Overseas remittances, the money sent home by migrant workers, are enormously important for developing nations’ economies and have a huge impact particularly in rural areas where they supplement families’ incomes and those of the wider community. They constitute perhaps the most significant form of ‘transnationalism from below’—the forging of transnational linkages between migrants and homelands by migrants themselves.

Remittances are particularly important in the case of the Philippines. More than US$430 billion (AU$585 billion) in remittances during the last 46 years have helped the Philippine economy promote investment, realise economic growth, and reduce poverty. Filipinos abroad have helped their home country’s economic growth through their fund transfers and transnational work. Remittances to the Philippines account for 40 percent of domestic consumption and can result in higher levels of educational attainment and household entrepreneurship, both of which can further increase local incomes.

Of course, international migration produces potential problems for families given the physical separation of family members.  Some scholars have also suggested that overseas remittances may breed inequality in rural communities. Nevertheless, there is substantial evidence that remittances have a positive impact on rural livelihoods, particularly in situations where basic needs cannot be met without recourse to migration.

How can remittances have the most positive outcomes in rural areas, particularly in the Philippines? My research shows that multiple factors may have to be present: good local governance, facilitative business climate-related services, responsive financial institutions, and more financially literate rural residents.

It is not enough that we look at the outcomes of remittances in local communities, such as businesses created, properties purchased, and amounts consumed locally using earnings from abroad. Processes that occur within migrant families, in remittance owners’ relationships with financial institutions and entrepreneurs and with people and institutions in rural communities, all determine how well these remittances are, or are not, utilised locally.

Studying a locality’s remittance investment climate

I explored the outcomes and processes surrounding remittances and rural home town investing in two municipalities in the Philippines: San Nicolas municipality in Ilocos Norte province (northwestern Philippines) and Moncada municipality in Tarlac province (approximately 150 kilometres north of the capital Manila), for four months each: from September 2018 to June 2019.  

I implemented a mixed methods tool called RICART (the Remittance Investment Climate Analysis in Rural Home Towns). This tool tries to determine if the household receiving remittances is financially literate and capable of making investments, and if the rural community’s investment climate is conducive for any type of investment. RICART can be implemented in any rural community whether it is proximate or distant from a nearby city.

I surveyed migrant and non-migrant households (the latter as a comparison group) who were recruited through quota and referral sampling. A total of 443 migrant and 463 non-migrant households were surveyed in all the villages (barangay in Filipino) of San Nicolas and Moncada. They were asked about their financial literacy and behaviors, their incomes and expenditures, and their activity relating to saving, investing and opening and running a business locally.

I also conducted numerous interviews with key informants and focus groups to determine the economic and investment conditions of San Nicolas (total N= 95) and Moncada (N=58). Some heads of migrant households surveyed also participated in object-centred interviews (OCIs [total N=59]), which involve methods other than verbal interviews to help respondents answer sensitive questions surrounding money and the family. I also collected a total of 162 sets of documents about San Nicolas and Moncada, on topics such as sources of local revenue, regulations for entrepreneurs, and local governance performance.

I implemented what is called a fully integrated mixed methods research design so that understanding of people-place interactions on remittances and rural home town investing covers both outcomes (quantitative methods) and processes (qualitative methods). The product of integrating quantitative and qualitative data is what RICART authors call the remittance investment climate (ReIC) of a rural locality. Joint display tables were used to make sense of survey results and of interview and documentary data. 

Geography and levels of urbanisation affect the use of remittances

San Nicolas (2020 population: 38,895) in Ilocos Norte province is between Laoag and Batac cities. Moncada (2020 population: 62,819) is some 30 kilometres from the capital city of Tarlac province, Tarlac City. Data from the national government’s migration agencies in 2017 show that San Nicolas had more overseas migrants (7,938) than Moncada (4,653), despite is smaller population.

Approximately 21.6 percent and eight percent of San Nicolas’ and Moncada’s populations respectively work and reside abroad.  More than 5,000 permanent migrants from San Nicolas work abroad in various countries, usually the United States. Meanwhile, there are approximately 3,300 temporary migrant workers from Moncada abroad, mainly female domestic workers.

San Nicolas is balancing agriculture with urbanisation. The landlocked municipality has extensive farmland which is irrigated with rainfall collected in small reservoirs. The 500 kilometre MacArthur Highway, which begins in San Nicolas, houses a shopping mall, which stands tall within the town’s built environment, as well as several car dealing companies and hotels. There are also 27 financial institutions, including branches of commercial banks with Automatic Teller Machines (ATMs) within San Nicolas.

Moncada is a predominantly agricultural town producing high-value crops such as sweet potato and onions, as well as rice and corn. The town centre houses the entrepreneurial alley of Moncada, the public market, located on the MacArthur Highway. The public market is where most of Moncada’s enterprises operate since villages are spread widely. Many enterprises are small scale; it was only recently that a well-known Filipino fast food chain (Jollibee) opened a branch in Moncada.

Moncada has a few banks, only one ATM, and microfinance institutions operating locally, as well as two of the province’s largest cooperatives (or credit unions). But Moncada faces two notable constraints: it does not have much additional commercial space available, especially in the public market; and its southern part is shaped like a basin that makes the town prone to flooding. This topographical fact, as local informants had pointed out, becomes a disincentive for would-be investors (including those from Moncada working overseas who might otherwise want to open businesses there).