MUMBAI -- Moody's Investors Service said Philippine banks' reliance on remittances from the country's overseas workforce provides enhancements to earnings stability and credit quality over the near and medium term.

Money sent home through banks by overseas-based Filipinos rose 9.4 percent to $1.4 billion in March from a year earlier, although slower than the 16-percent increase recorded in February year-on-year, central bank data showed on Thursday.

Since the 1970s, the export of labor and the subsequent remittances sent home by overseas Filipino workers have provided a stable source of income and foreign exchange for the Philippines. At the same time, its banks have played a key role in these cross-border cash flows.

However, while providing banking and remittance services to overseas Filipino workers presents venues for franchise development and growth, the building of long-term stable retail banking operations may prove challenging, Moody's said.

According to Moody's, as this highly bankable population lives abroad, geographic distances and changing immigration patterns and policies play a greater role than in less remittance-dependent economies.

Additionally, remittances are a service wherein technology could play a transformative role, challenge existing business models and alter the competitive landscape, Moody's added.

Moody's also noted that that over the next 10 years, new entrants and the adoption of new technology will erode the banks' dominance of this market and the profits they derive directly from the remittance business.

Also, if countries allow temporary Filipino workers to become more permanent residents, such a development could impact the flow of remittances as earnings directed to purchasing durables in the Philippines could be increasingly spent in host countries, Moody's said.