Experts share ways to transform postal banks
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BRUSSELS, 30 May 2018 – Postal banking experts from throughout the world convened yesterday at WSBI offices in Brussels to exchange ideas on ways to transform postal financial institutions (PFIs).
The all-day meeting of 16 representatives from postal banks, international organisations and WSBI explored how the transformation process works in countries like Morocco, Tanzania and China. Attendees also read through a draft research report by postal financial institutions consultant Hans Boon, who presented the finding of the paper.
Sabasaba Moshingi, chief executive of WSBI member TPB Bank of Tanzania, set the scene during the morning session with a talk on the potential of postal financial institutions to contribute to financial inclusion. Moshingi noted that public sector banking plays a special role in financial inclusion. PFI management must ask themselves pressing questions, he added, such as whether or not their postal bank brand is strong in the market. He urged senior management to pose whether postal banks are good in product innovation and profitability. Profits can be made if the right structure is in place, such as well employed technology, a cost effective operation, being well capitalised, and having good governance. Transformation requires a will by all stakeholders involved, especially from governments. A roadmap from international organisations can also help banking transform.
WSBI's Laurie Dufays asked why postal banks work so well in Asia, but less so in places like Africa. Governance remains a big challenge for struggling postal financial institutions. Meantime, transforming PFIs requires a strong desire by management and government. Case in point is the Chinese government, which has shown the will to tap into the postal savings banks model as a tool for financial inclusion. WSBI member Postal Savings Bank of China is a prime success story due in part to having the right financial infrastructure, a postal network that has strong logistics, and finally a physical presence, especially in rural areas.
Dufays also outlined success elements for transforming PFIs. One success factor is attracting and hiring senior management from outside the postal organisation or postal bank. Another element is hiring managers armed with the right skills to transform the organisation. Senior managers must display a deep desire to change their PFI.
Postal Financial Inclusion: Pushing the envelope
A draft WSBI-commissioned study on transforming PFIs was part of a talk by consultant Hans Boon, who authored the paper.
Providing 1.8 million accounts and 1.1 billion customers. PFIs are oftentimes misdefined by governments as part of postal services or telecommunications, rather than as a banking institution, he noted. Termed by Boon as a “giant hole”, the PFI definition should be framed more as a banking institution. On PFI business operations, Boon shared how PFIs tap into multichannel banking – both physical and digital – and can link to any payment system. PFIs remain a point of entry for payments and other services.
Roundtable participants also learned about the PFIs “life cycle", which starts with traditional, low-tech, basic services all the way to cashless, digital PFIs of the future. The bulk of postal banks dwell in between, especially in "unreformed" stage, characterised by being state-owned and postal-managed. As PFIs transform, he noted, they oftentimes become separated from post office. In this “reform” stage, they use post offices as agents, have separate management and become regulated banks.
PFIs can transform in 2 to 3 years, he concluded, if they stick to a dozen areas illustrated. There is need for a “champion" at high level to drive change from the inside. He cautioned PFI senior managers about the limits international organisations have in helping the change process.
Mauro Martini of IFAD brought another dimension of postal financial services: the remittance challenge. That issue has been tackled by IFAD and partners like WSBI through the African Postal Financial Services Initiative (APFSI). IFAD shared how close cooperation reaped rewards with national postal operators in four countries – Ghana, Benin, Madagascar and Senegal.
Cost of remittances fell by 42 per cent when sending remittances through post offices. All four countries achieved a slashing of cost in the market, close or below the three percent target. Flows via post offices jumped by 60 percent. In Ghana, market share doubled. Why the success? One reason is that accounts opened, traffic increased. Marketing efforts attract clients. In rural areas, the success has really been felt. IFAD found that post offices are a more friendly environment that a bank for people in all four countries. Data showed when post offices where restyled, transaction volumes and money levels increased too. More than 100,000 unbanked adults opened accounts for financial services.
Youssouf Sy of the Universal Postal Union (UPU) shared with the roundtable progress on the organisation's FITAF Technical assistance facility, which is done with support from the Bill & Melinda Gates Foundation and Visa. The facility looks to digitise banks through 20 digital financial services (DFS) projects.
Case studies of success stories were presented later in the meeting, with examples of how postal financial institutions transform. The push to digital is evident at both case study institutions Al Barid Bank (ABB) of Morocco and TPB Bank of Tanzania. Process modernisation, multi-channel strategies and a clear mission were key ingredients to success. The ABB case study, shared by its international affairs head Zakia Hazzaz, explored the main levers to widen financial inclusion, which has proven a success. The TPB Bank case study, presented by Sabasaba Moshingi, demonstrated how performance management can drive change help overall financial performance.
A debate moderated by Incofin Investment Management Managing Director Loic De Canniere gave participants time to give reactions to presentations and look at scope of potential initiatives.
There was broad agreement by participants to establish some sort of coordinating platform, such as a stakeholders working group. There is also a good opportunity in first quarter 2019 to share the PFI challenges with African Union Commission (AUC) when they hold a high-level forum bringing together African finance ministers on transforming post office institutions for financial inclusion and e-commerce. This will be followed up with an African Union heads of state meeting to review and assess what has been done. Studies or toolkits produced by the roundtable are being considered for the AUC finance ministers’ event, when at least some of the institutions present at the roundtable should participate. Following the AUC meetings, the roundtable foresees the topic needing to be placed on government agendas when they are discussing aid packages with international financial institutions like the World Bank Group.