Indebted Before Departure: Information Arbitrage and Financial Exploitation by Philippine Migration Intermediaries

Indebted Before Departure: Information Arbitrage and Financial Exploitation by Philippine Migration Intermediaries

Indebted Before Departure: Information Arbitrage and Financial Exploitation by Philippine Migration Intermediaries

Executive Summary

Who are we?

Founded in 2018, Migrasia is a social enterprise incubator for solutions to migration-related problems in Asia. We focus on a wide-range of issues ranging from unethical labor migration to modern slavery and human trafficking. Migrasia leverages technology, novel legal strategies, and knowledge sharing to promote change within the labour migration industry at large. In collaboration with the Global Migration Legal Clinic within The University of Hong Kong’s Faculty of Law, Migrasia has reached millions of current, former, and prospective migrant domestic workers through social media. Migrasia’s programs have led to direct assistance of thousands of migrant workers in countries throughout Asia, Africa, and Europe, with over HK$80,800,000 in monetary recoveries and illegal proceeds blocked in 2020 alone.

This research project, made possible by Winrock International, aims to reduce instances of human trafficking and forced labor (particularly debt bondage during labor migration) by clarifying the power and information asymmetries between Filipino migrant workers and their migration intermediaries in the pre-departure phase. In the context of this research paper, the ‘pre-departure phase’ of migration begins when an individual is considering overseas migration and ends at the point of departure from the Philippines.

Research objectives and methodology

Labor migration is currently the most common predicate action leading to human trafficking and forced labor, and debt bondage is the most common indicator of forced labor.1 Based on Migrasia’s first hand experience with directly assisting thousands of migrant domestic workers per year, instances of collusion between migration intermediaries in migrants’ pre-departure phase have been identified as an enabling factor for abuse. This research seeks to test and understand these relationships, filling important knowledge gaps regarding the pre-departure phases of the labor migration process.

Existing literature on forced labour does not sufficiently address the way different types of actors intersect with migration processes. There is a lack of information around how migration intermediaries reach and recruit migrant workers at the earliest stages, how they inform prospective migrants after reaching them, and the other factors that influence migrant workers’ decision-making in the pre-departure phase. In addition, existing research lacks sufficient analysis of the collusion between migration intermediaries and how they bypass government regulations to exploit prospective migrants.

Answers to these questions are critical to reduce instances of human trafficking and forced labor in the context of labor migration. In this study, quantitative analysis has been used to identify barriers faced by Overseas Filipino Workers (OFWs) when trying to access accurate information, loopholes that are being used for exploitation, and intervention points that can be explored in order to reduce instances of human trafficking and forced labour.

To address these points, this study seeks to inform:

  • The factors that influence OFW decision-making when selecting migration intermediaries in the pre-departure phase of migration.
  • The level of knowledge OFWs have about legal requirements for overseas migration, especially on questions related to mandatory fees and collusion between migration intermediaries.
  • The role of migration intermediaries as information sources and the accuracy of the knowledge they communicate to OFWs.
  • The primary coercive methods used by migration intermediaries in the OFW pre-departure phase.

Our quantitative study analyzes the survey answers of 961 randomly selected current and former OFWs in the Philippines who have completed the pre-departure phase of migration within the last 5 years through the services of an employment agency. The survey was disseminated to individuals via mobile phone applications, using a Random Device Engagement methodology through the online service provider Pollfish, from 5-16 May 2021.

After applying a gender quota in order for our sample to be representative of the gender distribution of the population of OFWs, this method allowed us to gather insights from OFWs currently or formerly working across a wide range of industries and destination countries that largely corresponds to the characteristics of the total OFW population in 2019.

Summary of main findings

In selecting an employment agency, OFW decision-making is constrained by external factors.

  • A substantial percentage of OFWs in our study reported that their ability to choose their employment agency was restricted in some manner. Collectively, 41.9% of OFWs in our sample reported at least one of the following factors as the main reason for choosing their employment agency: lack of time (27%) or money (9%) to shop around, having their documents confiscated by the agency (effectively restraining OFWs to start the migration process with another agency) (8%), or alternative agencies being too far away (7%).

