Postal Financial Inclusion: the Business Case

© UPU 2010 – All rights reserved

Postal Financial Inclusion:the Business Case

UPU Workshop on Postal Financial InclusionBerne, 31 October 2011

Alexandre Berthaud – Financial Inclusion Expert (DCC)


Postal Financial Inclusion:The Business Case

Why is the post the

optimal solutionfor Financial

Inclusion?

Why are the posts

interested in FinancialInclusion?

An Opportunity Map


The strengths of the post in financial inclusion

Post

Advantages

1. Network1. Network

-Higher postal density than Bank density

-Well distributed across income

-Well distributed within countries

-Presence in Rural Areas

-Well integrated by processes and communication channels


Why the post?1. The Network


Why the post?1. The Network: Density (Post vs. Banks)

Number of Commercial Bank Branches per 100.000 adults

Source: CGAP (2009) and Orozco (2011)


Why the post?1. The Network: Density (Post vs. Banks)

Number of Post Offices per 100.000 adults

Source: UPU (2009)


Why the post?1. The Network: Progressively Distributed

Physical network access points to financial services in the world by level of development and type of financial institution

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Semi-decile of income per capita (GNI in PPP)

Cu

mu

lati

ve

sh

are

of

tota

l p

oin

ts o

f a

cc

ess

Posts

Diagonal

Banks

Microfin

Coop

Statefin

Nigeria Mexico


Why the post?1. The Network: Progressively Distributed...

Physical network access points to financial services in SSA by level of development and type of financial institution

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

<380

380

- 770

770

- 810

810

- 830

830

- 870

870

- 110

0

1100

- 11

10

1110

- 11

40

1140

- 12

30

1230

- 12

60

1260

- 12

80

1280

- 14

70

1470

- 15

60

1560

- 17

80

1780

- 19

80

1980

- 30

90

3090

- 50

00

5000

- 97

90

9790

- 12

580

> 125

80


Cu

mu

lati

ve s

har

e o

f to

tal p

oin

ts o

f ac

cess

Posts

Diagonal

Banks


Why the post?... Even more so in Rural AreasPhysical network access points to financial services in rural SSA by level of development and type

of financial institution

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%


Cu

mu

lati

ve s

har

e o

f to

tal p

oin

ts o

f ac

cess

Posts

Diagonal

Banks


Why the post?1. The Network: Larger than any OtherPhysical network access points to financial services in the world by level of development and type

of financial institution

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Sh

are

of

tota

l p

oin

ts o

f access

Statefin

Coop

Microfin

Banks

Posts


Why the post?1. The Network: As large as the whole banking sector in SSA

Banks vs. postal networks in SSA: distribution of access points by country

0

10

20

30

40

50

60

70

80

90

100

Country

Perc

en

tag

e o

f to

tal

access p

oin

ts

Banks

Posts


Banks vs. postal networks in rural SSA: distribution of access points by country

0

10

20

30

40

50

60

70

80

90

100

Country

Perc

en

tag

e o

f to

tal

access p

oin

ts

Banks

Posts

Why the post?…yet much more capillarity as compared to banks in rural areas


The strengths of the post in financial inclusion

Post

Advantages

1. Network1. Network 2. Trust2. Trust

-Long-term presence

-Link between governments and its territory

-People Save at the post

-Well distributed across income

-Well distributed within countries

-Presence in Rural Areas

-Well integrated by processes and communication channels


Why the Post?2. The Trust Factor

Source: WEF (2010)

Relatively High Level of Trust

Relatively Low Level of Trust


Why the Post?2. The Trust Factor: a long-lasting institution

In the vast majority of countries Postal Operators have been established more than 50 years ago Ethiopia: 1894 Bangladesh: 1898

In most countries the Post has been offering payment and saving services for at least half a century and the level of trust in those institutions is higher than that of banks

Posts have survived and adapted to revolutions, decolonization and economic crises


Why the Post?2. The Trust Factor: Link between Government and its Territory

In most countries in Africa and Asia, and less so in Latin America, the Post Office has been and remains the channel of choice for Government Payments

Government payments are a point of entry into the financial system, hence we should use the door that people are already using In Bénin, all government employees and retirees must receive their salaries and

pensions through the Post Office giro accounts

In India the Government disburses the NREGA wages through the Post office in Rural areas.

In the CIS countries the vast majority of pensions payments are made through the Post Office

In Kenya, conditional cash transfers are made through the post and the post office provides last mile coverage for pensioners in rural areas


Why the Post?2. The Trust Factor: 500 Million People already save at the Post

Source: UPU (2009)

Number of Postal Deposit Accounts per 1.000 adults


Why the Post?Conclusions

Post is better positioned than Banks in terms of network

Much more people use the Postal network than Microfinance

It has a strong rural presence

The Post is an integrated network vs. many networks that often do not talk to each other in the case of Banks

It is a trusted institution worldwide



An Opportunity Map

Why are postsinterested in

Financial Inclusion?

