Pesos, Dollars, Euros, Pounds

One of the advantages of running a small business in the Philippines is that once profitable, you can count on an income stream in the local currency: Pesos. This is a definite advantage, because ideally it should mean you rely less and less on outside sources of funds. As a foreign small business owner, the more Pesos you earn, the less likely you are to tap into your savings or outside investments which are likely to be in a different currency like dollars, euros, pounds, yen, etc.

Having a local income stream is important for two very practical reasons. The first, and most obvious, is being able to lower your overall transaction costs when meeting your cash requirements in the Philippines. If you rely on the ATM to access funds from abroad, chances are you are paying some form of service charge each and every time you withdraw money from the ATM. You may even be double-charged when both the local bank here in the Philippines and the outside bank you are accessing funds from each charge you for the transaction. If you have an income stream in Pesos, you may not have to withdraw funds as often, or even at all, meaning either fewer service fees or transaction costs and maybe none at all! This allows more of your savings to work for you and not the financial institutions.

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The second reason why it is important to have an income stream in Pesos is for risk diversification purposes. In the past year, as the Pesos rallied and the US dollar weakened, many expats and others who rely on outside sources of funds saw their purchasing power fall as the Peso went from around 56 to 1USD all the way down to 40 to 1USD. Those who had budgeted living on a thousand dollars a month in remittances saw their usual monthly budget fall from P56,000 a month down to P40,000 per month. That is a huge fall, and meant a great deal of sacrifice and lifestyle changes for a good many people. On top of that, inflation was on the rise during the past year; meaning goods in the Philippines were increasing in price while the purchasing power of people relying on remittances was falling. A classic double-whammy! Those who have a small business earning a Peso income stream were much less affected by such gyrations in the value of the currency. For one, small business owners could adjust their budget easier because they knew how much they were earning in Pesos and did not have to worry about the impact a falling dollar would have on their budget. For another, they could also look at adjusting their own prices and pass on some of the cost increases wherever possible, provided such moves did not negatively impact their overall sales and profitability.

Having a Peso income stream is also important if you are worried about long-term uncertainty in relation to your savings. If you have a Peso income stream, you can rely less on your savings or nest egg that is likely to be tied up in a more stable or ‘hard’ foreign currency. Earning in Pesos can result in the ultimate protection of your savings — meeting your monthly needs entirely in Pesos, saving a portion of your business income in Pesos, and retaining your entire nest egg in a hard currency that can be invested prudently to allow for capital appreciation or if more conservative, for capital preservation.

Bottom line: Having the Peso income stream helps you when the dollar is weak, and can allow you to also retaining you nest egg which helps you when the dollar is strong. A true double-bonus!

So, how can you maximize this situation if your small business is providing you with positive cash flow? Keep separate currency accounts! Try to see if you can live on your earnings in Pesos. Invest your foreign currency savings in conservative investments that grow slowly but safely, and should you need to tap into them on occasion, try to only withdraw interest earnings and leave the principal untouched. If you are able to cover your living expenses and save Pesos, look at ways to grow your Pesos quickly. Many banks offer very attractive interest rates on Philippine Peso time deposits. One strategy may be to try to maximize such opportunities by allowing deposits to grow all the way up to P250,000 — the maximum insured by the Philippine Deposit Insurance Corporation. After 250K, one could then either open a new account at another bank and do the same, or perhaps look at converting excess savings above 250K back into a hard currency with the aim being to grow any foreign currency nest egg even further.

I hope this column gets small business owners and future entrepreneurs in the Philippines to start thinking about the benefits of even a small Peso-denominated income stream. As you can see, a Peso income stream can provide upside possibilities while at the same time limit downside currency-related risks. Good luck, and hopefully, happy saving!

Post Author: Martin (51 Posts)

Martin is an expat businessman based in Butuan City. Martin writes about business related topics here on LiP for those who want to engage in business here in the Philippines.

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  1. Randall Jessup says

    Hi Martin,

    You’re quite right when you say it’s a good idea to have a Peso cash flow to cover your living expenses in the Philippines.

    But one thing you said, “… converting excess savings back into a hard currency.” has me a bit confused. I was under the impression that you cannot convert pesos to hard currency except under very strict circumstances. I thought the only way to convert was by getting permission from the Central Bank at the time you send hard currency to the Philippines in order to be allowed to repatriate up to the exact amount you sent and not more. If you don’t follow certain prescribed procedures the banks won’t give you hard currency.

