the Philippines sent back $720 million to their families, 19 percent more than a year earlier. The Philippine central bank projects remittances to reach $9 billion this year, compared with a record $8.54 billion set in 2004, as more Filipinos seek work overseas and are increasingly taking higher-paid jobs as nurses, engineers or musicians. Repatriated funds last year accounted for about 10 percent of nominal gross domestic product and 15 percent of total current-account receipts.

For decades, that cash has gone -- through banks, remittance centers or in suitcases -- back to workers' families to be spent on food, education and homebuilding or, if there is any left over, on excess consumption or to idle in the bank. But the government, for one, has been considering a better use for the remittances. Iluminada Sicat, officer-in-charge in the Economic Statistics department at the Finance Ministry, suggested they could be channeled to invest in small businesses. Overseas workers' earnings also could be used to finance the country's foreign-exchange requirements, she said. The ADB also is pushing the Philippines to find ways of harnessing the cash flows to support developmental needs. In 2003, one-quarter of the 86 million Philippine population still lived below the poverty line. National Treasurer Omar Cruz said last month the government was again studying the idea.