Posts must exploit untapped potential for financial inclusion

02.10.2012 - An estimated one billion people are currently banked through the postal network, but despite having the largest number of contact points in the world, Posts are underused for financial inclusion, according to new research by the Universal Postal Union.

Postal services offer tremendous potential for financial inclusion

The research, presented at the 25th Universal Postal Congress in Doha, Qatar, says that only 51 postal operators offer account-based financial services today. Yet, with 660,000 contact points in the world, Posts and their financial subsidiaries come only second to banks in their potential to contribute to financial inclusion. There are 523,000 bank branches and ATMs in the world, according to the International Monetary Fund.

Fifty-one postal operators worldwide held 1.6 billion savings and deposit accounts in 2010. With the average postal client holding an estimated 1.5 accounts, this brings the number of people banked through the Post to more than one billion, according to the UPU. This figure does not take into account postal banks.

The report recalls that several hundred million people also use the Post to make and receive domestic and international transfers or pay government or utility bills, whether or not they hold a postal savings account.

“The postal network offers tremendous potential for fostering financial inclusion,” says Alexandre Berthaud, one of the report’s authors. “If only 51 Posts offering savings accounts can bank a billion people, then the remaining postal operators of the UPU’s 192 member countries, especially strongly populated ones such as Nigeria, Russia, Mexico, Ethiopia and Colombia, could easily provide a gateway to financially include at least 500 million unbanked people directly or through partnerships with banks.”

The findings provide a global panorama on postal financial inclusion. They identify five main categories of business models Posts use to provide financial services and key issues to keep in mind when providing such services or moving into more complex financial services. The report finally recommends how postal operators could progressively offer financial services.

Congress, the UPU’s supreme authority, last week adopted a resolution urging member countries to continue developing financial services. It recognized their value for contributing to the UN Millennium Development Goal of reducing poverty, as well as helping the growth of small and medium-sized businesses. During the recent economic crisis, several Posts that offer financial services through their own financial arm saw their number of customers and new accounts rise dramatically.

The UPU helps its member countries to introduce or develop inclusive and sustainable financial services by acting as an information and technical assistance platform for the postal sector. In recent years the UPU has worked closely with a number of lending institutions and donors to make postal financial services accessible to the most disadvantaged populations.

Financial services accounted for almost 12% of global postal revenues worth 304 billion dollars, according to 2011 UPU statistics. In several countries, such as China, India, Gabon, Tunisia, Bangladesh, Italy, Azerbaijan, Belarus and Burundi, postal financial services produce more than 50% of the Post’s revenues. With the decline of letter-post volumes, financial services offer new growth opportunities for postal services, and they are gaining ground as Posts consider strategies to diversify the business. 

The UPU report states that, while Posts may seem an unlikely champion in the fight against financial exclusion, the facts show them as “a key lever in advancing the inclusion of unbanked populations into the formal financial system.” Indeed, postal operators’ traditional business model of large volumes and low costs combined with its universal service obligation make the postal network a worthwhile ally in the global fight against financial exclusion, concludes the report.

The research is based on the answers of 123 countries to a UPU questionnaire and lessons drawn from field missions.

Business models

The report identifies five categories of business models used by postal operators to foster in financial inclusion. The models go from acting as a cash merchant for government and financial services providers, present in 85% of countries, to having fully licensed postal financial services, such as their own postal bank, which is the case for only 10% of countries.

Posts normally start with the basic model and move their way up, eventually offering services that are increasingly more complex to implement. The report warns, however, that moving to an upper-level scheme too quickly, such as wanting to launch a postal bank from the get-go, could result in failure and potentially cause political upheaval, especially when savings are concerned.

A Post’s success in implementing financial services depends on 10 key issues, including connectivity, financial capacity, automation, trust, and the existence of a legal and regulatory framework, among others, states the report.

Using capacity, automation and legal and regulatory framework as the three key indicators for success and giving them a specific weight, UPU researchers developed a success factor index and global ranking of countries evaluated. According to this global ranking, Morocco comes out on top as the developing country with the most potential for providing financial inclusion, followed by Serbia, Belarus, Malaysia, Indonesia, Tunisia, Kazakhstan, Brazil, China and Namibia closing the top 10. The UPU hopes the index will be used to inspire Posts and governments to utilize the postal network as a facilitator of financial inclusion.

Press release, Universal Postal Congress


Comments (0)

No comments found!

Write new comment

CAPTCHA image for SPAM prevention If you can't read the word, click here.