    I have heard though that you can get up to $30,000 US dollars if you are going on a business trip abroad as long as you can produce a valid air ticket.

    I am also wondering if it is possible to give pesos to a Western Union office in the Philippines and have them convert to Canadian dollars for deposit back in Canada?

    What has been your experience with trying to get hard currency with pesos?

  2. Dr. Sponk Long says

    Hi Martin. This is a very apt article especially with today’s dwindling retirement nest egg. Dave Starr’s recent piece also alluded to this. If one can postpone cashing in one’s stocks and live in an island for five years and forget their 401 K it will be an excellent move.

    I saw a white man selling mangoes, lanzones, marang, sereguelas, tambis, etc with his Kariton at DV Soria in Cagayan de Oro a few weeks back. I think he was raking it in. He as a novelty in the area. ..anything for a peso. The Chinese know about this for generations . Now they own the Philippines.

    The Chinese community better watchout! The white man is coming. (Just kidding, Martin.)


  3. says

    Hi Dr. Sponk Long – I always smile when my mother has a grin ear to ear when she is able to sell her mangoes for a few pesos. There is nothing wrong with how you earn your money as long as it is honest. There is also nothing wrong with earning “just” a few pesos. A few pesos go a long way here in the Philippines.

    I really must admire that white man for doing that. He is actually smart – he is different, and nobody else will be doing that, and locals will admire and respect him more and buy from him. Good for him.

  4. Martin says

    Hi Randall,

    Buying US$ is one of the easiest things you can do in the Philippines. You can take your Pesos to just about any bank and ask to buy dollars. Even better, find an OFW family who regularly remits money to the Philippines in US$ — they always have to exchange their dollars for Pesos. You can turn around and suggest a win-win situation where you buy at the official exchange rate. This way the OFW family gets more Pesos and you get more dollars than if you both went to the bank.

    For other currencies you will need to find a bank branch that offers accounts in different currencies. BPI offers accounts in Canadian dollars if you are interested, although only at certain branches. Wiring money is pretty easy to do as well. You will need to pay a wire transaction fee, so you may want to limit the number of outward remittances you make.

    I hope this is helpful. Cheers!

  5. Martin says

    Hi Dr. Sponk Long,

    Thanks for your comments. Indeed, now really is a bad time to take a loss in one’s investment portfolio if you are at or near retirement. Small business owners who are making good in the Philippines can at least be assured of having some local income to offset some of losses they may be seeing in their retirement accounts.

    I too know of some foreigners trying to make a go out of farming here in northern Mindanao. Farming can provide a small income stream, provided the weather is right, the pests don’t take too much of your crop, etc. As long as your produce is in good shape and priced right, there’s no reason why people won’t buy it in the market. As you mentioned, sometimes it is even a novelty to buy from a ‘white man’. One thing is for sure though, one can’t expect to charge more just because one looks different! After all, a camote is a camote, and a squash is a squash.

  6. Martin says

    Hi Ellen,

    You know, Ellen, your comment brings back memories of grad school for me! Behavioral economists have provided a great deal of evidence showing how people tend to suffer from ‘bigness bias’. Essentially, what this means is that most people have a tendency to pay more attention to big numbers and give less weight to smaller numbers. Whether it is small savings, or the reverse, small expenses, in both cases, over the long term, those small increases or decreases add up!

    As you suggest, a few Pesos really can go a long way, and this is especially true if those Pesos or at least a portion of them are invested prudently.

    Thanks for sharing!

  7. Randall Jessup says

    Hi Martin,

    Thanks for the info about converting pesos to dollars.

    This is really great news for me.

    Take care!

  8. Martin says

    Hi Randall,

    I just had another thought regarding your post. You may want to consider opening a US$ account in Canada. It is fairly easy to wire US$ from banks, and you’d cut down on your currency exchanges along the way.

    Also, while I’ve never used Western Union, I assume they can send/receive US$, so you could probably send US$ from a Western Union kiosk here and collect US$ in Canada. Then, simply deposit the US$ in your US$ account.


  9. Dr. Sponk Long says

    Hi Ellen. Amen to that.

