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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
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