FINANCE & MARKETS GLOBAL PRACTICE JUNE 2017 THE MALAYSIA DEVELOPMENT EXPERIENCE SERIES Greenback 2.0 Johor Bahru Report Migrant Workers’ Remittances from Malaysia in collaboration with CONNECT WITH US wbg.org/Malaysia @WorldBankMalaysia @WB_AsiaPacific blogs.worldbank.org/category/ countries/malaysia FINANCE & MARKETS GLOBAL PRACTICE JUNE 2017 THE MALAYSIA DEVELOPMENT EXPERIENCE SERIES Greenback 2.0 Johor Bahru Report Migrant Workers’ Remittances from Malaysia in collaboration with About KNOWLEDGE & RESEARCH The World Bank Group’s current partnership with Malaysia is focused on knowledge- sharing. It is centered on support for Malaysia’s vision to join the ranks of high-income economies by 2020 through inclusive and sustainable growth, and to share its lessons with developing countries. In March 2016, the World Bank Group officially launched its Global Knowledge and Research Hub in Malaysia. The new Hub is the first of its kind, serving both as a field presence in Malaysia and as a global knowledge and research hub. It focuses on sharing Malaysia’s people-centered development expertise and creating new innovative policy research on local, regional and global issues. Knowledge & Research reports are flagship work emanating from the teams based in the Malaysia Hub. The Malaysia Development Experience Series captures key lessons from Malaysia relevant for emerging economies in Asia, Africa and elsewhere that are transitioning out of poverty and into shared prosperity. The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Please contact Isaku Endo, the lead author of this report, at iendo@worldbank.org and ddesmet@worldbank.org if you have questions or comments with respect to content. Table of Contents Acknowledgements 4 Foreword 5 List of Tables and Figures 6 Executive Summary 8 Introduction 10 Migration and remittances: The context of the survey 11 The Greenback 2.0 survey: Research objectives and data collection 13 Findings and Analysis Based on Respondents’ Answers 16 Demographic and economic profile 17 Individual income 22 Savings and financial inclusion 25 Remittance behaviours: Purpose, flows and needs 29 Main remittance channels used 34 Perceptions of transaction fees and awareness of remittance cost 42 Migrants’ use of information and communication technologies 44 Conclusion 46 Annex: From Survey Design to Fieldwork: A Methodological Note 49 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 3 Acknowledgements This survey is the result of a partnership between Bank Negara Malaysia and the World Bank Group. Bank Negara Malaysia and the World Bank Group would like to thank all the participating communities, associations, the State of Johor, namely the city of Johor Bahru and, most importantly, the migrants who gave us their time and attention during the interview sessions. In recent years, global remittance flows to developing countries have received increasing attention from policymakers and the international community. Remittance flows have grown steadily over the years totalling USD582 billion in 2015, of which USD432 billion went to developing countries, involving 232 million migrants. More than 700 million people depended on these remittance flows and paid an excessive price in remitting their money, as the global average cost for sending remittances in 2016 stands at 7.6%. The efforts of the international community and the adoption of the “5x5 objective” by the G8 and G20 – reducing the average cost by five percentage points – would save USD16 billion per year. These funds would simply remain with the migrants and their families and could contribute significantly to improve the living conditions of the migrants themselves as well as reduce poverty in their countries of origin. Recently, in Brisbane, the G20 have renewed their commitment to the cost reduction objective. Project Greenback 2.0 aims at increasing efficiency in the market for remittances through an innovative approach: promoting change inspired by the real needs of the migrants and their families. In Project Greenback 2.0, Remittance Champion Cities are selected. Previously, Turin (Italy) and Montreuil (France) were selected. In Asia, Johor Bahru (Malaysia) was selected as the first Remittance Champion City as it has a large number of migrant workers from Indonesia, Nepal, China, Myanmar and Vietnam. The Greenback 2.0 Project, Johor Bahru further builds on the ideas and initiatives of the previous Champion Cities and implements good practices and lessons learned. 4 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Foreword Remittances have an important role in a country’s development. They are a key source of external development finance for many developing countries, contribute to poverty reduction and improve social welfare. ASEAN as a region has more than 21 million nationals living abroad, and is home to more than 10 million migrants. More than 2 million of these migrants live and work in Malaysia. Their families – mostly in Indonesia, Bangladesh, Nepal, India and the Philippines – depend on the money that they send home to school their children, pay for medical care, build homes and generate other sources of income. On 29 November 2015 Bank Negara Malaysia Governor Muhammad Ibrahim launched, in partnership with the World Bank Group, the Greenback 2.0 Project in Johor Bahru, Malaysia. Project Greenback 2.0 aims at increasing efficiency in the market for remittances through an innovative approach: promoting change inspired by the real needs of the migrants and their families. The reasons for BNM’s engagement with Greenback 2.0 are threefold: Firstly, the initiative ensures access to formal remittance channels and guarantees a safe transfer of migrant earnings. Secondly, it reduces the remittance cost so that migrants keep more of their hard-earned money and SMEs can increase their competitiveness. Thirdly, it reduces the proportion of remittances that are transferred through unauthorized channels. Through the implementation of Greenback 2.0 significant strides have been made, making a real difference in the lives of individuals and their families, while helping raise the competitiveness of the Malaysian economy and safeguarding the integrity of its financial system. Bank Negara Malaysia and the World Bank Group would like to express their appreciation to the Project Greenback 2.0 partners, for their support and exceptional commitment to this initiative and its important goals. Due to the success of the Greenback 2.0 model, efforts are currently undertaken to replicate the model across the country at large and we hope that Malaysia’s experience with Greenback 2.0 will inspire other countries in the region to explore similar opportunities. Jessica Chew Cheng Lian Faris H. Hadad-Zervos Assistant Governor, Bank Negara Malaysia Country Manager for Malaysia, World Bank Group- Global Knowledge & Research Hub in Malaysia Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 5 List of Figures & Tables Figure 1. Remittance flows are larger than official development assistance (ODA), and more stable than private capital flows 11 Figure 2. Outward and inward remittance flows - Malaysia 12 Figure 3. Map of Malaysia and Johor Bahru 13 Figure 4. Map of Johor Bahru and data collection points 14 Table 1. Main characteristics of the sample, by segment and country of origin 17 Figure 5. Respondent nationalities across segments 18 Figure 6. Blue and white collar distribution by segment 19 Figure 7. Job types by segment 20 Figure 8. Urban migrant workers by sector of employment 21 Figure 9. Mean income (in RM) by nationality and segment 22 Figure 10. Mean income (in RM) by educational level 23 Figure 11. Method and frequency of salary payment / Bank account ownership 24 Figure 12. Percentage of migrants across segments with savings 25 Figure 13. Monthly remittance frequency by nationality 25 Figure 14. Average monthly savings (in RM) by nationality and segment 26 Figure 15. Monthly savings rate (in percentage) by nationality 26 Figure 16. Bank account ownership by nationality and segment 27 Figure 17. Reasons for not having a bank account in Malaysia 28 Figure 18. Purpose of having a bank account 28 Figure 19. Number of dependents by nationality 29 Figure 20. What is the money sent used for? 30 Figure 21. Yearly remittances by nationality 30 Figure 22. Yearly remittances by gender 31 Figure 23. Frequency of remittances by segment (all nationalities) 31 Figure 24. Frequency of remittances by nationality 32 Figure 25. Frequency of remittances by Indonesian and Bangladeshi migrant workers in both segments 33 Figure 26. Source of information in choosing main remittance channel 34 Figure 27. Awareness on differentiating regulated non-bank remittance channels from unregulated remittance channels 35 Figure 28. Malaysian Association of Money Services Business (MAMSB) logo 35 Figure 29. Use of regulated vs. unregulated channels in total and by segment 36 Figure 30. Use of regulated remittance channels by segment and in total 36 6 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Figure 31. Regulated channels: Use by nationality 37 Figure 32. Use of unregulated remittance channels by nationality and segment 38 Figure 33. Reasons for not using unregulated remittance channels 39 Figure 34. Factors determining choice of remittance channel 40 Figure 35. Factors influencing switch in remittance channel 40 Figure 36. Distance from worker’s residence to nearest remittance channel 40 Figure 37. Length of time taken for recipients to receive money (by nationality and segment) 41 Figure 38. Transaction fee 41 Figure 39. Expectation of remittance costs 41 Figure 40. Transaction fee paid by nationality and segment 42 Figure 41. Awareness of remittance cost components 43 Figure 42. Awareness of remittance cost components by nationality 43 Figure 43. Smartphone ownership and use of internet through smartphone by nationality and segment 44 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 7 Executive Summary Executive Summary Overview of the project Income, savings and financial inclusion “Project Greenback 2.0 –Johor Bahru” is the product of a partnership between the World Differences arise across segments and Bank and Bank Negara Malaysia, aimed at nationalities: Plantation workers earn 46% less supporting the development