Abstract
Despite their predictable and regular incomes, Filipino domestic workers in Hong Kong, China commonly finance large expenses through interest-bearing loans rather than savings. Our analysis of survey data and records of a credit cooperative for migrant workers suggests that this cannot be explained by their inability to save, financial illiteracy, short time horizon, or limited liability. Instead, we speculate that the strict schedules and high interest rates of these loans create a disciplining effect that these individuals find desirable. This may help them avoid unnecessary consumption or demands from their social network. However, interventions should also consider that these workers often receive nonmonetary reciprocal benefits from members of their social network.
Highlights
Domestic workers make up a significant flow of migrants in Asia
In 2017, we interviewed a sample of 136 Filipino domestic workers and asked about their employment history, wage income, remittances, savings, and loans
This leads us to the central observation in this paper: Filipino domestic workers appear to routinely finance their investments through loans rather than savings
Summary
Domestic workers make up a significant flow of migrants in Asia. Employers from several higher-income regions such as Malaysia; Singapore; and Hong Kong, China recruit live-in domestic help from countries such as the Philippines and Indonesia. This paper begins with the observation that migrants’ financial choices during their tenure in the host country greatly influence their own and their households’ future outcomes Whether their incomes are spent only on consumption or saved, and whether they make productive investments for financial gain, will determine whether they will retire comfortably and whether migration will improve their economic status. Our study population is Filipino domestic workers in Hong Kong, China We examine how they manage their finances, their choice between savings and loans. Our data suggest that only a small fraction of these loans are used for unforeseen emergency expenses; the majority are remitted home for school fees, consumption needs, or investment This leads us to the central observation in this paper: Filipino domestic workers appear to routinely finance their investments through loans rather than savings.
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