Billions of dollars of remittances by maids and other migrant workers in Asia's wealthier economies bypass the region's banking systems, according to an Asian Development Bank study released Tuesday.
The Philippines-based ADB said remittances averaging 100-500 dollars a month per guest worker could be leveraged as a financial tool to develop the labor exporting countries if the funds were channeled through the formal banking system.
"The opportunities offered by banking, in the form of credits, long-term savings and insurance among other products and services, are missed by most financial institutions in both the sending and receiving areas," it said.
High transaction costs of between four and nine percent of the amount sent, poor education, as well as regulatory factors are to blame, it added.
"The stricter the rules (on remittances) ... the more informality exists in the marketplace."
It said much of the remittance money flowing between Singapore and Malaysia, which the ADB estimated at 1.1 billion US dollars per year, "is transferred through physical means."
It said more than a third of Indonesian maids in Singapore "do not have bank accounts in their home country ... (while) half of Filipino workers in Hong Kong do not."
If the workers use the banking system, "the portion of remitted money that remains in recipients' bank accounts could potentially be mobilized through short-term placement of savings in a money market, or investments in securities including government bonds" or through lending to recipients of remittances.