of an efficient and than urban workers. In the plantation segment, transparent remittances market. Previously, Bangladeshis earn 10% more than Indonesians, the World Bank Group launched the Project whilst in the urban segment, Indian migrants earn Greenback 2.0 in Turin, Italy (2013); and Montreuil, the least and Chinese migrants earn the most. France (2014). As part of the project, a survey Higher educational levels translate into higher was conducted among 401 migrant workers wages for migrants but beyond a secondary school from Indonesia, Bangladesh, Nepal, Myanmar, education wages stabilise since the type of labour Vietnam, China and India in order to understand performed by migrants typically does not require their remittance behaviour and level of financial higher educational levels. The vast majority receive inclusion. The survey focuses on the economic and their salary in cash. financial profile of migrants working in urban areas of Johor Bahru and surrounding plantations, and Savings rates across segments are high, with analyses their remittance and financial behaviours. urban workers saving on average 38% of their Particular attention has been given to the use of monthly income and plantation workers 51%. regulated and unregulated remittance channels to Indian workers, who have the lowest wages, have transfer money abroad. the highest savings rate and the opposite applies to Chinese workers. Even though urban workers earn 46% more than plantation workers, their monthly Demographic breakdown nominal savings are about the same, suggesting that the cost of living in remote plantations is cheaper and there are less spending opportunities Interviewed migrants differ by country of origin, than in urbanised areas. Women earn more but gender, type of occupation, economic stability save less compared to men. and length of stay in Malaysia. The vast majority of migrants are of Indonesian nationality and male In general, the collected survey data suggests a workers are the dominant workforce in both the low level of financial inclusion of the interviewed urban area and plantations. Most of these workers migrants, with 55% of urban workers and only have a primary or secondary school education 22% of plantation workers being banked. These and have been working in Malaysia for several groups mainly use their bank account to save, send years, performing blue collar work. The plantation or receive money. Other banking products are workers are typically younger than urban workers hardly used. due to the labour-intensive work. 8 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Executive Summary Remittance behaviour 68% of respondents reported sending cash through a remittance service provider (RSP) and only 25% of respondents use bank transfers, with a much smaller proportion remitting money via money exchangers or a post office. The use The survey focuses of unregulated remittance channels by plantation on the economic and workers is higher than that of urban workers (12% vs. 8%). The majority of respondents remit money financial profile of each month but there are differences between nationalities. While all respondents cited speed, migrants working ease of transaction cost and reliability as crucial in urban areas factors when choosing a remittance service, safety is a top consideration. Convenience of location is of Johor Bahru also an important factor, especially for plantation and surrounding workers where a quarter of respondents have to travel at least 30 km to gain access to a remittance plantations, and channel. analyses their Many respondents only associated remittance remittance and costs with the transaction fee. The vast majority financial behaviours of the respondents were unaware of the foreign exchange costs or other costs when asked how much it costs for them to send money abroad. This reflects a need for greater awareness in this respect and tools that allow remitters to better understand and calculate the costs incurred when sending money. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 9 CHAPTER 1 Introduction This report will share key findings from the survey, starting with an overview of the global and Malaysian context of international remittance flows in the last decade, as a general framework of the study. Next, the report will present the objectives of the research and related survey design and sampling techniques for the fieldwork, while a specific methodological note is added at the end of the report on the fieldwork phase. The following section articulates findings of the analysis on the 401 interviews collected. Following a brief description on the demographic and the economic conditions of the informants, this section focuses on the analysis of the migrants’ remittance behaviours and needs. Finally the report concludes with a summary of the main findings and provides recommendations on how to address the barriers and issues faced by the migrants in Johor Bahru pertaining to financial and remittance services, as well as potential areas of further investigation. 10 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 1: Introduction Migration and remittances: The context of the survey Global context In 2016, remittance flows to developing countries are projected to reach USD442 billion, marking an increase of 0.8 percent over 20151 . The importance of these remittance inflows cannot be underestimated. At the macro level, they provide an important source of foreign exchange and contribute to a country’s balance of payments. At the micro level, remittances constitute an important source of household income and support basic consumption, including investments in education, entrepreneurship and healthcare. Remittance flows are significantly larger than official development assistance (ODA), more stable than foreign investment to developing countries and are less likely to be volatile in the wake of external shocks, and can in fact increase in times of crisis (i.e. disasters and humanitarian emergencies) (Figure 1). In short, remittances generally reduce the level and severity of poverty and lead to higher human capital accumulation, greater health and education expenditures, better access to information and communication technologies, improved access to formal financial sector services, enhanced small business investment, more entrepreneurship, and better preparedness for natural disasters such as droughts, earthquakes, and flooding as well as reduced child labour2. FIGURE 1. Remittance flows are larger than official development assistance (ODA), and more stable than private capital flows $ billion 800 700 FDI 600 500 Remitt nces 400 Pvt debt & port. equit 300 200 ODA 100 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016f 2018f Source: Trends in Remittances, 2016: A New Normal of Slow Growth (World Bank, 2016) 1 http://blogs.worldbank.org/peoplemove/trends-remittances-2016-new-normal-slow-growthpercent20 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 11 Chapter 1: Introduction Malaysia Project Greenback 2.0 in Johor Bahru, Malaysia In 2014, there were 2.1 million registered immigrants in Malaysia and likely over 1 million In 2013, the World Bank launched “Project undocumented immigrants, making up 15% of Greenback 2.0 – Remittances Champion Cities” Malaysia’s workforce3 . Malaysia has the fourth and selected Turin (Italy) as the first Champion largest number of migrants and the seventh highest City followed by Montreuil (France). Project ratio of migrants to total population in East Asia Greenback 2.0 is designed to understand the Pacific. Top source countries include: Indonesia, issues faced by consumers through surveys, face- the Philippines, Bangladesh, Thailand, Myanmar, to-face workshops, interviews, and to intervene Nepal, India, China, Singapore and Vietnam. with migrant communities, remittance service providers (RSP) and other stakeholders in order to As Malaysians have become more educated and promote changes. seek out higher-skilled jobs, and as the labour market remains tight, immigrant labour has filled In November 2015, Project Greenback 2.0 Johor gaps in low and mid-skilled jobs, which make up Bahru was launched in partnership with Bank three quarters of all jobs in Malaysia. Negara Malaysia which conducted a survey on migrants residing in Johor Bahru. The survey was Figure 2 displays the dramatic growth of outward aimed at exploring the migrant workers’ level of remittances in Malaysia from 2006 to 2015. Inward financial inclusion and their prevalent practices and remittances have been growing as well but at a needs in remitting money to their origin countries. slower pace. FIGURE 2. Outward and inward remittance flows - Malaysia RM billion 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tot l outw rd remitt nce Tot l inw rd remitt nce Outw rd remitt nce vi non-b nks ch nnels Outw rd remitt nce vi b nks Inw rd remitt nce vi b nks Inw rd remitt nce vi non-b nks ch nnels Source: International Transactions Information System (ITIS), e-SURVEY on bank remittance transactions and Money Services Business Statistical Report on Remittance Business, Bank Negara Malaysia 2 http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/overview 3 Malaysia Economic Monitor – Immigrant Labour (December, 2015 – World Bank); See: http://documents.worldbank.org/curated/en/753511468197095162/pdf/102131-WP-P158456-Box394822B-PUBLIC-final-for-printing.pdf 12 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 1: Introduction The Greenback 2.0 survey: Research objectives and data collection FIGURE 3. Map of Malaysia and Johor Bahru Perlis Ked h Pen n S b h Kel nt n Teren nu Per k P h n Sel n or Ne eri Sembil n S r w k Mel k Johor Johor B hru Se m t Sin pore Mersin Mu r Klu n B tu P h t Kot Tin i Johor B hru is st t c pit l loc t d in th south rn p rt of Johor, bord rin Sin por Ponti n Johor B hru Work plan and survey design Research objectives Under the Greenback 2.0 Project, this survey of The main objective of the Greenback 2.0 survey migrants in Johor Bahru draws on the design of is to investigate the level of financial inclusion research already undertaken in Turin, Montreuil and remittance behaviour of migrant workers in and London, but has been tailored to the Johor Johor Bahru. The survey focused both on migrants Bahru context. There were three main phases working in Johor Bahru and migrant workers of the research: on neighboring plantations. It was important to • Research design and the definition of the understand what barriers or issues these migrant sample structure communities face in accessing or using remittance • Data collection, input and analysis services and what their current behaviours and • Preparation of the final report needs are in this respect. Sample structure definition The main objective The selection of migrant workers is based of the survey is to on “natural fallout” where respondents investigate the level of were approached in their respective work environment and/or place of dwelling. The total financial inclusion and sample size is 401 individuals and comprised of remittance behaviour of two segments of migrants: those working in Johor migrant workers Bahru’s urban area and those working in plantations around Johor Bahru. