ABU DHABI // A new financial literacy programme aims to prevent Filipino workers in the UAE from falling into debt.
The joint programme by the UAE and the Philippines hopes to reduce the number of migrant workers who move to the UAE to make money, but end up in jail because of debt-related charges.
"I am saddened that people work overseas to earn money but end up in debt," said Grace Princesa, the Philippine ambassador to the UAE.
"Financial literacy training would be a concrete intervention to minimise this important issue."
The UAE branch of Migrante, a group created to protect the rights and welfare of Filipinos overseas, says it receives between six and seven calls a day from Filipinos in the UAE with huge amounts of bank loans and credit card debt.
"The majority of them owe between Dh20,000 and Dh50,000," Nhel Morona, the secretary-general for Migrante-UAE, said. "Many claimed they were unable to keep up with their credit card payments due to delayed salaries and salary cuts."
Credit cards were behind the majority of expatriate cases, according to a report released by Orion Analytics, a financial data analysis firm, in May.
According to the report, Indians, Pakistanis and Filipinos were the leading communities when it came to people skipping their debts. It showed that 30 per cent of expatriates who left the country because of debt in 2004 owed money on credit cards, a figure that rose to 66 per cent by the third quarter of last year.
A UAE Government ministry, the Philippine Embassy and other government agencies in Manila are now preparing for a two-day event called "Training of Trainers on Financial Literacy and Addressing Family Issues" .
"It will be done on a weekend in the first quarter of next year, and funds might come in from the UAE side," Ms Princesa said.
"The UAE recognises the importance of reintegration among migrant workers," she said. "There are positive developments regarding the UAE's role in ensuring the successful implementation of this project."
The training will be conducted by representatives from Atikha, a nongovernmental organisation in the Philippines that provides economic and social services to overseas Filipino workers and their families in the Philippines.
Atikha aims to help address the perceived social cost of migration and provides training to both migrants and their families in the Philippines. It believes that the social preparation of the families and the community is important for an effective reintegration programme for migrant workers.
Ms Princesa agreed that families should also undergo financial literacy training to prevent dependency and consumerist attitudes among migrants' dependents.
"Atikha piloted this project in Italy last year and they were successful in implementing it with communities of migrant families in San Pablo City in Laguna and Mabini in Batangas," she said. "Filipinos do not have a high savings rate but saving habits can be learnt."
Atikha's research in 2001 shows that most overseas Filipino workers have no significant savings, despite years of work abroad, and many of them are caught in the debt trap.
The Philippine Embassy has established that the second highest number of cases among Filipinos in Abu Dhabi and Al Ain jails involve debt-related charges.
About 600,000 Filipinos live and work in the Emirates, accounting for 12 per cent of the country's population, according to the 2008 estimate of the Commission on Filipinos Overseas in Manila.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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