    Hi Martin. I brought a friend from West Virginia a few years back to the Philippines. At one time he saw a small patch of land planted with corn, camote, and string beans in different areas of that small piece of land.

    As a native from the hills and an expert in planting corn( he used to make moonshine), beans and potatoes he just could not hold himself of such a waste of land above. He approached the owner of that land and advised him that he should be planting camote first, then as the root crops are forming, plant the corn. When the corn is already a foot high, plant the beans near the corn ( the corn will serve as trellis later). All three in the same patch of land. Three crops to be harvested at the same time.

    I heard that the owner of that land was a happy guy. He increased his harvest by 50% and with less work.

    A foreigner with farming knowledge will do very well in Mindanao or in rural Philippines.


  10. Martin says

    Hi Dr. Sponk Long,

    What a great example! Thanks for sharing the story of your friend and his experience. What this story reminds me of is how even small forms of innovation can result in great successes. That’s a good lesson for everyone in business already and for those wanting to get their feet wet. Taking the time to find ways to make marginal improvements in the way we do things can and often does result in a very pleasant surprize!


  11. allen small says

    i am from canada and want to open a canadian bank account and wire canadian money here to the philippines and then withdraw canadian money from the bank,,can i do that with BPI or any bank here, the exchange rate my bank charges to convert to US dollars is outrages,i need help

  12. Randall Jessup says

    Hi Martin,

    Thanks again for your additional suggestions regarding money transfers. The specific situation that I am considering is this.

    I want to borrow money in Canada at low interest rates and invest it in the Philippines in a business that makes a high rate of return albeit in Philippine pesos. Then I want to pay off the Canadian dollar loan with the peso profits from the Philippines. Naturally this requires the peso be converted back to Canadian dollars ( or US dollars if need be).

    A couple of months ago my wife and I contacted the HSBC branch in downtown Davao City and were advised that we couldn’t convert pesos to dollars. They mentioned that if we got permission from the Central Bank at the time of remittance we could repatriate an equivalent amount in dollars. In other words a lot of red tape. She alluded to other ways around this which I assumed meant going the black market or something like that.

    My wife has a nephew who goes to Butuan City on a regular basis so we’re going to ask him to take some pesos to the BPI bank there and see if he can convert them to US dollars. I’ll let you know how that turns out!

    Best Wishes!

  13. says

    Hi Martin, as always a great article…Congrats… Actually my family and I following your advices since we are living here and doing several businesses. Up to now we are doing good… But no one knows, what future will bring… . Many people are scared – especially older generations. If one think back to the Golden Twenties etc. etc. etc… .

  14. says

    Hi Randall Jessup- Converting from Pesos to Dollars should be no problem at all. I’ve done it plenty of times myself, and it’s no different than converting Dollars to Pesos. An alternative method, which I believe Martin already mentioned would be to buy dollars from an OFW family who is getting remittances. That’s a win-win.

  15. Martin says

    Hi Allen Small,

    I understand your dilemma. Unfortunately, the problem, once you leave Canada, is that nobody really wants to take Canadian dollars compared to other major currencies. This is the case just about everywhere, and why you usually get the best exchange rates when you change US dollars.

    BPI offers Canadian dollar accounts, but only at certain branches nationwide. A fair number of Metro Manila branches have C$ accounts, as do a handful of branches in other cities, like the main branches in Cebu, Davao, and a few others. But many second tier cities don’t have such branches offering accounts in currencies other than US$ and Pesos. Even then, you will still have the problem of wanting to exchange C$ to Pesos, and you will always receive a very inferior rate when doing so. Banks, and even money changers don’t really want them because the demand for C$ is not very high.

    Sorry to sound so down regarding the Loonie, but it is just the way it goes.

    Good luck!

  16. Martin says

    Hi Randall Jessup,

    As Bob and I have mentioned, buying US$ is no problem at banks in the Philippines. Furthermore, you can leave the Philippines with up to US$10,000.00 without requiring notification to the BSP. When wiring money OUT of the Philippines, I have also not had any problems when doing so. I do have to fill out a form at my local bank as to what the funds were being sent out for — in my case, I occasionally need to buy supplies or equipment for my business, so it’s not really a problem filling the paperwork out. To the best of my knowledge, any red tape when wiring money out of the Philippines is done so to comply with anti-money laundering laws here in the Philippines. But again, I have not encountered any cumbersome red tape.