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 13 Chapter 1: Introduction The urban workers sample consists of Indonesian migrant workers in Johor Bahru. Since 250 respondents who are employed in the Greenback 2.0 is also implemented in Lombok this manufacturing, construction and services survey sheds light on the remittance behaviour and industry within a 50 kilometre radius from needs of this specific group of Indonesian migrant the city of Johor Bahru. They are mainly from workers. Indonesia, Bangladesh, Nepal, China, Myanmar and Vietnam. The eligibility criteria to be included in the survey sample were: The remaining sample of 151 respondents • Be at least 18 years old are plantation workers employed at three • Live in Johor Bahru City, on, or near the plantations (Ulu Remis, Bukit Lawiang and plantations where one is employed Gunung Sumalayang plantations) near Johor • Have an income through a job or occupation; and Bahru. These respondents are mainly from • Have sent remittances to his/her country of Indonesia and Bangladesh. origin in the last 12 months4 For both samples there was a stronger focus No minimum thresholds were applied in terms of on Indonesian migrant workers since they form type or length of employment in Malaysia as the the largest community of migrant workers in objective is to understand general remittance Malaysia. The plantation sample consisted of behaviours rather than those associated with a larger number of respondents from Lombok, migrant workers who have resided in Malaysia for a Indonesia who make up the largest group of longer period of time. FIGURE 4. Map of Johor Bahru and data collection points Bukit Lawiang Plantation Ulu Remis Plantation Gunung Sumalayang Plantation Johor Bahru 4 While the focus is largely on workers who have sent money to their home country in the past 12 months, a small proportion of the total sample consists of those who have not sent money to their home country in the past 12 months. These respondents were included to provide insight on their knowledge of remittance and willingness to participate in future financial education initiatives. 14 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 1: Introduction Sampling method and surveying technique The urban migrant worker respondents were sourced through the free-find methodology whereby the interviewers randomly intercepted respondents in areas with higher density of migrant workers. The interviews were carried out face-to-face at the intercepted location or at the respondent’s preferred location within the vicinity. Plantation migrant worker respondents were interviewed using the central location test methodology whereby the respondents were gathered in one location to be interviewed individually. Three plantation estates’ management teams recruited migrant workers in their estates who were willing to participate in the study. The workers who consented to participate in the study were provided with transportation to the interview location arranged by their employers. A single questionnaire was used for both segments. The questionnaire comprised of closed- ended questions only, with questions programmed to be asked or skipped depending on prior responses provided. All responses were recorded via a programmed survey link using tablets. The interviews with the urban workers were conducted in English, Bahasa Malaysia, or Mandarin, depending on the respondent’s preferred language. Most interviews with plantation workers were conducted in Bahasa Malaysia. To facilitate comprehension, the plantation respondents were provided the option to view the questionnaire in their native languages of Bahasa Indonesia or Bengali for questions that require prompt responses. The average length of interviews was 17 minutes. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 15 CHAPTER 2 Findings and Analysis Based on Respondents’ Answers 5 5 The following findings and analysis are purely based on the respondents’ answers to the survey questionnaire. 16 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Demographic and economic profile The demographic profile of the final sample is reported in Table 1 which includes statistics on gender, length of employment, age, and educational level of the 401 interviewed migrant workers. This data has been segmented by location (plantation versus urban area) and nationality. TABLE 1. Main characteristics of the sample, by segment and country of origin Plantation Urban Nationality Indonesia Bangladesh Indonesia Bangladesh Nepal Vietnam Myanmar China India Gender M F M F M F M F M F M F M F M F M F (n=114) (n=4) (n=33) (n=48) (n=53) (n=48) (n=39) (n=11) (n=12) (n=3) (n=8) (n=7) (n=19) (n=2) 97 3 100 - 7 53 100 - 100 - - 100 80 20 5 47 90 10 Education Level (%) No formal 2 - 3 - 2 - 4 - 3 - - - 8 - - - - - schooling Did not complete 6 - 9 - 8 6 8 - 15 - - - - - - - - - primary school Primary 27 50 58 - 54 34 46 - 46 - - 55 2 100 - - 21 5- school Secondary 38 50 21 - 31 60 40 - 31 - - 36 42 - 38 100 63 - school Senior high 26 - 9 - 4 - - - 5 - - 9 8 - 63 - 16 50 school Tertiary 1 - - - - - 2 - - - - - - - - - - - Age (%) 18 to 24 42 - - 8 2 15 - 28 - - - 2 33 - - 16 - years old 25 to 29 21 25 45 - 13 11 27 0 33 - - 9 33 - - - 26 - years old 30 to 34 18 50 27 - 23 11 31 - 21 - - 18 17 33 13 43 16 100 years old 35 to 40 10 25 12 - 23 9 15 - 13 - - 9 8 33 75 29 37 - years old Above 40 10 - 6 - 33 36 13 - 5 - - 64 - - 13 29 5 - years old Length of employment (%) Below 1 34 50 3 - 17 2 15 - 8 - - - 17 - 75 43 5 - year 1 to 2 29 - 24 - 13 13 10 - 36 - - - 8 - 13 43 37 - years 2 to 4 18 50 3 - 15 34 15 - 41 - - 64 17 33 - - 21 50 years 4 years and 1 - 33 - 56 51 60 - 15 - - 36 58 67 13 14 57 50 above Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 17 Chapter 2: Findings and Analysis Based on Respondents’ Answers Nationality: Indonesians form the largest Length of employment: Difference in length of community, both in the plantation (78%) and the employment between the urban and plantation urban segment (40%). Therefore, the survey results segment is not significant, with the exception of are significantly impacted by the Indonesian the group of migrants who have been working workers sample. The Bangladeshi workers are in Malaysia for four years or more: the size of the second largest community in both segments, this group is twice as large for the urban migrant constituting 22% of plantation workers and 19% workers in comparison with plantation workers. of urban workers. The Nepalese workers are the A potential explanation for this difference across third largest group in the urban segment (16%). segments could be that plantation workers, as they The survey results of other nationalities include get older, transfer to less labour-intensive jobs. Vietnam, Myanmar, India and China, but are based on a relatively small sample size (Figure 5). Job type, occupation and industry sectors: All migrants included in the sample were employed Gender: The majority of migrant workers in the or self-employed (2%) in order to ensure that they survey sample are male (only 30% of the urban have control over economic resources in relation to workers and 3% of the plantation workers are remittance decisions. female). The very low percentage of female workers in the plantation segment can be attributed to the labour-intensive nature of the work in plantations. FIGURE 5. Respondent nationalities For the urban segment, the dominance of male across segments workers is concentrated among the Bangladeshi and Nepalese nationalities which are exclusively male, followed by the Indian nationality where only 4% 4% 10% is female. 4% 3% Age: Age demographics between the plantation and urban segment differ: plantation workers 10% are generally younger than urban workers. 57% of plantation workers in the survey sample are between 18 and 29 years old while only 38% of 55% sample urban workers are between 18 and 29 years old. The preference by employers in plantations 20% for a younger labour force may be related to the labour-intensive work. 40% of the total urban workers sample are 35 years old or older, whereas for this category of workers their share drops to 20% in the plantation segment. Indonesi M nm r Education: Most workers in both segments have B n l desh Chin a primary/secondary school education; only 9% have a lower education level or lack education. Nep l Indi Interestingly, 22% of the plantation workers have a Vietn m senior high school or equivalent education whereas only 6% have obtained this level of education in the urban segment. 18 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Distribution by job type FIGURE 6. Blue and white collar distribution by and occupation segment Respondents were asked about the title or % content of their job position to determine the job type distribution in each segment. The 100 following job type and category definitions were used: 90 White collar jobs involve clerical, managerial work and enterpreneurship while the place of 80 work is the office or business premises. Blue collar jobs are those that require physical labour 70 and the place of work is an industrial location or (agricultural) field. Within each category, 60 a job can be skilled (requires a specialised training or learned skill-set) or unskilled (does 50 not require special training or skill). White collar jobs include managerial6, unskilled and other 40 skilled jobs. Blue collar jobs include those that require physical labour with specific skills or can be performed by unskilled workers. 