Migration and f inancial stability: A model on how to get there
Inow conclude this series on a mini-research project I had conducted on OFWs in Paris, exploring different dimensions — including trying to understand the financial strategies of the poor, dissecting the economic reasons for migration, and finally uncovering whether and how (if so) migrants and the families they left behind really do end up better off.
Last week, I presented a model of a migrant’s road to financial stability, which is composed of two stages: Achieving Independence and Achieving Stability. All of this is based on two precipitating conditions: an indebted road to migration and a home bias for investing. I explained how achieving independence not only depends on financial freedom, which comes from higher and more stable income, but also on professional freedom (the possibility to change employers and situation freely), social freedom (repairing relationships that may have suffered due to indebtedness), and, finally, psychological freedom (learning to be motivated again once they feel a sense of security).
However, all these achievements remain fragile at Stage 1. Whenever a bad situation arises or due to the cultural need to help others in need, migrants not only get stuck in this stage, without the ability to move forward and accumulate more wealth, but they often end up back where they began. I highlighted how it was accessibility to financial products and financial literacy education which were catalysts for them to break above this Stage 1 level and onto Stage 2: Achieving Stability.
Once they have overcome these hurdles, the use of their incomes dramatically changes. Migrants shift from freedom-based objectives to stability-based objectives and enter a second stage in Migrant Finance, characterized by the items below.
Financial stability. Migrants began to move from acting with the objective to be free from debt to using the money they accumulated for savings and investments to assure their futures and those of their loved ones. They would implement budgets that had a savings and investments component both in their host and home countries. They would also participate in the paluwagan (a group savings scheme with friends) not for debt repayment purposes but instead for long-term investment and retirement plans.
Professional stability. The effects of financial stability for migrants extend much more than just being able to lift their families out of poverty or provide an education for their children, though these are important things. Financial stability also introduced confidence in their professional lives. They no longer needed to accept abusive jobs or engage in very risky activities.
“After four years, I managed to build a house. So, I began fighting them back, my coworker and my employer. I said,
‘if you don’t need me, I will go.’” (Evelyn)
Social stability. Similarly, because they had cut the cord with those on whom they were financially dependent, they again felt accepted in their social circles. They also began themselves becoming the debt provider to others in need and continued to participate in social savings schemes, now with the additional objective of helping other people.
Psychological stability. Finally, migrants were also eventually able to achieve psychological stability and the feeling that they were happy where they were. To facilitate this, they began to create spending budgets that would instill discipline and a schedule for meeting daily needs and future investments. They participated in bank schemes and financial products that facilitate and enhance decision making and guarantee a better future. They could now also send money used as “mothering money” to make them feel closer to their loved ones, which aided both sides in the situation of separation.
“Yes, the daily talks, those don’t go away, and then each time I send money, even just a small amount — it’s not in the amount — as long as I can make them feel that I am taking care of them.” (Eduardo)
RESULTING CONDITIONS: (1) SOCIAL INTEGRATION (2) HOST COUNTRY APPRECIATION
Once the migrant had achieved stability, I found that this resulted in two key conditions: Social Integration in the host country and appreciation for the host country. Although migrants began with a home bias and had the intention to go back, this timeframe continued to extend. In fact, 60% of survey respondents said that they had surpassed their initial timeframe, with a majority stating that the reason was that they were happy with their lives in the host country and did not want to go home yet, as opposed to only a minority who stated that they had not returned because they were unable to save enough.
“Yes, I am happy. At the beginning I was disappointed but, in the process, when I managed to put myself in a stable place, that’s where I felt that I was okay here, I was happy already, as long as I continued the positive things
I was doing, not deviate from what I should be doing, just be stable.” (Jenalyn)
“I have some words to leave. So, for me, one’s success is not measurable by living in a big condominium, a big house, by buying a car, buying expensive things. Success of a person is really measured by whether you are financially stable and whether you are ready in the event that you really need it
(…) when there is an emergency, you can really manage. At least you are not afraid of what could happen to you. That’s where you will see a stable person.” (Jenalyn)
DANIELA “DANIE” LUZ LAUREL is a business journalist and anchor-producer of BusinessWorld Live on One News, formerly Bloomberg TV Philippines. Prior to this, she was a permanent professor of Finance at IÉSEG School of Management in Paris and maintains teaching affiliations at IÉSEG and the Ateneo School of Government. She has also worked as an investment banker in The Netherlands. Ms. Laurel holds a Ph.D. in Management Engineering with concentrations in Finance and Accounting from the Politecnico di Milano in Italy and an MBA from the Universidad Carlos III de Madrid.