    I guess it depends on the overall size of your remittances as well. You may want to discuss things with an attorney if you are talking about really large sums of money, because if you are a legal partner in the venture and your corporation is SEC registered, you should have no problems repatriating funds so long as your corporation is operating legally and in good standing.

    As for your nephew buying US$ in Butuan City, it is not a problem. I have bought dollars in Butuan City before.

    I hope this is helpful.


  17. Martin says

    Hi Klaus,

    As always, thank you for your nice comments. I think just about everyone is concerned about the problems the world economy seems to be in these days. We clearly are living in a world full of market uncertainty. That being said, I will say this: a lot of companies didn’t all of a sudden go sour overnight, so a lot of the sell-off seems panic driven!

    Businesses with a positive cash flow, whether small or large, would seem to be in better shape coming out of this period of uncertainty, so hopefully you and others are doing everything you can to increase the cash flow of your business, and are combining any increases in cash flow with a bit of restraint on the spending side of the equation.

    Cheers, Klaus!

  18. Martin says

    Hi Bob,

    Indeed, working with an OFW family receiving remittances in US$ is a win-win situation. I really encourage everyone who buys dollars to consider this option.

    Thanks for supporting this win-win suggestion!

  19. Randall Jessup says

    Hi Martin and Bob,

    Thanks again for the helpful tips. This really sets my mind at ease on the issue of money transfers.

    All the best to both of you!

  20. Martin says

    Hi Randall Jessup,

    No problem. I’m glad if my comments can provide you with additional information.

    On a side note, I would caution a bit against providing funds for business ventures in the Philippines if it means taking out an overseas loan to do so. You run into currency-related risk issues when you do this. Even if you think the returns may be better in the Philippines, you may also see a deterioration in the currency part of the equation, which can wipe out some or all attractive gains.

    There is usually a reason why there are higher rates of return in developing countries — it is because of the additional risk one has to carry. At the end of the day it is up to you as an investor, but I’d really look into any such ventures very carefully before proceeding, if at all.

    Good luck!

  21. mark alderman says

    what banks in the philipines offers the best high yielding rates on a large deposite. like cds in america offer 4.23 i year. i need something i can with draw after 1 year.

  22. Martin says

    Hi Mark,

    The problem you will encounter is that there is a 20 percent witholding tax on time deposits in the Philippines for 1 year. If you are fine with that, then many banks offer Peso rates of around 5 percent minus taxes. Same for dollars, but now US rates are falling. For zero tax, you need to place funds in a 5 year time deposit. Some banks even allow interest to be credited monthy to your account.

    I hope this is helpful.

  23. Martin says

    Hi Mark,

    I should quickly clarify a bit further. Only interest on the deposit is taxed, not the whole lump sum of your deposit. Furthermore, there is a graduated lessening of the withholding tax as you move from 1 year to 5 years. 1 year and under is 20% tax on interest, 2-3 years, is less, 3-4 years even less, and finally 5 years plus a day will mean interest is not taxed at all.

    In addition, you can also purchase Philippine Government T-Bills. A number of the major banks offer this option, and I believe it is for both US$ and Philippine Pesos.

    Good luck!

  24. says

    I’m a Filipino and I thank you for these wonderful and very informative site, especially on the issues on dollar tp peso exchange. It helped me a lot.

    God bless.

  25. Martin says

    Hi Charlie,

    Thanks for dropping in and sharing your thoughts. I’m glad you found this article interesting. I agree, there’s lots of really good information on this site regarding money-matters. Bob has written quite a bit on the topic of exchange rates at different times and on the ramifications of a swing one way or the other.

    Good luck and please keep reading and sharing your thoughts!

  26. Akit says

    Hello Martin. I’m a Filipino and just like the others, I too find your site very informative especially from the point of view of our foreign friends.

    Can you also share your thoughts in case one would like to venture into the gold and silver thing just like:

    Some are saying that during times such as this, precious metals is the best thing to invest on. I’m having mixed thoughts whether that observation is sound or not. TIA.

  27. Martin says

    Hi Akit,

    Thanks for your kind words. Bob’s LiP site has a wealth of information that is useful to a variety of readers, both foreign and local.