30 20 Composition of sample 10 by job category and segment 0 Urb n Pl nt tion Across segments, 84% of the workers are blue Blue Coll r (skilled nd unskilled) collar and 16% are white collar. If we analyse White Coll r (skilled nd unskilled) the composition in each segment, we notice that the workers in the plantation segment are almost exclusively blue collar (96%), whereas in the urban segment, their share drops to 76% (Figure 6). 6 CEO/Chairman/Managing Director/President; Director/General Manager/Vice President; CFO/Treasurer/Company Secretary/Controller CFO; Owner/Partner; Manager/Executive/Supervisor/Officer. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 19 Chapter 2: Findings and Analysis Based on Respondents’ Answers Figure 7 provides a breakdown by job type across both segments and reveals that the share of unskilled blue collar workers in the plantation is almost twice as high than in the urban segment and the share of skilled blue collar workers in the urban segment is 27% higher than in the plantation segment. The other job types which belong to the white collar job category are largely represented in the urban segment, whereas in the plantation segment, workers employed as managers/executives, or those performing unskilled and other skilled white collar jobs, are hardly represented. FIGURE 7. Job types by segment % Urb n Pl nt tion 60 40 50 30 20 10 0 Owner/ M n er/ Other Skilled Unskilled Other Skilled Unskilled P rtner Executive White Coll r White Coll r Blue Coll r Blue Coll r Across segments, Chinese workers are dominating the skilled white collar category. They are the only community with workers holding titles/job positions as Director/General Manager/Vice President. They also lead in the owner/partner category, followed by Vietnamese and Indians. It is noteworthy that in the aforementioned job categories, Indonesia, Bangladesh, Myanmar and Nepal are not represented across segments. In the unskilled white collar category, the Vietnamese are leading, followed by the Indian workers. The representation of other nationalities in this category is negligible (<4%). In the unskilled blue collar category for the urban segment, workers from India, Indonesia and Bangladesh have the highest percentage of concentration. The workers in the plantation segment consist of Indonesians and Bangladeshis whose jobs fall under blue collar job category. However, the division of migrants in the unskilled blue collar category is different depending on the nationality. Three quarters of Bangladeshi workers belong to this category whereas only half of the Indonesian workers do. In the urban segment, higher education levels correlate with higher job positions, but in the plantation segment, this is not the case. Independent of their education levels (e.g. no education as well as senior/ tertiary education), the workers perform the same type of skilled or unskilled blue collar work. 20 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Industry sector of occupation Plantation workers exclusively fall under Agriculture, Forestry and Fishing sector. In contrast, the distribution of the urban migrant workers sample by sector of employment is diversified (Figure 8). For the urban segment, the service industry employs more than half of the urban migrant workers, with the accommodation and food services industry share almost being equal to the wholesale and retail trade share (14% and 15% respectively). The group of migrants involved in other business services represents 16% of the service industry. The manufacturing and construction industries represent 28% and 16% respectively of total employment in the sample. Although not shown in detail, there are significant differences in the gender distribution among specific sectors of employment. Male migrants are concentrated in the construction and manufacturing sectors while women are overrepresented in the human health and social activities industry. The composition of the accommodation and food services industry is more gender balanced. FIGURE 8. Urban migrant workers by sector of employment 7% A riculture, Forestr nd Fishin 16% M nuf cturin Construction 28% 15% Hum n He lth nd Soci l Work Activities Accomod tion nd Food Services Activities 14% Wholes le nd Ret il Tr de 4% 16% Other Services Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 21 Chapter 2: Findings and Analysis Based on Respondents’ Answers Individual income Mean income by segment and nationality Figure 9 shows mean individual incomes in the When compared with the national mean plantation and urban segment by nationality. monthly income of employees (Malaysia-born) The mean income of plantation workers is 46% in the urban area, which was RM2,514 in 2015, lower than the mean income of urban workers urban migrant workers are earning, on average, (RM1,056 vs. RM1,544). This difference can be 40% less7. The mean income of plantation migrant explained due to the lower cost of living in remote workers (RM1,056) was on average, 35% less than plantations in comparison with the cost of living the national mean monthly income for employees in Johor Bahru City. As such, wages for plantation (Malaysia-born) in the rural area who earn RM1,617. workers are adjusted to the local cost of living. Additional factors which contribute to the higher Bangladeshi plantation workers have a mean wages of urban workers according to our sample income which is almost 10% higher than that group include, older age and longer length of of Indonesian workers. However, the same employment than plantation workers who are observation cannot be made for urban workers young, relatively inexperienced and typically work of these nationalities where income levels are less than 4 years at plantations. For urban workers, the same. For the urban segment, Indians have their work experience/expertise gained over time the lowest mean income (RM1,166). Outliers are is a factor, together with the higher cost of living in the Chinese urban workers who have the highest Johor Bahru, which determines their higher wage. income (RM3,834), followed by the Vietnamese with RM1,682. FIGURE 9. Mean income (in RM) by nationality and segment RM 4,000 3,834 3,200 2,400 1,682 1,544 1,600 1,421 1,417 1,423 1,234 1,136 1,167 1,056 1,034 800 0 Me n Me n Indonesi Indonesi B n l desh B n l desh Nep l Vietn m M nm r Chin Indi (Urb n) (Pl nt tion) (Urb n) (Pl nt tion) (Urb n) (Pl nt tion) 7 Salaries & Wages Survey Report 2015, Department of Statistics Malaysia : https://www.statistics.gov.my 22 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Mean income and educational levels For both migrants and Malaysia-born workers the level of schooling is positively correlated, FIGURE 10. Mean income (in RM) by with a higher mean income (Figure 10). Two educational level trends can be observed when compared with the Did not mean income of nationals. First, for the group complete 918 schoolin of workers with a primary school education and or form l 1,214 those who did not complete schooling or have no schoolin formal schooling, wages are higher for migrants than for nationals. Second, beyond the secondary 1,180 Prim r school education, higher education does not yield school/ equiv lent further increases in income for migrants, whereas 1,307 for Malaysia-born workers, the secondary school education level functions as a stepping stone 1,713 to higher incomes, with senior high school and Second r school/ tertiary education levels resulting in income levels equiv lent 1,426 which are 2.5 times higher than migrants with the same education levels. The fact that migrants with higher education levels are not rewarded by Senior 3,686 higher incomes to the same extent that Malaysian- hi h school nd terti r 1,420 born workers are in other jobs, relates to the fact that the type of labour performed by migrants, in our sample, typically does not require higher 0 800 1,600 2,400 3,200 4,000 educational levels. Me n Income (S l ries nd W es Surver Report, Dep rtment of St tistics, M l si 2014) Me n Income (Greenb ck 2.0 Johor B hru Surve , 2016) Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 23 Chapter 2: Findings and Analysis Based on Respondents’ Answers Method and frequency of salary payment/bank account ownership In general, across segments, workers are predominantly paid in cash (Figure 11). However, the differences between plantation and urban workers are substantial. The vast majority (89%) of plantation workers receive their salary in cash and only one in ten receive them via bank transfer. When compared with urban workers, one notices that salary payment methods are more balanced with 58% of respondents receiving their salary in cash and 42% in their bank account. The differences in salary payment methods across segments impact bank account ownership which is 2.5 times lower for plantation workers compared with urban workers. Most of the workers receive their salary on a monthly basis. Nevertheless, the group of workers who receive their salary on a bi-weekly basis is 4.5 times larger in the plantation segment compared to the urban segment. FIGURE 11. Method and frequency of salary payment / Bank account ownership % Urb n 100 92 89 Pl nt tion 77 75 58 55 50 42 22 25 18 11 4 0 C sh Tr nsfer into P ment Once P ment Twice B nk Account B nk Account Per Month Per Month Ownership 24 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Savings and financial inclusion An entire section of the survey was dedicated to understanding respondents’ saving habits and financial inclusion levels. The data gathered reveals whether migrant workers are able to save money and what the mean savings and savings rate is per nationality working in plantations and urban areas. Savings Across segments, 94% of workers have savings. Of the 6% who are unable to save money, 83% are urban workers. Within this group, the inability to save differs among nationalities (Figure 12). Those who did not have any savings said that they remitted money to dependents instead of saving, or that their monthly salaries were too low to allow for savings. The former correlates with the nationalities in Figure 13 who have a