Employment agencies are mandating OFWs to utilise specific migration intermediaries, including
training centers, medics clinics and money lenders, in the pre-departure phase

  • Despite exclusive referrals being prohibited according to the POEA Rules and Regulations, employment agencies, both in the Philippines and overseas, played a central role in determining the other service providers that OFWs used in the pre-departure phase. When asked who, if anyone, required or pressured them to use a specific service provider, 44% of OFWs reported being required to use a specific training center by their employment agency, while 53% reported the same for the medical clinic that they used.
  • Nearly a quarter of OFWs (24%) reported that they were required or pressured to use a specific money provider by their employment agency, from whom they borrowed money to pay the costs of their

Many OFWs felt pressured into choosing the specific migration intermediaries that they utilised in
the pre-departure phase.

  • Respondents were surveyed on whether they felt they had the option or ability to choose the specific migration intermediaries that they utilised, as a measure of perceived pressure experienced in selecting service providers.
  • The data indicate that 43% of OFWs experienced high pressure at least once when selecting their medical clinic, training center, or money provider, reporting either feeling that they had no choice at all, or were pressured to use a particular migration intermediary. One in ten OFWs reported high pressure when selecting all three migration intermediaries (i.e., medical clinic, training center, and money provider for those who borrowed money).
  • Perceived high pressure was greatest in the selection of medical clinics, affecting 32% of OFWs, and was particularly prevalent for those bound for GCC countries (36%). 6 OFWs are taking on significant debt to finance their migration, with training fees in particular contributing to a large portion of that debt.

OFWs are taking on significant debt to finance their migration, with training fees in particular contributing to a large portion of that debt.

  • In order to finance the costs associated with migrating overseas, roughly a third of respondents (32%) took on debt that was larger than their annual household income.
  • Medical fees charged to OFWs frequently exceeded the legal limit set by the Department of Health of PHP2,200. Among respondents, 58% of OFWs paid more than PHP2,500 for their medical fees.
  • Training fees constituted a substantial part of the debt incurred by OFWs, as roughly half of respondents (49%) reporting all of their expenses (n=743), indicated that training fees accounted for more than half of the debt incurred to finance their migration.

OFWs are misinformed about critical laws and regulations relating to their migration and illegal practices perpetrated by migration intermediaries.

  • To assess levels of knowledge on relevant laws and regulations relating to their migration, OFWs were asked a series of five questions assessing knowledge on the legality of exclusive referrals, training requirements and medical fees. Roughly half of all respondents (49%) did not give a single correct response to the five knowledge questions, indicating a low level of relevant knowledge of OFW rights among the sample.
  • Concerning training requirements, 85% of OFWs wrongly believed that undergoing training was mandatory in order to take the NC II examination and obtain the NC II certificate, which is necessary for OFWs to work abroad. This is particularly important given that, as mentioned above, training fees constitute a substantial part of the debt incurred by OFWs.

Migration intermediaries and government agencies are important sources of information for OFWs. Government agencies are informing OFWs while migration intermediaries may be spreading misinformation.

  • Migration intermediaries are an important source of information, but the data indicate that the information they provide can be misleading. Among OFWs that incorrectly thought that exclusive referrals were legal, 55% of respondents reported learning this from a migration intermediary, including their employment agency, training center, medical clinic or money provider. Conversely, government agencies were more commonly cited as a source of information for OFWs who answered this question correctly.
  • In the pre-departure phase, findings indicate that more OFWs attended the non-mandatory and paid NC II training (65.3%), organised by migration intermediaries, than attended the Pre-Employment Orientation Seminar (PEOS, 15%); an online, free and mandatory government seminar aimed to inform OFWs about illegal recruitment practices.
  • Post-deployment, both government agencies and migration intermediaries are currently the main sources of information for OFWs. When asked “If your knowledge of Philippines OFW laws has improved since working overseas, where did you learn more?”, “Government agencies” (41%) and “Migration intermediaries” (42%) were reported in near equal measure.

Read full report here.

Learn more about Migrasia here.

Learn about Winrock International here.