Caribbean Remittance Forum

Note: Due to recent events in Jamaica, this Forum is due for rescheduling.

I'm off to Kingston, Jamaica this Monday to participate in the Caribbean Remittance Forum hosted by the World Bank in cooperation with the Canadian Government and the University of West Indies. The regional forum aims at sharing knowledge and generating dialogue to enhance the efficiency and integrity of the migration and remittance transfer process in the Caribbean region through effective regulatory and supervisory processes.

The Philippines has been invited to participate in the forum to share experiences in the regulation of innovative remittance products. As a regulator, I will be discussing the overall Philippine scenario on remittance and the policies set in place to provide proactive guidance to different participants in the remittance system.

The Philippine approach to the regulation of mobile commerce, which includes remittance and money transfers, has been favorably recognized by publications such as The Economist. I wrote about it here. Yet, every opportunity for knowledge sharing such as this still holds lessons to be learned and applied to further improve and maximize the benefits to be derived from a well-functioning remittance and payment system.

I will be sharing more on this in future posts, and I hope you will join in the discussions.

Your Net Worth IQ

A while back I've written about the initial steps that you can take to get a hold of your finances. As the focus of that post was about you getting a grip of the more immediate matters, namely your disposable income and your cash balance, a discussion of one's net worth was not included. Now, we turn our attention to the larger aspect of your finances.

Simply put, net worth is what you have left with monetary value, after deducting any obligations you may have. Things with monetary value, called assets, include cash and other items that you can convert to cash. This can include "tangible" assets such as loans you gave and properties, as well as "intangible" assets such as trademarks, patents, or rights that is legally yours. Obligations, also called liabilities, are simply what you owe somebody, such as a bank loan.

You get your net worth by listing down and assigning an amount to your assets and subtracting from it the amount you assigned as your liabilities. Some items are pretty much straightforward: cash on hand and in bank is simply that. However, you may need to do some estimates to determine how much is the value of the car you own or the house and lot that you have. Liabilities are usually simple to find out as well, as it is usually billed on you.

Having a high net worth is of course a good thing, but what is a "high" amount is always relative to the lifestyle that you live. If your disposable income, as discussed earlier, is constantly on the negative (because you are spending more than what you are earning), then you can expect to see a decline in your net worth as you take on more liabilities or be forced to sell some of your assets. How fast the decline is a matter of how much larger your expenses are compared to your income.

One tool that can help out in knowing and understanding your networth is NetworthIQ. It's a site that provides you with a template or a sample of the items that you may own or owe, describe what these items or accounts mean, and provide some level of automation for you and a place to keep a record of your net worth month after month. NetworthIQ also goes further than simply being a site to record your assets and liabilities by providing features such as the chance to post financial questions you may have to the site's members, give and receive tips, and even record your financial journey. It will even allow you to compare your net worth against others once you decide to make it public, although I am not particularly sure what is the value of that. But making one's net worth public can be useful for some individuals such as financial planners and bloggers that may have a need to "prove" something.

I've signed up with the site, and although one can have some apprehension as to security, it doesn't seem much of a concern for me. The information they require at signup is quite limited. Utilizing the template does not require you to provide sensitive information, although you are pretty much limited as to the level of analysis you can make. Keeping your net worth private is the default for the site. What I find as potential value here is the community that can grow and assist you in your financial journey. You may want to try it out yourself. (Note: I am not related to nor gain income from NetworthIQ).

Slot Machine Investing

There are a number of things that differentiate an "investment" from a not-so-carefully disguised form of gambling. Understanding these factors can spell the difference between making a payoff and ending up a financial ruin.

1. Investment is all about making informed assumptions. Gambling, on the other hand, relies heavily on luck. While it is true that luck plays a part in getting an income from one's investment, it should never be the primary factor. This is what makes it tricky this early. No one who will offer you an investment will come to you and say that it has a 50-50 chance of succeeding. Otherwise, you are better off heading to a casino (although I don't think there are games there that offer even a 50-50 chance). Rather, what you will get is a carefully packaged set of assumptions and computations that shows a high probability of getting a high income. What makes it an investment is whether or not you can vouch for the plausibility of these assumptions. Or, as a next best thing, your financial advisor (who is not the one offering you the investment), can vouch for it. Of course, there will be varying degrees and methods, but the bottomline is that the decision to invest was made based on facts, and not chance.

2. Investments offer a reasonable return, while a gamble will promise the moon. So, if you are investing in a highly regulated or very competitive industry, a higher than expected return should be a cause for careful evaluation. Not that it's not possible; it's whether or not the assumptions or methods (as mentioned above) allow for such a return to be achievable.

3. Investments feed on fundamentals, gambling feeds on frenzy. That's why so many who are excited with all these "Ponzi" schemes ended up getting burned. They either knew that there were no underlying reason for such a return on investment, or they couldn't care less.

4. Some investments are really just a step better than a gamble. Let's face it, some investments will have assumptions that will not be any better than a roll of a dice. This is true in such cases as pioneer industries or new technologies. The important thing is to recognize it for what it is.

Hopefully this post can help you in making that very important distinction between investing and gambling. Let me know your views or share what other criteria you may be using.

The Benefits of Mobile Commerce

Mobile commerce (m-commerce) is a way of conducting financial transactions without the necessity of going to an office or place of business such as a bank, a payment center, or other financial institutions. For many of us living in urban areas, we could take for granted the fact that we have access to various electronic channels, like we can pay our bills via the Internet, via SMS or through a simple telephone call. It saves us the time that we could better spend doing our jobs or being with our family. The convenience it provides us is something we can enjoy almost on a daily basis. Likewise, banks and financial institutions are plenty enough in urban areas so that in the event the electronic channels aren't available (or we just don't want to use them), we can always pay a visit to these institution's offices.

For some people, however, m-commerce is more than just convenience. It can become a life-changing innovation in their lives. Take for example a farmer who lives some distance away from the nearest business center. For him to make some transactions, like getting a loan, paying bills, or receiving payments for his produce, he would need to make the trek to town that can probably take him away from his business for a full day every time.

Through the m-commerce network, however, the farmer can receive proceeds of loans and payments made to him delivered electronically through an access device, like a cellular phone, in a form commonly referred to as e-money. He can then use the e-money to also electronically make payments for expenses of his business, or he can "cash out" through a nearby cash center and pay his suppliers and creditors who may prefer to be paid in regular cash.

Through all of these, he would probably spend only a fraction of the time and expense he would have to make if he had to go to town for each and every financial transaction he needs to make. He can then devote this saved time and money to producing more and possibly engaging himself in additional profitable business. Likewise, the risk of losing the money by traveling large distances is also minimized. You can only imagine the impact once this process is replicated and compounded.

For the companies and individuals the farmer deals with, they also benefit from receiving his payments faster. They likewise need to have less people manning their offices, or they can channel their personnel to more productive activities as well. Safety also comes into play in these situations, as fewer people need to handle cash and transport them over long distances.

A lot needs to be done for this system to work, though. Legal frameworks need to be set, infrastructures need to be laid, and the target market need to be made aware and capable of using the network. The efforts, however, is worth it once a vibrant m-commerce is set in place.