Abstract
Indonesian migrant workers (IMW) face life difficulties after returning back to Indonesia. This is a contrary condition considering their contribution to their home family in Indonesia while working abroad. Literature mentions that their financial planning is the root of the poverty of ex-IMW. Therefore, this research adopts literacy theory to explain this phenomenon. This research conducted a survey among 548 ex-IMW and measures their financial literacy and financial planning. This research also maps their asset ownership to examine the relationship between financial literacy and asset ownership. Overall, this research documents that financial literacy contributes statistically significantly and positively to financial planning. Furthermore, this research shows that asset ownership is closely related to financial literacy. In a nutshell, this research concludes that it is important for migrant workers to have good knowledge of financial issues, because having good financial literacy helps the migrant workers to plan their finance and budget much better, thereby helping them to avoid the poverty trap. Therefore, policymakers such as migrant worker authorities and/or Indonesian embassies abroad have to institute financial education programmes for migrant workers before they return to Indonesia.
Highlights
There are about 2 million Indonesian migrant workers working in Malaysia currently; the biggest among the migrant workers’ destination countries
The life after returning to Indonesia is a different story for most migrant workers, where most of ex-Indonesian migrant workers (IMW) face their lives in poverty again
The objective of this research was to investigate the role of financial literacy in financial planning of Indonesian migrant workers (IMW)
Summary
There are about 2 million Indonesian migrant workers (hereafter, IMW) working in Malaysia currently; the biggest among the migrant workers’ destination countries. The national authority for migrant worker placement and protection of Indonesians (hereafter, the migrant bureau) reported that the remittances from those workers to Indonesia reached USD 7.4 billion in 2013; the largest among the migrant workers’ destination countries. This implies that IMW are important for Indonesia’s economy. The life after returning to Indonesia is a different story for most migrant workers, where most of ex-IMW face their lives in poverty again This leads to intriguing questions: What have they done with their money? This leads to intriguing questions: What have they done with their money? What has happened to their remittances?
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