Financial Education for Migrant Workers: Enhancing the Financial Knowledge of Indonesian Overseas Migrant
Workers and Communities
Prepared for the Asian Seminar on Financial Literacy and Inclusion Mactan, Cebu, Philippines September 11, 2012 Yoko Doi Financial Specialist Financial and Private Sector Development Department World Bank Indonesia Office
Outline
1. Background of Indonesia
Overseas Migrant Workers
2. The World Bank Pilot Project
3. Impacts of Financial Literacy
Training on Migrant Workers and
their Households
2
3
I. Background
Size of the IOMWs’ Population
4
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
US$ Million Workers
Total Legal MWs (Left Axis)
Total Remittance (Right Axis)
IOMWs by Destination Countries, Sex and Type of Sector (% of Registered IOMWs)
5
0
20,000
40,000
60,000
80,000
100,000
120,000
Male
Female
19.5%
12.5%
18.4%
28.9%
8.2% 3.9% 3.2%
9.5%
2.5% 3.8% 9.1%
0.8%
69.8%
79.7%
69.3%
60.8%
2008 2009 2010 2011
Formal Male
Formal Female
Informal Male
Informal Female
Financial Literacy Average Level
6
0
0.1
0.2
0.3
0.4
0.5
0.6
Male Female
IOMW
Nationwide
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Non Savers Bank Account
IOMW
Nationwide
7
Critical Financial Issues for IOMWs
Topic Description Issue
Placement Fees Range from US$55 to US$2,800 depending on the destination
country.
IOMWs have little access to formal credit products to finance placement fees and rely on savings or informal
loans from recruitment agencies and sponsors.
Savings Accounts Prior to departure, every IOMW must have an active savings account under
his/her name.
Most accounts not used and fall dormant
Remittances Both IOMWs and family members need to send and receive remitted
funds
IOMWs often relying on “account mediators” to act on their behalf.
Remittances seldom used productively and effectively by family
members to improve livelihoods.
Migrant Worker Insurance
Every IOMW must buy the mandatory insurance, covering risks at every
stage of the migration process (pre-placement, during placement and
post-placement).
Low awareness and complicated claims procedures
Post-Migration Livelihood Upon return, IOMWs must
reintegrate into their communities and find new sources of income.
IOMWs often have limited access to credit and training to start
microbusinesses upon return from overseas
8
II. Pilot Project
This pilot is a randomized research. The main objective is to evaluate the impact of financial literacy training for migrant workers and their families and to explore the effective ways to improve their knowledge in managing their remittances
Developing training modules / manuals/ supporting materials and tools for migrant workers and their families
Providing financial literacy training: trainings are conducted for migrant workers who have registered to recruitment agencies (PPTKIS) to work overseas and/or their families
Phone and face to face based monitoring were carried out to assess how the training affected the household’s financial behavior
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Activities
Pilot Project on Financial Literacy Training for Indonesian Overseas Migrant Workers and Their Families
Output and Outcome
Modules: Training Guidelines, Trainer’s Guide for Migrant Workers, Trainer’s Guide for Migrant Workers’ Family; and supporting training tools: poster, comic book, financial book, and brochure
Overall, 432 migrant workers and/or their families from Greater Malang area have been trained
The report on the results of pilot are published in early August 2012
Impact Assessment Methodology
10
Intervention A (N = 109)
Train MWs
No training to MW family
Intervention B (N = 107)
Train MWs
Train MWs family
Intervention C (N = 108)
No training to
MWs
Train MWs family
Intervention D (N = 108)
No training to
MWs
No training to MW family
• Assessing the impact of financial literacy training delivered to migrant workers and/or their families by measuring:
• Behavioral changes on financial management/ planning
• Depth of understanding on financial services/ products
• Changes on their decision making on financial related matters
• Degree of usage of financial services/ products
Objectives
• MWs who were already registered at recruitment agencies and/or their families from Greater Malang (East Java area) whom received and managed the remittance
Participants
• Four different interventions to determine the most effective method / target groups in providing financial literacy training Interventions
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Stage 1:
Preparation
Stage 2:
FL Training
Stage 3:
Monitoring
Stage 4: Analysis &
Recommendations
Develop training materials Establish partnerships with local MoM and PPTKIs Train FL trainers Field test FL trainings with IOMWs and IOMWs’ families
Conduct FL trainings: • 10 classes for
IOMWs • 11 classes for
IOMWs’ families
December 2009 June 2010 January 2012
Prepare baseline survey (prepared prior, between Jan and June, 2010) Conduct 2 phone surveys and 3 household surveys
Analyze survey results Formulate policy recommendations
Structure of the Pilot Program
November 2008 April 2012
12
Item Training for IOMWs Training for Families
Core Materials
1. Financial Management 2. Understanding banking
services 3. Savings 4. Loan Management 5. Sending and Receiving
Remittances 6. Understanding Insurance
1. Financial Management 2. Savings 3. Loan Management 4. Sending and Receiving
Remittances 5. Understanding Insurance
Duration 2 days @ 9 hours = 18 hours 2 days @ 4 hours = 8 hours
Handouts Comic book, my financial book, brochure
Comic book, my financial book, brochure
Training venue
1. Manpower & Transmigration Office’s Training Center in Malang
2. Recruitment agencies in Malang
Manpower & Transmigration Office’s Training Center in Malang
Financial Literacy Training
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III. Impact Assessment
• Significant impacts of financial literacy training given to both the migrant and the family on saving behaviors and outcome and rely less on loans
Savings and Loans
• Training both the migrant and the family increase their awareness in financial concepts and improve their applied financial knowledge
Financial Awareness and
Knowledge
• Training both the migrant and the family increase their ability to prepare their cash records, budgeting and financial planning
Budgeting and Financial Planning
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Key Impacts of Financial Literacy Training (1)
• Training both the migrant and the family increase their awareness their knowledge on remittance cost components
Knowledge of Remittance
Costs
• Training the migrant only, both the migrant and the family, and family member only increase their awareness on mandatory migrant insurance
Knowledge of Insurance
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Key Impacts of Financial Literacy Training (2)
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Category Group A: Migrant
only
Group B: Family-only
Group C: Migrant
and Family
Financial Awareness
Low High High
Applied Financial
Knowledge Low Low Moderate
Financial Numeracy Skills
Low Low Low
Impacts on Financial Knowledge
Note: High indicates coefficient different from control at 1% significance level. Moderate indicates 5% significance level. “Low” indicates positive but insignificant effect. Impact Assessment Survey was conducted through MW family members in Indonesia.
Who You Train Matters: Identifying
Complementary Effects of Financial
Education of Migrant Households
Link: http://econ.worldbank.org/external/default/main?pageP
K=64165259&piPK=64165421&theSitePK=469372&menu
PK=64216926&entityID=000158349_20120814084903
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Further Reading
18
Thank You
