Remittance and the Filipino Community in Canada

Historical Context

Remittances are a direct outcome of migration which is central to Philippine culture and history. Since the 1970s, specific conditions in the Philippines’ economy and politics led to increasing labour emigration to other countries. (See Migration History in Filipino Canadians.)

In the 1970s, Philippine President Ferdinand Marcos started instituting several policy reforms to encourage emigration. He wanted to ease unemployment and secure foreign currency income. While these policies were initially temporary, labour migration has since then steadily increased. Marcos made it mandatory that overseas contract workers send back a portion of their income to the Philippines through banks. The rule gave the government greater access to foreign currencies, usually US dollars, to fund government activities and pay the country’s debts. Many migrant labourers went to the Middle East, but many highly skilled migrants were admitted on a more permanent basis in countries such as Canada. (See Economic Immigration to Canada.)

Beginning in the 1980s, political unrest, natural disasters and an economic crisis worsened the Philippine economy. The country continued to focus on exporting labour abroad. New ministries and agencies were created to manage, protect and represent workers abroad. These institutions include: the Commission of Filipinos Overseas (created in 1980), the Overseas Filipino Bank (created in 2017) and the Department of Migrant Workers (created in 2022). Overseas Filipino Workers (OFWs) also became an official term to refer to any person from the Philippines who works for a limited duration in a foreign country. They represent a subset of overseas Filipinos and are considered temporary migrants.

Remittances from Canada to the Philippines

Remittances are a significant source of income for the Philippines. The country has sometimes been described as operating a so-called “remittance economy.” The flow of remittance money can have important impacts on the disposable income, domestic consumption and credit constraints of migrant households in the Philippines. In 2017, according to Statistics Canada, the Philippines ranked first with $1.2 billion sent in remittances from Canada, followed by India with $794 million.

Remittances also provide support in times of crisis or after natural disasters. In 2013, the super typhoon Haiyan struck the Philippines. In the first three months after Haiyan, remittances surged as part of the country’s post-disaster recovery. The Canadian government established the Typhoon Haiyan Relief Fund in response to the super typhoon’s impact. Overall, the government committed $90.5 million in funding, including around $43 million to match donations from individual Canadians.

During the COVID-19 pandemic, $1.079 billion was sent between January and October 2020.

Today, remitting remains a common behaviour among Filipino Canadian immigrants. In 2022, remittances accounted for 8.9 per cent of the Philippines’ gross domestic product.

Transfer Methods

There are formal and informal channels to transfer remittances across international borders.

Formal transfers

A formal remittance channel is an authorized and legal method of sending money or other goods across borders. Usually, financial institutions facilitate the transaction. Common types of formal transactions include the use of banks, credit unions and money transfer operators. Banks and credit unions allow a sender to remit funds with an account in the host country.

Meanwhile, retail money transfer operators are non-traditional institutions that are authorized to engage in banking activities. Remittances through these businesses can be processed without the need for the sender to create an account. Technological innovations like mobile payment systems are also alternative platforms that sustain the flow of remittances along the Canada-Philippines corridor.

Another example of formalized and regulated remittance is the balikbayan box. These are freight packages sent primarily by a Filipino abroad to extended family members in the Philippines duty-free. The Filipino term balikbayan refers to a Filipino visiting or returning to the Philippines after living outside the country for a while. These boxes, typically made of corrugated carton, come in every size and shape with a maximum volume of up to 200,000 gross cubic centimetres (7 cu. ft.), according to the Philippines Bureau of Customs. One balikbayan box can be sent every six months. The contents of these balikbayan boxes are tax-exempt in the Philippines. These goods are considered personal-use property or in-kind gifts. While the custom of sending these boxes dates from earlier, the practice appears to have flourished in the US during the 1990s.

Informal Transfers

Informal methods of transfer are just about any money transfer system that does not involve a traditional bank. These informal methods used to be the most popular methods for immigrants and workers to send money to their families in their countries of origin. One example is the Filipino practice of padala with relatives or friends carrying the money back by hand. Various similar informal arrangements that are generally culture-specific also exist: hawala or hundi among Middle Eastern, South Asian and certain African diasporas, fei-ch'ien in China, phei kwan in Thailand or chuyển tiền tay ba in Vietnam. More recently, cryptocurrency-based value transfers are increasing but there are challenges to monitor such flows. (See Canada and the Digital Economy.)

Risks and Security Enforcement

The remittance of funds poses risks of fraudulent activity. Money laundering in the remittance sector can sometimes be linked to other cross-border criminal activities, such as fraud, human trafficking, smuggling, drug trafficking, economic crime and, in some instances, terrorist financing. Informal methods of transfer are sometimes used as they are less regulated. As a result, these remittances come under increased scrutiny from a wide range of public agencies and banking institutions. After the 9/11 attacks in the US, there has been a new emphasis on money laundering laws to combat terrorism financing. (See Terrorism in Canada.)