WSBI Managring Director Chris De Noose
High-Level Forum on Digital Transforming of Postal Services in Africa
Tunis, 15 March 2019
Ladies and Gentlemen,
It is a pleasure and an honour to be here today with you. Before I begin my keynote, I would like to thank WSBI Member La Poste Tunisienne and the African Union for allowing me to present two successful experiences of the implementation of a postal bank. I would also like to congratulate the organisers for taking the initiative of this Forum of the digital transformation of the African postal sector.
It is an initiative that comes at the right time. You are indeed all aware of the fact that digitisation is changing our life, our way of working and living right now, as I am talking and you are listening.
Digitisation gives all of us, gives you, the representatives of the more than 40 African posts who are present here, the power to change this continent.
Digitisation presents you with the daunting challenge, but also with the once-in-a-lifetime opportunity to reinvent your institutions and turn the post offices and the postal banks that are part of it into pathways for greater social and financial inclusion.
Because Africa can only become better if we include a maximum of people into the formal economic system, into the formal financial system.
Today's event gives a much-needed boost to the policy debate around postal financial institution reform. It is a welcome opportunity to address the future role postal banks can play in the rebirth of Africa.
Let me first re-assure you: the rumours of the death of postal banks are greatly exaggerated. Postal banks are not dead. Nor are postal banks on their final leg. In fact, they are alive in well in many parts of the world, including here in Africa. I know this first hand as Managing Director of WSBI – the World Savings and Retail Banking Institute.
Allow me to briefly introduce the WSBI for those among us today who may not be familiar with the Institute. WSBI is an international association that represents the interests of 6,000 savings and retail banks globally. WSBI has a big stake in helping postal banking thrive, because postal banks make up two thirds of our members in Africa.
WSBI works with postal banks because they have a huge and underestimated potential to widen financial inclusion and unleash banking innovation. Postal banks play a “real" role in people's lives, serving households, and businesses at local level: in large cities, small villages and everywhere in between.
To go further, postal banks provide services to a broad swath of customers, from poor and underbanked all the way “up" to high net worth people. Postal banks have a simple, easy-to-understand set of services. Much of what they do overlaps with digital financial services. Postal banks oftentimes are:
When it comes to financial inclusion, their role is especially crucial. Their work closely aligns with stated aims of governments across Africa, the African Union and other international bodies to address financial inclusion. Postal banks are driven by the notion that when people are connected to – and use regularly – basic financial services, they become better connected on many fronts: financial, economic and social.
Post Offices as access point, Post Offices as agents
As you may know, the post office has been a proven way to reach people. There are nearly 2 BILLION people worldwide who use post offices in some 100 countries as an access point to basic financial services: Nearly 2 billion accounts are held by an estimated 1.1 billion people. Nine hundred million people also use post offices as an access to make or receive payments.
In 24 countries, post offices play a substantial role in providing access to financial services as “agents" of one or more financial institutions – that are often autonomous parts of the same group. These “banks" are marked as being what we call “licensed and corporatised". They are under separate governance and management from the post offices. Postal banks have a strong reason to transform more towards this model.
WSBI and others have observed that although many postal banks in Africa are in a process of reform, they have yet to be transformed into banks that are managed and governed autonomously. Because of this, un-reformed postal banks are hindered to go beyond a limited range of services. It's a missed opportunity given the substantial and obvious potential they hold.
That change was spelled out in a WSBI-commissioned study released last year. Called Postal financial inclusion: pushing the envelope (Governance and Corporate Transformation of Postal Financial Institutions), it provides a roadmap that can help Postal banks become more modern, more robust, and more sustainable businesses.
While these three steps to governance are straightforward, governments sometimes face another problem: how does one regulate a postal bank ? Does it fall under postal services? Does it fall under telecommunications? Or should it be considered as a financial institution?
This is perhaps the most important question, because defining what IS a postal bank has knock-on effects for how a ministry decides to regulate it and what form its management and governance will take.
We at WSBI are convinced that postal banks should be defined as a bank.