Why are posts the OptimalSolution for



Incentives for the Post to be Financially Inclusive

Post

Incentives

1. Viability1. Viability

-Mail is slowing down: Need for Diversification

-Existing Infrastructure whichneeds to be sustainable

-Economies of Scope


Why is the Post interested?1. Viability: Diversification

Source: UPU (2009)

Share of Financial Services as a Percentage of Total Income


Incentives for the Post to be Financially Inclusive

Post

Incentives

1. Viability1. Viability 2. Social Impact2. Social Impact

-Universal Service Obligation

-Post is used to adressing the needs of the poor

-Mail is slowing down: Need for Diversification

-Existing Infrastructure whichneeds to be sustainable

-Economies of Scope


Why is the Post interested?2. Social Impact: Universal Service

Source: Ansón and Toledano (2010)

Distribution of Networks according to Population in Brazil



An Opportunity Map

Why are postsinterested in


Why are posts the OptimalSolution for



Half the World is Unbanked…

Source: McKinsey 2010


and Half the Network is Postal

Source: UPU and CGAP (2010)


… So there is a World of Opportunities for Postal Fin. Inclusion

Angola

Costa R ica

Lebanon

RwandaCambodia

Spain

Bolivia

Singapore

Dominican RepublicPhilippines

Panama

Chile

BelgiumDenmar kGreenland

Cape Verde

Mauritania

Turkey

Greece

United States of America

Mali

El Salvador

Gambia

T ogo

Portugal

M alays ia

Bulgaria

Jordan

Burkina Faso

Italy

Liberia

Peru

Mauritius

Senegal

Burundi

Ireland

Republic of Korea

KenyaSierra Leone

France

T hailand

Côte d'Ivoire

Morocco

Poland

Tanzania

N igeria

Libya

Croatia

South Africa

Netherlands

Uganda

GhanaBelarus

Austria

Paraguay

Sweden

IranAlbania

Brazi l

Norway

Uni ted Ki ngdom

Tunisia

Bosnia and Herzegovina

Argentina

Lithuania

Germany

Benin

Slovakia

Pakis tan

Ecuador

Z ambia

Central African Republic

Indonesia

Georgia

Oman

Ethiopia

Czech R epublic

H ungar y

Bangladesh

Botswana

Syria

Malawi

Saint Lucia

Estonia

India

Grenada

Armenia

Algeria

Latv ia

Azerbaijan

Mexico

Yemen

Slovenia

Swaz iland

Tajikistan

Sri Lanka

M adagascar

U zbek istan

Egypt

Kyrgyzstan

Uruguay

Jamaica

Niger

Lesotho

C hina

Viet Nam

Kazakhstan

Russian Federation

Ukraine

Pe

rcen

tag

e o

f u

nb

an

ke

d a

dults

0 .2 .4 .6 .8 1Postal share of access points


A World of Untapped Opportunities

Low inclusion-larger network

Low inclusion-smaller network

High inclusion-larger network

High inclusion-smaller network

Source: UPU and McKinsey(2009)


Conclusions:

Postal Financial Inclusion

-1.5 billion people have access to one or several financial services through their post offices (Ansón)Today

Potential -1 billion can be banked by Posts if we work together and build on the Opportunities

-500 million people in the developing world have an account at the Post/Postal Banks


POSTAL FINANCIAL INCLUSION

OPPORTUNITY ATLAS


Lebanon

Mauritania

JordanMorocco

Libya

Tunisia

Oman

Syria

Algeria

Yemen

Egypt

20

40

60

80

100

Pe

rcen

tage

of u

nba

nke

d ad

ults

0 .2 .4 .6 .8Postal share of access points

Opportunities in Arab countries


Costa RicaBolivia

Dominican Republic

Panama

Chile

El SalvadorPeru

Paraguay

Brazil

Argentina

Ecuador

Saint Lucia

Grenada

Mexico

Uruguay

Jamaica40

50

60

70

80

Pe

rcen

tage

of u

nba

nke

d ad

ults

.2 .4 .6 .8Postal share of access points

Opportunities in LAC


Cambodia

Singapore

Philippines

MalaysiaRepublic of Korea

Thailand

Iran

Pakistan

Indonesia

Bangladesh

India

Sri Lanka

China

Viet Nam

Pe

rcen

tage

of un

ba

nke

d a

dults

0 .2 .4 .6 .8 1Postal share of access points

Opportunities in Asia-Pacific


AngolaRwanda

Cape Verde

MaliGambia

TogoBurkina Faso

Liberia

Mauritius

Senegal

Burundi

Kenya

Sierra Leone

Côte d'Ivoire

Tanzania

Nigeria

South Africa

Uganda

Ghana

Benin

Zambia

Central African Republic

Ethiopia

Botswana

Malawi

Swaziland

Madagascar

Niger

Lesotho

Pe

rcen

tage

of un

ba

nke

d a

dults

0 .2 .4 .6 .8Postal share of access points

Opportunities in SSA

Postal Financial Inclusion: the Business Case

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