Postal Savings

8/6/2019 Postal Savings

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Postal Savings and the Provision

of Financial Services: Policy Issues

and Asian Experiences in Savings

Mobilization

United Nations Department for Social and Economic

Affairs Discussion Paper No. 22

by Mark J. Scher


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Study Participants

Bangladesh, China, India, Indonesia, Japan,Kazakhstan, Republic of Korea, Philippines,Sri Lanka, Thailand, and Viet Nam

Additional site visits and assessments:Malaysia, Singapore and Uzbekistan

First lesson: No universal postal savings model


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Four Asian Models National saving organization

Postal savings bureau

Linking postal payments to savings

National savings banks

The European postbank model remains

highly limited in Asia


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How Postal Savings

Can Aid Development

Provide financial services to rural areas

and low-income urban populations Mobilize domestic financial resources

Intermediate savings for developmental

purposes


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Scope of postal infrastructure:

a unique foundation for

savings operations

To reach into virtually every region and

corner of the country

To be accessible to all, regardless of

economic class, caste affiliations, or gender


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Providing financial services to allsegments of the population

Women Rural area

Low-income urban

populations Disadvantaged groups


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Tackling Financial Exclusion

Closure of bank branch networks

The un-banked who you are and whereyou are

Restoring the post office payments network,

moving payments into savings


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The Myth That the Public Does

Not Trust the Post Office

Implicit, if not explicit government guarantee of

postal savings deposits

Seeking safety in time of economic and political

uncertainty

Fears of safety in the commercial banking system


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Mobilizing domestic financialresources through postal savings

Historical role in economic development in 19th

century European countries Reducing dependency on foreign borrowing for

infrastructure and industrial development in Japan

Financing Government bonds and approved

securities Intermediate savings to public policy-based

development institutions


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Intermediate savings for policy-based developmental goals

Low-income mortgage housing

Consumer credit Small business credit

Agricultural credit

Sustainable national, regional and community

development projects Support for microfinance institutions

Safe and secure remittance services for smallbusinesses and entrepreneurs

Bringing tangible development programs back to the

community of savers, for example:


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Postal Giro and Postal CheckingSafe and Cost-effective Remittances

Accessible to everyone

Low-cost fees

Safe and reliable

Aids domestic trade and commerce

Household payments

Small businesses payments


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International Postal GiroOverseas Remittances via the Posts

Overseas workers remittances

Enhancing aid to families

Source of foreign exchange

Cross-border trade

Encourages investment in communitydevelopment by overseas workers


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Postal Payments Systems Can BeConverted into Savings Systems

Deposits and payments account for a

major part of postal revenues in manytransition economies.

Conversion of these payments into postal

savings accounts could aid savings

mobilization and create a culture of thrift


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Problems Confronting Savings

Use of the Postal NetworkThe Changing Economics of the Posts

The impact of market liberalization and

deregulation on the postal environment Privatization of public services

Cross-border entry and acquisition of the posts

profit centers

Postal savings and the lack of credit facilities

Asset management and investment policy


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Loss of Posts Profit Centers Separation and privatization of profit

centers, such as telecommunications,

severely impact posts revenues

The detachment and loss of postal

bankings synergistic relationship with the

posts threaten the very survival of the postalinfrastructures branch network, especially

in rural and least developed regions


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Postal savings in rural areas

making a link to credit In developed countries, mainly European,

most postal savings systems provide client

access to consumer credit and some

commercial credit as well

Among developing countries, only 10 reported

any kind of credit function whatsoever


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The importance of the credit

function to rural savings

The credit function is an integral necessity

in rural agricultural economics The lack of such facilities forces clients to

deposit their savings in competing

agricultural-credit cooperatives

In the least developed countries, clients are

forced to use money lenders charging

illegally high rates of interest


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Postal Savings = Microsavings

Microcredit is unsustainablewithout microsavings

Regulatory restrictions on credit and deposit

taking

Alliances with microcredit institutions

Finance for the community of savers, their

small businesses and farms


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National Savings Banks

and Postal Savings Savings banks: largely urban

Facilities are air-conditioned offices, linked online to

mini-branch outlets Post offices: urban and rural

Rural branches in particular may experience long

withdrawal delays, limiting client access to savings

Post office paper transaction procedures oftenunchanged since their introduction in the 19th century

Postal facilities, both urban and rural, often in an

advanced state of physical decrepitude


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Agency relationship with a savings

bank or other financial institution 70% of postal savings deposits are from urban

areas in virtually all developing countries

Consequences of inadequate agency contractsbetween the posts and financial institutions

Devaluation by the financial institution of its

relationship with the posts

Savings bank concludes that an independent bankbranch network in the urban market would lower its

transaction costs

Only the barest postal savings transactions are left to

the more remote and underpopulated areas


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Problems with thePostbank Model

Severely reduced agency fees to the posts

Further limitations in the financial services offeredto remote rural clientele

Government transfer of postal savings franchise tocommercial bank or postbank

Postbank adopts commercial bank strategy


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Need for a constructive policy for

the investment of mobilized fundsEconomic environment and weakregulatory regimes usually lead to:

Limitations on the investment policy ofmobilized funds

Lack of viable alternative investment

opportunities in the financial markets ofdeveloping countries

Lack of policy-based financial institutionsto intermediate postal savings funds


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Creation of institutions for

returning constructive use of thefunds to the community

These institutions would address the need for: Low-income mortgage housing lending

Consumer and small business credit within

the community Credit evaluation and finance of sustainable

infrastructure development projects


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Maintaining Confidence

in Postal Savings

Among the transition economies, CIS, and

developing countries, the rapid proliferation ofprivate commercial banks has been followed by therapid collapse and consolidation of the commercialbanking system

In the Asian financial/banking crisis (1997), postalsavings rapidly increased as depositors sought safety

Implicit, if not explicit, government guarantee ofpostal savings deposits


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Important Issues for the Future of

Postal Saving

Corporate structure and governance

Legal and regulatory framework

Agency and stakeholder relationships

Investment policy

Management operations

Product development and market analysis Promotion and sales

Financial technology utilization

Postal Savings

Documents

Transcript of Postal Savings