higher incidence in remitting money on a monthly basis than other nationalities. FIGURE 12. Percentage of migrants FIGURE 13. Monthly remittance across segments with savings frequency by nationality 6% B n l desh 19 Chin 13 Nep l 8 94% Indonesi 6 S vin No S vin 0 4 8 12 16 20 % Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 25 Chapter 2: Findings and Analysis Based on Respondents’ Answers For those who are able to save some of their income each month, the amount can be significant (Figure 14). In the urban segment the Chinese migrant workers, followed by the Vietnamese, are saving the most on a monthly basis and migrant workers from Myanmar are saving the least. Indonesian migrant workers in the urban segment save more than those working in plantations, but Bangladeshi migrant workers in the plantation segment are saving more than Bangladeshi migrant workers in the urban segment. Overall, across segments, plantation workers save the least. FIGURE 14. Average monthly savings (in RM) by nationality and segment Se ment Me n 578 535 Chin 897 Vietn m 656 B n l desh 572 585 Indonesi 554 521 Nep l 553 Indi 546 Urb n M nm r 517 Pl nt tion However, if we compare the monthly savings of each nationality against their monthly income, FIGURE 15. Monthly savings rate we discern different trends. The workers from (in percentage) by nationality Myanmar and India, who have the lowest monthly savings on a nominal basis, actually have the 51 Se ment highest savings rate (Figure 15). The Chinese, who Me n 38 have the highest nominal savings, have the lowest Chin savings rate (23%). When comparing segments, 23 workers from Indonesian and Bangladeshi have a Nep l higher savings rate (+11%) than their counterparts 38 in the urban segment. One of the reasons for this Vietn m difference in savings rate could be the lower cost of 39 living in plantations as well as fewer opportunities Indonesi 50 39 to spend money due to the remote location of plantations. B n l desh 51 40 The mean savings per month for men is M nm r 42 slightly higher than women’s monthly savings. Nevertheless, the difference is negligible (RM563 Indi 46 for males vs. RM553 for females). If we look at the mean income/salary, women who earn more than 0 10 20 30 40 50 60 % men (RM1,488 vs. RM1,329), actually save 5% less Pl nt tion Urb n of their monthly income than men (women save 37% of their income and men 42%). 26 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Banking products and services About 55% of the migrant workers in the urban segment and 22% of the migrant workers in the plantation segment have a bank account (Figure 16). However, differences within each segment are significant. In the urban segment only 14% of the Indian migrant workers are “banked” which contrasts sharply with the Vietnamese migrant workers who, with 91%, are highly banked. The fact that wages for plantation workers are mostly paid in cash, combined with the remote location of plantations, which are further from banks, seem to be factors that impact bank account ownership as shown in the discrepancy of bank account ownership percentages between Indonesian and Bangladeshi workers in both segments. Those respondents without a bank account were asked about the reasons for not having one (Figure 17). In the urban segment the number one reason for not having a bank account is simply that migrant workers do not have a need for one. In the plantation segment, migrant workers state that the distance to banks is the main reason for not having a bank account. It is interesting to see that there is no trust issue with banks. Those who do not feel qualified to open a bank account claim they cannot do so because they do not have the proper documentation (70%), their salary is too low (33%) or they cannot meet the required minimum balance. FIGURE 16. Bank account ownership by nationality and segment % Urb n Pl nt tion 100 91 80 77 67 60 60 55 49 42 40 40 22 20 15 14 0 Indi Chin Indonesi B n l desh M nm r Nep l Vietn m Se ment Me n Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 27 Chapter 2: Findings and Analysis Based on Respondents’ Answers FIGURE 17. Reasons for not having a bank account in Malaysia % 100 Urb n 80 75 Pl nt tion 62 60 40 27 27 20 17 11 12 8 6 3 0 I don’t need I don’t feel B nks re I don’t Too m n b nk ccount qu lified to ppl too f r w trust b nks forms re needed for b nk ccount FIGURE 18. Purpose of having a bank account % Urb n 100 Pl nt tion 80 80 60 55 53 48 40 20 15 3 4 0 To s ve To send or To obt in or To p bills, To receive receive mone p lo ns rent, etc. s l r Those who have a bank account mainly use it to save money and this trend is stronger with urban migrant workers than plantation migrant workers (Figure 18). Using the bank account to remit or receive money comes second but only half of the migrant workers do so. As a result, only one out of four urban workers and one out of ten plantation workers use banks to remit money8. Hence, the vast majority of migrant workers use other regulated or unregulated channels to remit money. A more detailed discussion in this regard follows below. Urban workers predominantly opt for a telegraphic transfer when remitting money via their bank accounts whereas plantation migrant workers prefer account to account services. Only 20% of workers in both segments use online banking while the use of bank cheques in the plantation segment is negligible. 8 Bank account ownership for Urban/Plantation workers is 55 percent/22 percent respectively. Half of these use their bank account to remit money. 28 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Remittance Behaviours: Purpose, Flows and Needs Sending money to the origin country is a transnational activity, which typically characterises the migration experience. The analysis of remittance transfers helps us to understand the level and depth of migrants’ labour market integration at destination and of their connection with the origin households, which directly influence the frequency, amount and regularity of remittance flows. Number of recipients and motivations When the Nepalese, Vietnamese, Myanmarese and Indian migrant workers remit money, they all do so to support their dependents. They also have the highest average number of dependents since a percentage of other nationalities do not have any dependents (Figure 19). FIGURE 19. Number of dependents by nationality % 100 12 21 7 73 33 6 75 61 94 80 52 43 60 53 40 32 24 32 20 27 24 12 13 0 4 Indonesi B n l desh Nep l Vietn m M nm r Chin Indi More th n 6 3 to 6 Up to 2 No dependents Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 29 Chapter 2: Findings and Analysis Based on Respondents’ Answers As Figure 20 shows, respondents were asked what the remitted money was used for. Consistent with many other surveys, family maintenance is the main reason, followed by savings, education and health (Figure 20). FIGURE 20. What is the money sent used for? (More than one answer allowed) % Tot l Aver e Urb n Pl nt tion 100 98 94 80 63 60 56 44 42 44 45 42 40 34 29 22 23 20 14 13 11 7 7 7 4 2 3 2 4 0 F mil S vin s Educ tion Emer encies Home Debt Ph sic l Investment M inten nce & He lth renov tions rep ment oods Characteristics of remittance flows Yearly remittances by nationality With the exception of the Chinese migrant workers, most migrant workers remit between RM5,000 - RM10,000 on a yearly basis (Figure 21). This corresponds with the monthly savings rate of RM556 across segments, or RM6,678 savings per year. The Chinese migrant workers is the only group with almost half of the respondents remitting between RM10,000-RM20,000 per year and is also the only group where 8% are remitting more than RM20,000 per year. With a monthly income of RM3,833 they earn substantially more than the average in the urban segment (RM1,544) and even though they have the lowest savings rate (23%), they still remit the most in total, based on the average yearly remittances across the remittance brackets. FIGURE 21. Yearly remittances by nationality Indi Chin Up to RM3,000 M nm r Between RM3,001 to RM5,000 Vietn m Between RM5,001 to RM10,000 Nep l Between RM10,001 to RM20,000 B n l desh Above RM20,000 Indonesi 0 20 40 60 80 100 % 30 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Gender distribution in yearly remittances With the exception of the RM3,000 - RM5,000 segment, women migrant workers, on average, remit less than men on a yearly basis (Figure 22). Based on the survey data women migrant workers, on average, earn 12% more (W: RM1,488 vs. M: RM1,329) but save 5% less (W:37% vs. M: 42%) and remit 14% less than men migrant workers. FIGURE 22. Yearly remittances by gender % 50 40 30 20 10 0 Up to RM3,000 Between RM3,001 Between RM5,001 Between RM10,001 Above RM20,000 to RM5,000 to RM10,000 to RM20,000 FIGURE 23. Frequency of remittances by segment (all nationalities) 4% 10% 17% 35% 32% 24% 55% 23% Ever month Once in two months Once in three months Onl when ur ent / I don’t remember Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 31 Chapter 2: Findings and Analysis Based on Respondents’ Answers FIGURE 24. Frequency of remittances by nationality 10 Indi 47 Chin 33 20 27 M nm r 40 33 9 Vietn m 55 36 3 13 Nep l 26 55 26 B n l desh 26 26 5 16 Indonesi 18 60 0 10 20 30 40 50 60 % Onl when ur ent/ Once in three months I don’t remember Once month Ever month Frequency of remittances by segment and nationality When measuring the frequency of remittances per year, nationalities of migrant workers behave differently within segments. In the urban segment, the dominant frequency of remittance is monthly (Figure 23) for Indian, Indonesian, Bangladeshi and Nepalese migrant workers but only once in three months for Chinese migrant workers, and once in two months for Vietnamese and Myanmar migrant workers (Figure 24). 