Why? Because postal banks can and do tap into multichannel banking – both physical and digital – and can link to any payment system. It's important to note that postal banks remain a point of entry for payments and other services.
Framing postal banks more like banking institutions allows governments to take advantage of the fact that no other institution is so close to their customers than the post offices. Postal banks bring basic financial infrastructure to remote areas, and support rural and regional economic development. They can also help spur the transition to cashless payments and have an essential role to play in the first and last mile of e-commerce and in the financial transactions linked to ecommerce.
WSBI thinks that postal banks should offer banking products and services using the post offices as their agent, in addition to other physical and electronic distribution channels. This implies a change from the traditional model, where the postal services manage and govern the activities of the postal bank.
The positive effects of this reform are huge, as I will explain you in a moment, with concrete cases in Tanzania and in Morocco.
A prerequisite for reform
A prerequisite for a successful reform is the clear desire by governments to tap into postal banks to boost financial inclusion. You can see that this is the first step on the ladder to success. This step is especially strategic in nature. The middle step is more about funding. Does the postal bank need to be recapitalised? Will there be capital needed to make necessary changes to the banks operations, like IT? The final step is putting in place the right management
Reform first hand: ABB and TPB Bank
With so many arguments to reform postal banks, the question becomes “how"?
Al Barid Bank in Morocco and TPB Bank in Tanzania are two fine examples to answer that question. They have in place well-trained, strong management, have moved their model towards the “post as agent" model , and successfully implemented innovative digital tools adapted to rural populations. Their country's people are reaping benefits, especially when it comes to digital banking and financial inclusion.
Change by both ABB and TPB were based on five strategic principles outlined in the WSBI Study.
First, both were supported by their governments' push to harness them as part of nationwide financial inclusion strategies.
Second, and perhaps more importantly, they got the green light to be licensed by a financial regulator.
Third, both ABB and TPB defined a clear mission and invested a lot updating how they work, plugging into multi-channel banking.
Next, there was a willingness and desire to tap into innovation through areas like mobile money.
Fifth, both TPB Bank and Al Barid Bank brought in strong senior management with the right skills to transform the organisation. They were considered “outsiders", not coming from the postal service or postal bank. Both CEOs – TPB Bank's Sabasaba Moshinghi and ABB's Redouane Najm Eddine – have done a fine job of change management.
And finally, capacity building was employed, the fifth principle outlined in the WSBI study. That involved change management systems put in place by both banks. In addition, TPB tackled compensation and brought in a performance-oriented culture. ABB addressed a need for better skills training through its own university.
Postal banks being held back
Despite the commendable success attained by TPB Bank and Al Barid Bank, many postal banks need help because they are falling behind. They are held back.
Before my conclusions, I would like to highlight the potential role of international institutions. Over the past decades, those international bodies, agencies and private sector donors dipping into this area have helped some 40 countries to make a step forward in their reform journey. In most of the cases, however, support has been short-term, small-scale or fragmented.
More joined-up efforts work better, with more focus on how postal banks are governed and led (accountability) alongside technical assistance in capacity building.
Reforms can be achieved at a faster pace through more international cooperation – on one platform – between all involved. That means governments, their postal banks, international financial institutions and other funders supporting financial inclusion, and key industry stakeholders of these institutions.
So, to conclude, we must ensure that a maximum of people are included in the formal financial system. This aim aligns with The African Union 2063 Agenda and the UN Sustainable Development Goals: financial inclusion and economic inclusion. Society craves basic financial services to help improve their lives both now and in generations to come.
Given this backdrop, postal banks have a potential to further help. Their potential will be fully unleashed if postal banks are allowed to transform into autonomous institutions that use post offices as agents for the distribution of their financial products and services.
We also think that postal banks should be able and permitted not only to safeguard deposits but transform them into loans. Those loans spur economic activity, whether it be for a home loan or to create or expand a small or medium-sized business, including those in the farm economy.
We have a unique opportunity to use the enormous potential of postal banks in Africa. You can make it happen if you decide to give postal banks the right tools to succeed and to bring financial inclusion and wellbeing in Africa to a higher level.