    There is generally a lot of interest in gold and other precious metals whenever the world is in an unexpected state of flux. But the jury is out when it comes to the importance of gold in either an inflationary or deflationary global environment since the end of the gold standard.

    Some people equate gold to a ‘real’ currency. It is not. It is however a commodity that is subject to the forces of supply and demand. I believe that as China and India grow, the demand for gold will grow and be high — not because of the safe currency arguement, but because people in these two countries like to display their wealth through jewelry. These countries have a long history of using gold as a hedge and for cultural expressions, but in the past their importance in the global gold market has been not so important. But as China and India grow, and as more ‘new rich’ that come on stream in these countries, the greater the demand for gold will be. So long as there is a global downturn, there will be fewer and fewer ‘new rich’ to buy gold. That is my explanation as to why gold has been dropping as of late.

    When then, does gold really do well? When global markets heat up, gold goes up because people fear that inflation could soon follow. In other words, gold does well as a predictor of inflation. If the price of gold falls, it generally means a slow down in inflation. Gold also does well in periods of double-didget inflation, because at some point, people really begin questioning if and when price inflation will come under control. Holding gold provides a feeling of safety.

    What do I make of all of the numbers? Well . . .

    (1) since gold is a commodity, I expect it to do well in a bull market that appears to be overheating;

    (2) having actual gold in your portfolio is not a bad thing, just don’t go overboard with it in the same way you wouldn’t want to go overboard in having too many commodities stocks in your overall portfolio;

    (3) oil and gold move in the same direction for the most part. If oil starts rising to unexpected highs once again, you can bet gold will move along with it.

    So, given today’s environment — global slowdown, low oil prices, low commodity prices — I do not expect gold to move up very high very quickly. But having a small portion in gold as a part of an overall portfolio is comforting considering there is always a threat of war in the middle east that could push oil up fast.

    There’s sure to be different opinions out there, and that’s fine. But that is my take on it right now. Until gold is given a status different from other commodities, it will still behave exactly like a commodity.

  28. Justin says

    Hello Martin,

    Regarding gold in the Philippines, What is your oppinion on it? I ask because the BSP website speaks of the Phil Gov gold buying program that buys gold at a rate set by the daily spot price. I believe this program was originally implimented to help the local small scale mining industry. Anyway, It just seems that if still applicable this program could be used effectively to dispose of bullion when needed in an effective manner and without the losses people often take when exchanging cash. Should this be seen as a positive program for those interested in bullion hedging in the RP?

    Regarding gold in general, Do you think gold will continue to increase over time as the Asian nations get wealthier? I ask because historically people of Asian nations have used gold as a way to store wealth and maintain their buying power so it seems that asian demand will continue to increase as the continent builds its wealth. At current time, as you mentioned, gold has taken some hits but still you must wonder how much of that is due to actuall supply and demand issues and how much is due to market manipulations. I meen its quite well known that most gold is traded in paper and that theres not enough physical to cover the paper transactions on precuious metals. Anyway, Do you feel that increased Asian demand for physical metals will rectify this in the future and send metal into skyrocket mode in much the same way the Hunts did a few decades ago?


  29. Martin says

    Hi Justin,

    Thanks for sharing your thoughts on gold. To be honest, I think that gold can make a nice addition to an overall portfolio. But everyone is different and not everyone would agree. I make a habit of trying to balance my overall portfolio every year in accordance with meeting my short, medium, and long term financial goals. That means diversifying into a variety of places — I try and make ratios according to my risk tolerance and that becomes reflected in the proportion going into equities, bonds, real estate, and cash. I think gold is another category one might add to that generic list. Personally, would I allocate more than 5% of my overall portfolio to gold? No. But that’s just me. I’m not the right person to ask, frankly. At the end of the day that is a decision everyone must come to themselves, hopefully with some inputs from a certified financial advisor that offers you independent advice based on your own financial objectives.

    I do believe demand for gold will rise along with growing Asian economies, especially China and India. But that’s a commodity story, just like food consumption should go up in these two countries. People want to eat better as they grow more wealthy. But the list doesn’t stop there — they also start craving convenience, so demand for small appliances also goes up (for washing machines, microwave ovens, etc.). So you could pick any number of sectors that will rise as Asian economies get back on a growth trajectory.