32 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers If we compare the Indonesian and Bangladeshi migrant workers in the urban and plantation segments, we can see that they behave differently as well (Figure 25). Indonesians in the plantation segment remit less frequently than their colleagues in The receivers the urban segment (41% remit only once every three months whereas can have a in the urban segment, 60% of the Indonesians remit every month). role to play in About 50% of Bangladeshis remit monthly and there is no deciding which difference among segments. However, the share of Bangladeshis remittance in the plantation segment remitting once in two months is higher channel and than in the urban segment (39% vs. 26%). Interestingly, the group of Bangladeshi migrant workers who remit only once every three product to use months is three times as large for the urban segment than in the plantation segment (26% vs. 9%). FIGURE 25. Frequency of remittances by Indonesian and Bangladeshi migrant workers in both segments 3 9 Vietn m 39 49 26 Nep l 26 49 13 41 B n l desh 16 26 5 16 Indonesi 18 60 0 10 20 30 40 50 60 % Onl when requested bec use Once in three months of ur ent needs / I don’t remember how frequent Once in two months Ever month Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 33 Chapter 2: Findings and Analysis Based on Respondents’ Answers Main remittance channels used FIGURE 26. Source of information in choosing main remittance channel R dio 1 1 1 Television 2 2 1 Newsp per 4 3 5 Emb ss /comsul te 5 5 5 Internet 7 6 1 Associ tion/ 9 Group/ enc 6 8 B nks/RSPs 31 23 4 Advertisement 20 (e. . p mphlet) 15 19 F mil or friends 50 in home 39 77 Friends/colle ies 96 in M l si 89 0 10 20 30 40 50 60 30 40 50 60 % Pl nt tion Urb n Tot l Source of information on remittance channels Word of mouth has always been the main source of information on remittances and the survey results confirm this phenomenon (Figure 26). It is interesting to note that the second most popular source is “family or a friend in home country” which shows that receivers can have a role to play in deciding which remittance channel and product to use. 34 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Regulated versus unregulated remittance channels Awareness of differences between regulated non-bank remittance channels and unregulated remittance channels Respondents were asked whether they were able to distinguish regulated from unregulated FIGURE 27. Malaysian Association of channels by inquiring about their knowledge Money Services Business (MAMSB) logo on the specific characteristics of a regulated channel. First of all, regulated remittance channels are required to display a license from Bank Negara Malaysia at their premises. Secondly, they need to have proper business signages and procedures (e.g. issuance of receipt). Thirdly, for regulated non-bank remittance service providers, they are required to display the Malaysian Association of Money Services Business (MAMSB) logo (Figure 27). FIGURE 28. Level of understanding to differentiate between regulated non-bank remittance channels from unregulated remittance channels % 40 36 32 28 24 20 16 12 8 4 0 Yes (B nk Ne r Yes (Proper business Yes No, I don’t know how M l si License) si n e nd procedures) (MAMSB Lo o) to differenti te A rather large group of respondents (40%) replied that they did not know how to differentiate regulated from unregulated remittance channels (Figure 28). 38% of the remaining respondents knew that a Bank Negara Malaysia license is required, 33% ackowledged the requirement of proper business signage and procedures and a mere 5% were aware of the MAMSB logo requirement for non-bank remittance service providers. Clearly, there is a huge opportunity for education campaigns to increase awareness about characteristics of regulated remittance channels. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 35 Chapter 2: Findings and Analysis Based on Respondents’ Answers Use of regulated and FIGURE 29. Use of regulated vs. unregulated unregulated remittance channels in total and by segment channels % Figure 29 describes the use by workers in 100 92 both segments of regulated or unregulated 91 88 remittance channels. 91%9 of the respondents 80 which were part of our sample group declared to use regulated remittance channels and only 9% 60 engaged in using unregulated channels. Regulated 40 channels consist of banks, remittance service providers, money exchangers10 and post offices. 20 12 Unregulated channels include a respondent’s 9 8 friend or employer, chalo, hawaladar or someone 0 trustworthy recommended within the respondent’s Tot l Indonesi Pl nt tion network. The use of unregulated channels is higher Re ul ted Unre ul ted in the plantation segment (12% vs. 8%), although the difference is not significant. When we look at the breakdown of the type of regulated channel used per segment, we see that the main method of sending money abroad is through remittance services providers, followed by banking services (Figure 30). Money exchangers and post offices are used by less than 5% of the repondents. When comparing segments, we notice that remittance service providers are almost twice as popular in the urban segment than in the plantation segment. Banking services on the other hand are comparatively used more in the plantation segment than in the urban segment (34% vs. 21%). FIGURE 30. Use of regulated remittance channels by segment and in total % 80 80 68 64 Urb n 48 47 Pl nt tion 34 Tot l 32 25 21 16 11 7 5 4 1 0 B nkin Remitt nce Mone Post office services service providers exch n ers (Non-b nk) 9 It is possible that this may include a percentage of migrants who may not be able to differentiate the non-bank remittance service providers and unregulated channels. 10 Money exchangers can only conduct remittance transactions as an appointed agent of authorised Remittance Service Providers under Section 42 of the Money Services Business Act 2011. 36 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers FIGURE 31. Regulated channels: Use by nationality Indi Chin M nm r Vietn m Nep l B n l desh (Urb n) B n l desh (Pl nt tion) Indonesi (Pl nt tion) Indonesi (Urb n) 0 20 40 60 80 100 % B nkin services RSPs (non-b nk) Mone exch n ers Post office Regulated channels: Use by nationality With the exception of Chinese migrant workers, most respondents prefer to remit money via regulated (non-bank) remittance service providers (Figure 31). Indonesian migrant workers in the urban segment use money exchangers (12%) as much as banking services (13%) whereas in the plantation segment, money exchangers are hardly used but workers do remit money through the post office. Interestingly, Bangladeshi migrant workers in the plantation sector use money exchangers and post offices although to a limited extent, while these channels are completely absent in the urban segment. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 37 Chapter 2: Findings and Analysis Based on Respondents’ Answers Unregulated Channels: Use by nationality The use of unregulated channels is highly Earlier we mentioned that 91% of the dependent on the nationality and segment respondents are already using regulated (Figure 32). In the urban segment, 37% of the channels to remit money and 9% use migrant workers from Myanmar send money unregulated channels. These numbers are abroad through unregulated remittance channels, reflective of the surveyed sample group only. followed by the Chinese (25%), Indians (9%) and the During the survey, our interviewers were careful to Vietnamese (7%). When comparing nationalities not to inquire about the legal status of the migrants across segments, Indonesian plantation workers since this would have resulted in answers from are more than three times likely to use unregulated legal migrants only since illegal migrants would not channels than their counterparts in the urban have wanted to participate out of fear. Due to the segment. The use of unregulated channels by vast majority of the respondents using regulated Bangladeshi migrant workers is low in the urban channels, it could be argued that our sample group segment (3%) and drops to zero in the plantation consisted mainly of legal migrants. Nevertheless, segment. Based on the small sample size, the it is insightful to know the reasons why the 9% of Nepalese workers are the only ones who remit our sample group use illegal remittance channels money exclusively through regulated remittance to inform approaches and activities in persuading channels. this group to use regulated channels. FIGURE 32. Use of unregulated remittance channels by nationality and segment % 40 37 32 24 25 16 14 8 9 7 4 3 0 Indonesi B n l desh Nep l Vietn m M nm r Chin Indi Unre ul ted ch nnels (Urb n) Unre ul ted ch nnels (Pl nt tion) 38 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers FIGURE 33. Reasons for not using regulated remittance channels 6% 10% Inconvenient loc tion Un w re of the services 16% offered b re ul ted remitt nce ch nnels Fees re too hi h 42% L ck of trust in re ul ted remitt nce ch nnels 26% Refused to nswer Those respondents who were using unregulated About a quarter said they simply were not aware channels to remit money were asked about of the remittance services offered by regulated their reasons for doing so. 29% of them replied remittance service providers. Of those who were that they did not have the relevant documentation aware of the regulated remittance services, 16% to use regulated remittance channels. When said the fees were too high while 10% did not trust asking the remainder about their reasons (Figure the services. Here, awareness campaigns regarding 33), the majority said the location of the regulated services offered by regulated remittance channels, remittance channels is inconvenient (too far away). costs and reliability could help these respondents Hence, bringing regulated remittance services make a more informed choice when choosing a closer to these respondents could persuade them remittance channel. to switch to using regulated remittance service providers. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 39 Chapter 2: Findings and Analysis Based on Respondents’ Answers Factors that determine FIGURE 34. Factors determining choice the choice of remittance of remittance channel channel E se of tr ns ction S fet Figure 34 states the four most important factors cited by respondents based on their selected remittance channel. F ctors th t determine choice of When asked what would make remitt nce ch nnel respondents switch from their most used remittance channels, the answers Speed Reli bilit were uniform across segments. Safety is the main concern for remitters since transactions typically involve hand-carried cash. Respondents are, of course, looking FIGURE 35. Factors influencing switch in remittance channel for the lowest remittance fees and are also concerned that the money always reaches 1. S fet its destination (Figure 35). Convenience of location is important as well, especially for 2. Che per Fee plantation workers (Figure 36). 