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Postal financial inclusion: Pushing the envelope

Postal financial inclusion: Pushing the envelope

​​​​​​​​Discussion paper on postal financial institutions governance,
​corporate transformation

>> See .pdf version of full report

Published: 31 October 2018



The modern postal banking concept effectively contributes to lowering barriers to financial inclusion. Using post offices can help to eliminate access constraints across a country, keeping costs low for financial services for the un(der) banked – and via trusted places – educating users with simple, standard products enabling them entrance to financial inclusion in combination with issuing identification documents as part of e-Gov or ID4D programmes.

In 51 countries, people use the services provided by a corporatised and licensed PFIs. This is the prevalent model. In a group of 24 countries, post offices play a substantial role in providing access to financial services as agent of one or more licensed and corporatised financial institutions. In another 24 countries, PFIs are in a process of reform and not yet corporatised nor licensed: they provide a limited range of services. A missed opportunity occurs for this group, which holds substantial and obvious potential. In another 30 or more countries, post offices have relevant, widespread networks with presence in bank “deserts”, but their institutional framework limits their obvious potential to act as agents of licensed banks and insurers.

Reforms of PFIs until now were dependent on, and driven mainly by, individual government initiatives and have taken often 12 years or more to complete. For a group of at least 24 PFIs in transformation, there appears a compelling rationale for governments to intervene and to pursue accelerated reforms to realise a PFI’s contribution to rural financial inclusion. The main reason would be to turnaround the existing loss-making operation into a sustainable, profitable institution that adds value to poverty reduction, economic growth and competitiveness in the retail banking market. Pathways to progress could benefit from best practices and lessons learned elsewhere, as well as support to step up partnership-building efforts with the private sector to fill in existing gaps in PFI capacity.

Interventions and support by the international financial institutions, UN agencies and other public- and privatesector donors helped some 40 countries to make a step forward in the process of transformation. In most of the cases, support has been short-term, small-scale or fragmented. More concerted and convergent efforts during the process could be more effective, with more focus on governance and management accountability alongside technical assistance in capacity building.

Reforms can be achieved at an faster pace through more international cooperation – on one platform – between governments, their PFIs, and international financial institutions and other funders supporting financial inclusion and, in particular, by the key industry stakeholders of these institutions. WSBI is a committed stakeholder in this area to push the financial inclusion envelope.

This report provides 10 strategic principles and actions needed to widen financial inclusion via postal networks in Africa and beyond. Those principles, designed for policymakers and international institutions, when applied, can (a) help accelerate the process of transformation and (b) catalyse the process of bundling international efforts.

Ten strategic principles and actions needed to boost financial inclusion via postal networks in Africa


The following principles are seen as essential for strategies to boost financial inclusion through postal networks and highlight the factors that are considered essential for viability of the provision of financial services through the postal network to low-income populations.

1. Post offices need to be seen as an existing specific component of the financial access infrastructure and as a distribution channel with substantial unutilised potential. Post offices are neither bank branches nor a group of random retail agents. Post offices carry a social and public responsibility to provide reliable, fair and transparent financial services, and where applicable, a specific role in promoting financial literacy.

To function as a distribution channel of one or more financial institutions, at least three main issues need to be addressed:
• interoperable ICT supporting the operations in post offices and connected with financial institutions;
•  sufficient control by the financial institutions on the operations, quality and cost of offices, staff and systems at post offices; and
• promoting competitiveness for delivery of sustainable financial access.
 Dependent on if and how these issues are resolved and on the institutional framework of the post offices, financial institutions need to be engaged in using post offices for management of the delivery of financial services. This can vary from simple, one-product, agency agreements for short-term to long-term ventures in which the financial institution is involved in managing and in investing in the network and staff. 

2.Financial services via the post offices need to be managed and controlled by responsible institutions licensed by the financial regulator. Financial services via the post offices are in principle not in the domain of a postal regulator.