    I’m not for or against gold. It’s simply one of many different investment vehicles out there. Just remember, you need to safely store gold, and that has a cost associated with it as well.

    Good luck!

  30. Justin says

    Hello Martin,

    Thank you for your response and I want to say that I truly enjoyed reading your articles and find them well written as well as informative.

    Actually, Was interested in asking about the gold after reading about the BSP gold program as I found the program quite interesting because as far as I know nothing like it exists here in our area of the states. Also, Have a buddy online earning a living in Mindanao through gold by buying at 15% under spot from the small scale miners and selling to the BSP program. You are right though and physical metal storage would seemingly present a problem or expense in PI.

    In regards to realestate, Are you reffering to physical Philippine real estate investments or realestate stocks in like filinvest or etc? Also, If its physical realestate holdings do you recommend like landbanking or rental type propertys? Only problem I could see with Philippine realestate is it doesnt seem it would be very easy to liquidate. I remember when we lived in Butuan there where multi million peso bank forclosures just sitting vacant and beeing skelitonized by scavengers because noone had cash to buy them and those with cash seemed to build rather than buy. At same time though seems that lower end residential housings that could be availed through pag-ibig financing would have been good investment if one had capital needed to get into realestate developing.


  31. Martin says

    Hi Justin,

    Thanks for your kind words. I’m glad you find my column to be both interesting and useful.

    I really don’t know anything at all about the BSP gold program. Perhaps it is something to look into for those interested in gold for diversification purposes. If you have an electronic link to the website or an e-article with program specifics, please pass it on for those who may have an interest in that as well.

    I share your cautionary approach to thinking about real estate in the Philippines. As you correctly point out, there are two ways of going about doing so — either through stock purchases of real estate companies, or through actual physical ownership. Many real estate companies have done well up until the past year, but as of late, most companies on the PSE have stumbled just like everywhere else in the world. I’m not sure when or at what point things will turn the corner. I believe we’re in a global slowdown, and it could take a while for markets to stabilize.

    As you also point out, liquidating an actual property can be difficult in the Philippines, especially since most buyers have trouble purchasing outright, and loans can be difficult to obtain. Furthermore, those with money tend to build a building as per their own requirments/tastes. Then there is the issue of being a landlord if you desire to go the revenue property route. There are all sorts of headaches associated with being a landlord, and tennant rights are very strong in the Philippines. Getting a bad ‘renter’ out of your property can be a nightmare.

    I have friends who circumvent this issue by owning revenue property in their home countries. They have property managers who look after the properties and in return take a commission of the rent. The advantage of this type of arrangement is that the main ‘nest egg’ remains in their own name, and their income from it is in a hard currency. They live off the payments and other sources of income they have. They still have to worry about exchange related risk — i.e. fluctuations between the Peso and their currency — but they sleep well at night knowing their property is in their own name, in a country that has a legal system that they are comfortable with, etc.


  32. Justin says

    Hello Martin,

    Heres link to the BSP gold buying program below, seems like a nice program and may be of interest to people in the Agusan and Surigao Norte and Sor regions as I remember those areas as having a rather large number of small scale mining operations. Would be also be beneficial if the BSP would give pinoys a chance to build physical bullion holdings by implimenting a bullion program along the lines of the Eagle, Maple, Panda, Libertad and etc but I dont know of such program although I do know the philippines has released numismatic gold in the past. Anyway, Below is link to the BSP gold buying program.

    Regarding the Real Estate, Thats a good idea they had to keep their real estate assets in home country and lease them out through a property management company. Most the property management companys here I believe charge around 10% of rental but still is ok since it would eliminate the hassels you spoke of regarding Philippine rentals, piece of mind is priceless. Also, Would as you say give them the opportunity to keep the assets in their name as well as possibly keep them out of that monstrosity they call a justice system over there.



  33. me-ann says

    Hi Martin, need your expert advice. I went to a BPI branch in my city and the accounts officer gave me the information that if i open a canadian dollar account here in the philippines at select BPI branches, when i get to canada, i can just easily transfer the funds to any canadian bank. is this a wise decision? will i not lose money in bank charges or taxes or woud it be better if i just bring cash with me and deposit it directly to any bank once i get there

    thanks a lot for your advice.

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