77% of the 3. Reli bilit urban workers have access to a remittance 4. Convenience of Loc tion channel within 5 km from their residence whereas 66% of the plantation workers only 5. Speed of Tr nsfer have access to a remittance channel over 5 6. E se of F mil to Collect Mone km away from their residence. In fact, 24% of plantation workers mentioned they need 7. Av il bilit of Cle r Inform tion to travel 30 km or more to gain access to a remittance channel. FIGURE 36. Distance from worker’s residence to nearest remittance channel Urb n Don’t know/ 2 5 C n’t rec ll Pl nt tion 30km or more 24 15km - 30km 3 18 10km - 15km 5 10 5km - 10km 13 12 1km - 5km 59 18 0 - 1km 18 11 0 16 32 48 64 80 40 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Since the main reason for remittances is family maintenance/purchase of food, the speed of remittance services is a basic requirement for most migrant workers. All remittance channels provide fast remittance speed and typically the recipient would receive the money within one business day. Related to this basic need of speedy remittances is the ease of collection by the family/dependents. Hassle-free, straightforward collection of the transferred money is important when selecting the remittance channel, together with the availability of clear information on fees, transfer speed and collection procedures. Those who specifically opt for a slower remittance speed may do so because a lower remittance cost outweighs the importance of speed (Figure 37). FIGURE 37. Length of time taken for recipients to receive money (by nationality and segment) Indi Chin M nm r Vietn m Immedi tel Nep l Within 1 business d B n l desh Within 2 business d s Indonesi After 2 business d s Pl nt tion Urb n Tot l 0 20 40 60 80 100 % FIGURE 38. Transaction fee FIGURE 39. Expectation of remittance costs 1% 3% 2% 11% 3% 43% 51% 86% Up to RM10 RM11 - RM20 RM21 - RM30 Yes, I expected to No, I did not expect p this mount to p this mount Above RM30 Don’t know I w s not w re th t there were other ch r es Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 41 Chapter 2: Findings and Analysis Based on Respondents’ Answers Perceptions of transaction fees and awareness of remittance cost components Remittance cost consisted of transaction fee, exchange rate cost, receiving cost, and service tax. Through the survey, respondents were questioned to understand their perceptions of costs associated with remittance transactions. They were asked to estimate the transaction fee for each average remittance transaction in Malaysian Ringgit excluding other cost components (Figure 38). Across both segments 94% of the respondents pay a transaction fee of RM20 or less, with half paying RM10 or less (Figure 39). Transaction fee The percentage of plantation workers that pays RM10 or less for the transaction fee is larger than that of the urban workers. In general, Indonesian migrant workers pay less than other nationalities with 70% paying RM10 or less. The Chinese migrant workers, followed by the Vietnamese, pay the most per transaction. However, as mentioned above, the Chinese migrant workers remit the highest amount on a yearly basis among all surveyed nationalities. When remitting larger amounts, transaction fees typically increase as well, which explains why the Chinese migrant workers on average pay more than others (Figure 40). FIGURE 40. Transaction fee paid by nationality and segment Indi Chin M nm r Vietn m Nep l B n l desh Indonesi Pl nt tion Urb n Tot l 0 20 40 60 80 100 % Up to RM0 RM11 - RM20 RM21 - RM30 Above RM30 42 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Awareness of remittance cost components When asked about the different components of the total remittance cost, most workers mentioned the transaction fee but only a minority was aware of the other components such as the costs related to foreign exchange and costs charged to recipients of the remitted amount. The urban workers were more aware than the plantation workers about the cost components (Figure 41). Only 3% of the urban workers were not aware of the cost components compared to 20% for plantation workers. The Vietnamese and Nepalese migrant workers are the best informed and are aware of all cost components. The Indonesian migrant workers in the plantation segment are the least informed, with about 81% only having knowledge about the transaction fee and about 14% not being aware of cost components (Figure 42). FIGURE 41. Awareness of remittance cost components % 100 95 91 Tot l 80 Urb n 72 Pl nt tion 60 40 21 20 20 17 9 9 4 5 1 3 0 Tr ns ction Fee Forei n exch n e cost Costs for recipient I don’t know FIGURE 42. Awareness of remittance cost components by nationality % 100 80 Tr ns ction fee Forei n exch n e cost 60 Costs for recipient 40 Don’t know 20 0 Indonesi B n l desh Nep l Vietn m M nm r Chin Indi Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 43 Chapter 2: Findings and Analysis Based on Respondents’ Answers Migrants’ use of information and communication technologies Smartphone ownership by migrants and access to internet via smartphone In 2015, 65% of Malaysians owned a smartphone11 , which is the most used device to search the internet (52%), followed by the computer (36%) and the tablet (12%). Within Southeast Asia, Malaysia is the country with the highest internet penetration. According to World Bank’s 2014 figures, close to two- thirds of Malaysia’s population has internet access12. 86% of smartphone users research products and prices on their smartphone13. According to a survey conducted by Google & TNS, 35% of Malaysian smartphone users solely depend on their smartphones for all internet access. This figure is estimated to be the highest in the world, making Malaysia the top country when it comes to internet access exclusively via smartphones. FIGURE 43. 100 Indi Smartphone 52 ownership and use Chin 100 100 of internet through M nm r 100 53 smartphone by 100 Vietn m nationality and 91 97 segment Nep l 82 79 B n l desh (P) 73 90 B n l desh (U) 60 87 Indonesi (P) 80 86 Indonesi (U) 72 86 Pl nt tion 78 92 Urb n 71 90 Tot l 74 0 20 40 60 80 100 % Use of internet b sm rtphone owners Sm rtphone ownership The questionnaire included questions on migrants’ ownership of smartphones and use of internet through their smartphones (Figure 43). Smartphone ownership among migrants (74%) is higher than the national smartphone penetration percentage, and 90% of migrants use their smartphones to access the internet. This is particularly relevant as this may encourage new types of remittance services which are available via the internet or are based on other new technologies. In addition, this will make communication with remittance senders easier and present the right conditions for initiatives regarding app-based remittance price transparency tools. Figure 43 displays the smartphone ownership among different nationalities across segments. Migrant workers from India and Myanmar have the lowest percentage of smartphone ownership. The Chinese migrant workers, together with access to the internet via the smartphone, havev the highest smartphone ownership percentage (100%). 11 http://www.pewglobal.org/2016/02/22/smartphone-ownership-and-internet-usage-continues-to-climb-in-emerging-economies/ 12 http://data.worldbank.org/indicator/IT.NET.USER.P2 13 www.shockmediastudio.com 44 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 2: Findings and Analysis Based on Respondents’ Answers Pick Remit app Pick Remit, which is a part of Project Greenback 2.0, is a smartphone and tablet app developed by the World Bank to help migrants make the best choice of services when sending money back home to their families. Pick Remit helps individuals pick the international money transfer service that best fits their needs. Remitters choose how much money they would like to send to the destination country and Pick Remit tells them what are the options available in the area, the fee and exchange rate applied, and conditions of each service. By choosing the most convenience service, migrants can save and keep more money in their pockets or just send a little more. The survey inquired about the migrants’ knowledge of this app. Due to its recent introduction in Malaysia only 10% of the migrants had heard about this app, via word of mouth (78%), the World Bank website (13%), or a newsletter (9%). Nevertheless, when introduced to its functions most were enthusiastic and over half said they would likely use the app in their next remittance transaction. When asked if they would be willing to try online-based remittance methods (online banking, TT, online money order, apps), 50% said they would be willing to use these for future remittances. Half preferred online banking over telegraphic transfers (30%), online money order (25%) and other remittance apps (15%). Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 45 CHAPTER 3 Conclusion 46 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 3: Conclusion This survey, which was conducted as part of Greenback 2.0 in Johor Bahru, Malaysia, provides a detailed overview of the financial The level of financial and remittance habits of migrant communities working in the urban area of Johor Bahru and inclusion/bank on plantations outside the city centre. An account ownership investigation into the income and savings habits of these migrant communities has provided useful at 22% is very low for conclusions on their financial inclusion levels and plantation workers. highlighted the extent to which respondents are able to support their dependents in their home At 55%, urban country. workers fare better The findings obtained outline a number of but it is clear that significant observations across nationalities and location of employment (urban or plantation). The there is a long way findings can be grouped in three main areas: ahead for a ‘high level • Income, savings and financial inclusion of financial inclusion’ • Remittance behaviours • Use of information and communication of migrant workers technologies Income, savings and financial inclusion The average income of urban workers is 46% than that of urban workers, which can mainly be higher than the average income of plantation attributed to the lower cost of living at remote workers. The Chinese are the highest earners, with plantations. an income that is three times as much as the lowest earners the Indian workers. Higher education The level of financial inclusion/bank account levels are positively correlated with higher incomes ownership at 22% is very low for plantation but workers who have a secondary school level workers. At 55%, urban workers fare better but it is education do not earn much higher incomes with clear that there is a long way ahead for a ‘high level further education due to the fact that the type of financial inclusion’ of migrant workers. A number of work performed by migrants typically does of reasons explain the low level of bank ownership: not require a skill set above a secondary school certain workers cannot comply with the basic education. requirements to open a bank account due to a lack of proper documentation but factors that have the Almost all of the respondents have savings, biggest impact are salary payments in cash and and the monthly average savings for plantation the remoteness of plantations, making traveling to workers is RM578, slightly higher than the banks not only hazardous (cash is carried on one’s average for plantation workers (RM535). person) but also a time-consuming undertaking, However, the savings rate of the latter is 11% higher especially for plantation workers. Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 47 Chapter 3: Conclusion Remittance behaviour The purchase of basic necessities to support 91% of the respondents use regulated channels dependents in the home country is the main to remit money and the most popular regulated reason for remittances. Remittances are generally channel is remittance service providers which sent on a monthly basis and on a yearly basis, are used by two thirds of the respondents, most respondents remit between RM5,000 and whereas banks are only used by one third. RM10,000. Women, even though earning 12% more Money exchangers and post offices play a marginal than men, save 5% and remit 14% less than men. role in migrant remittances. 94% of the respondents pay a transaction The determining factors when choosing a fee of RM20 or less. Apart from this transaction remittance channel are the same among all fee, workers are less aware of the other cost respondents: safety, ease of transaction, speed components of the total remittance costs, such as and reliability are key but when choosing the the foreign exchange cost and costs charged to channel (regulated or unregulated), price, trust and the recipient. convenience of location are also important. Use of information and communication technologies Smartphone ownership and internet use via smartphone is very high across the sample. Therefore, this can be a very powerful vehicle for promoting transparency and services built on new technologies. E-wallet services for migrants, allowing online remittances instead of going through traditional channels is expected to assume a more important role in future. Market players who invest in educating their consumer base, providing reliable and competitive services and creating trust stand to gain a sizeable market share of remittances. Policy insights The survey was able to provide valuable insights for regulators in developing impactful policies. Embracing technology can be an effective way to address the low level of financial inclusion among migrant workers, with significant potential to capitalise on the high penetration of smartphone and internet access among migrant workers. Regulators can encourage more innovative means for conducting remittances such as mobile remittances. E-remittance applications can overcome geographical barriers and contain remittance costs as services are offered directly to migrants, by-passing intermediaries or illegal operators. As part of the initiatives to reduce remittance flows through unregulated channels, the survey highlighted various awareness gaps among migrant workers that should be reduced or eliminated. A comprehensive education strategy should target methods for identifying authorised non-bank RSPs and emphasize the protection afforded by using regulated channels. It should also educate remitters on the total costs of remittances to help remitters make informed choices between remittance services. The findings further affirm the relevance of principal-agent arrangements and operation of temporary remittance kiosks which have helped to improve accessibility, particularly in rural areas such as plantations. Agents and mobile kiosk arrangements can be a cost effective alternative to bring remittance services to the migrants in remote areas. 48 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia CHAPTER 4 Annex: From Survey Design to Fieldwork: A Methodological Note Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia 49 Chapter 4: Annex The questionnaire The questionnaire was drafted following alignment on the key research objectives and scope. Most of the questionnaire closely emulated the questionnaire used in previous Greenback surveys to ensure consistency with answering the overarching objectives. The questionnaire was divided into the following sections: • Personal background – Demographic information to understand the respondents’ background • Employment information – Information about the respondents’ employment in Malaysia such as length and sector of employment • ICT literacy – Information about usage of Internet/ devices used in Malaysia, smartphone ownership, awareness of Pick Remit, willingness to use Pick Remit in the next transaction • Banking and financial background and level of financial inclusion – Income profile (main method of receiving salary, frequency of receiving salary), saving behaviour, bank account ownership and reasons for having or not having a bank account • Remittance behaviour – Methods used, reasons, and frequency of sending money to home country, knowledge of remittance costs, sources of information on remittance, challenges faced when sending money to home country • Awareness of unregulated remittance channels – Awareness of how to identify unregulated channels and the risks associated with them • Participation in financial education training or programs – Interest in participating in financial education training or programs, contents expected of the programs Training of interviewers and pilots All interviewers were provided with a soft copy of the questionnaire and the survey link prior to actual fieldwork. Both materials were referred to in a comprehensive field briefing to all field supervisors. In the field briefing, the project team outlined the research objectives and requirements. All survey questions were reviewed together with the field supervisors in the field briefing to ensure that all teams are aligned in the meaning of each question and how questions should be conveyed to respondents. Following the field briefing, the supervisors conducted another briefing with all the interviewers by going through the questionnaire. All the interviewers selected for this research received standardised training and have extensive experience in conducting face-to-face interviews. The survey link was provided to all interviewers to enable them to familiarise themselves with the contents of the questionnaire. Prior to the fieldwork, the field supervisors and interviewers conducted six pilot interviews to assess the complexity of the questionnaire and gauge the length of interview. Feedback on the questionnaire was then provided to the project team and incorporated into the survey link ahead of the start of fieldwork. 50 Greenback 2.0 Johor Bahru Report: Migrant Workers’ Remittances from Malaysia Chapter 4: Annex The fieldwork: Sampling strategy For the urban worker segment, the fieldwork team consisting of 11 interviewers was deployed in areas with higher migrant worker densities (e.g. near banks and bus stations). The respondents were also intercepted in residential areas. The plantation worker segment sampling was directly controlled by the plantation employers who extended the invitation to the workers to participate in this research. No quotas were imposed in recruitment, except that the workers should be from Indonesia and with a preference toward migrants from Lombok. A team of 17 interviewers conducted the interviews at locations determined by the employers. Feedback from the fieldwork At the beginning of fieldwork, the sampling was distributed across workers from Indonesia, Bangladesh, Nepal, Myanmar, Vietnam, and China. However, Indian workers were added, resulting in a redistribution of sample sizes across nationality. The soft quotas set for blue/white collar classification; occupation industry, gender, and age were also relaxed following feedback from the interviewers that the demographic distribution of the migrant workers within the sampling areas was falling out in different proportions. Similarly, the soft quotas for gender and age in the plantation worker segment were relaxed as the plantation employers were recruiting larger groups of younger male workers. Data entry, cleaning and analysis All responses by the respondents were keyed directly into electronic data tablets with a pre- programmed survey link. After completing several interviews, the interviewers would upload the responses into an online survey platform which stored all the raw data collected. The project team had access to all the data collected to do routine checks to ensure that the sample distribution was falling within acceptable ranges and that the responses are logical and of good quality. Any responses identified as ambiguous and requiring clarification were highlighted to the field team and, if required, to the respondent through a phone call. All data cleaning was done on the online survey platform before the survey was closed for data export. Upon completion of the fieldwork, the data was exported from the online survey platform in SPSS. The data was processed to produce Excel data tables for data analysis and report production. 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