The institutions can be:
  • Banks, microfinance institutions, money transfer operators, payment service processors and insurers meeting a set of minimum requirements in responsible finance, transparency, literacy and consumer protection. They operate under an agreement with the postal operator to use one or more post offices as their agent, or alternatively under an agreement to rent space in one or more post offices for their representation with own staff and ICT.
  • A historic postal (savings) bank institution as a licensed deposit-taking institution and, for example, as a microfinance institution (MFI) wholesale funder, in conjunction with a programme to corporatise the entity within a reasonable term into a licensed retail bank and operating under a transparent agreement for the usage of the post offices; and
  • A state-owned postal operator licensed as a non-bank financial institution to operate in areas such as money transfer services and bank agency services.

3.  Diversity of the financial services offered via the post offices is needed through a broad range of affordable services, such as payments and transfers, savings and deposits, loan instalments, bonds and insurance premiums. It should not remain limited to one or two products and also not be based on long-term exclusivity to providers, oftentimes “historic” provider, who face limitations in their capacity to expand to a broader range of services on a competitive basis or to a larger number of clients.

4.  Innovation in delivery of financial services via post offices is needed through building partnerships. Those partnerships should be formed between the post offices as a delivery channel, and competent financial institutions and mobile telecom operators for the application of new technologies to expand financial system access and usage. This needs to be seen beyond the usage of modern ICT for teller operations and delivery of financial services. It could include issuing biometric ID cards with payment functionality, self-service terminals, mobile post offices and postal couriers equipped with mobile technology to deliver financial services fitting in a broader scenario of expanding e-commerce, e-government and e-learning. Standardised interconnectivity and interoperability is therefore a requirement with, for example, mobile and electronic channels for financial services.

5.  Empowerment for financial inclusion via the post offices needs to include the development of financial literacy with the un(der)banked. Post offices need to be seen as a mass communication medium instrumental to enhance information and transparency about using financial services. Empowerment of the post offices as a channel for financial inclusion will frequently require transformation and change programs based on building financial management capabilities within the postal operator and post offices, and the involved financial institutions. Empowerment needs to be based on a “learning curve” for the postal organisation and its environment. This also requires proportionality in strategies to widen financial inclusion via postal networks, with steps that are balanced between the risks, capability and benefits while taking into account the gaps and barriers in existing postal sector regulation. 

To unleash the potential of postal networks it is recommend following up the above principles with a minimum set of actions including:


6.  Full data reporting to the financial regulator on all financial services delivered via post offices, and inclusion of these data in the financial sector statistics. Statistical reporting does not require an immediate change of existing legislation or regulation of the postal operator. In cases where the reporting does not exist it can be seen as one of the first steps in the preparation of new strategies to widen financial inclusion via postal networks.

7.  Corporate transformation of existing postal financial services in a corporatised entity that forms part of regulated financial sector. Roadmaps for the transformation need to be based on a consensus between the financial regulator and the involved government agencies. Roadmaps depend on specific local circumstances but can be built around a selected number of options and phases. Intensified cross-border cooperation or international alliances will need to be considered, moreover, to ensure adequate economies of scale and sustainability. 
As a part of the transformation, there is need for audited IFRS financial statements of the designated postal operator. It is imperative that these financial statements include segmented accounting of the services provided within the reserved area for mail services and of the financial services entities.

8.  Transparent methodology of financing of net cost of reserved area of postal universal service obligation (USO). It appears as essential to make transparent the financing methodology of the net cost of the postal USO, avoiding the suggestion that internal cross subsidies exist between the postal services and the provision of financial services to the low-income groups.

9.  Revised sector policies and regulations for ‘postal services’. Emphasis should be placed on promoting growth and competitiveness of the sector. In recognition that the postal sector has been liberalised globally, a redesign is needed of a reserved area for a specific operator or design of other measures encouraging nationwide delivery and taking experiences from other sectors. Sector policy needs to take into account the new postal logistics business models and application of new ICT-based postal technologies, replacing large parts of the early 20th-century model mainly based on manual labour.

10.  Human capital building is a prerequisite. It is a critical success factor in implementing effective strategies to increase financial inclusion and improve competitive viability of the postal services. To build up human capital, it requires recognition that trustworthiness and competence to reach out to the un(der)banked hinges on investing in and incenting talented post office staff and management while ensuring a customer-centric corporate culture.


Postal savings banks; Financial inclusion