World Savings & Retail Banks Institute
Governance and corporate transformation of postal financial institutions
Discussion paper
The modern postal banking concept effectively contributes to lowering barriers to financial inclusion. Using post offices can help to eliminate access constraints across a country, keeping costs low for financial services for the un(der) banked – and via trusted places – educating users with simple, standard products enabling them entrance to financial inclusion in combination with issuing identification documents as part of e-Gov or ID4D programmes.
In 51 countries, people use the services provided by a corporatised and licensed PFIs. This is the prevalent model. In a group of 24 countries, post offices play a substantial role in providing access to financial services as agent of one or more licensed and corporatised financial institutions. In another 24 countries, PFIs are in a process of reform and not yet corporatised nor licensed: they provide a limited range of services. A missed opportunity occurs for this group, which holds substantial and obvious potential. In another 30 or more countries, post offices have relevant, widespread networks with presence in bank “deserts”, but their institutional framework limits their obvious potential to act as agents of licensed banks and insurers.
Reforms of PFIs until now were dependent on, and driven mainly by, individual government initiatives and have taken often 12 years or more to complete. For a group of at least 24 PFIs in transformation, there appears a compelling rationale for governments to intervene and to pursue accelerated reforms to realise a PFI’s contribution to rural financial inclusion. The main reason would be to turnaround the existing loss-making operation into a sustainable, profitable institution that adds value to poverty reduction, economic growth and competitiveness in the retail banking market. Pathways to progress could benefit from best practices and lessons learned elsewhere, as well as support to step up partnership-building efforts with the private sector to fill in existing gaps in PFI capacity.
Interventions and support by the international financial institutions, UN agencies, and other public- and private sector donors helped some 40 countries to make a step forward in the process of transformation. In most of the cases, support has been short-term, small-scale, or fragmented. More concerted and convergent efforts during the process could be more effective, with more focus on governance and management accountability alongside technical assistance in capacity building.
Reforms can be achieved at a faster pace through more international cooperation – on one platform – between governments, their PFIs, and international financial institutions and other funders supporting financial inclusion and, in particular, by the key industry stakeholders of these institutions. WSBI is a committed stakeholder in this area to push the financial inclusion envelope.
This report provides 10 strategic principles and actions needed to widen financial inclusion via postal networks in Africa and beyond. Those principles, designed for policymakers and international institutions, when applied, can (a) help accelerate the process of transformation and (b) catalyze the process of bundling international efforts.
