Postal Financial Inclusion: the Business Case

1. Postal Financial Inclusion:the Business Case UPU Workshop on Postal Financial Inclusion Berne, 31 October 2011 Alexandre Berthaud – Financial Inclusion Expert (DCC)

2. Postal Financial Inclusion: The Business Case Why is the post the optimal solution for Financial Inclusion? Why are the posts interested in Financial Inclusion? An Opportunity Map

3. The strengths of the post in financial inclusion Post Advantages 1. Network -Higher postal density than Bank density -Well distributed across income -Well distributed within countries -Presence in Rural Areas -Well integrated by processes and communication channels

4. Why the post? 1. The Network

5. Why the post? 1. The Network: Density (Post vs. Banks) Number of Commercial Bank Branches per 100.000 adults Source: CGAP (2009) and Orozco (2011)

6. Why the post? 1. The Network: Density (Post vs. Banks) Number of Post Offices per 100.000 adults Source: UPU (2009)

7. Why the post? 1. The Network: Progressively Distributed Nigeria Mexico

8. Why the post? 1. The Network: Progressively Distributed...

9. Why the post? ... Even more so in Rural Areas

10. Why the post? 1. The Network: Larger than any Other

11. Why the post? 1. The Network: As large as the whole banking sector in SSA

12. Why the post? …yet much more capillarity as compared to banks in rural areas

13. The strengths of the post in financial inclusion Post Advantages 1. Network 2. Trust -Well distributed across income -Well distributed within countries -Presence in Rural Areas -Well integrated by processes and communication channels -Long-term presence -Link between governments and its territory -People Save at the post

14. Why the Post? 2. The Trust Factor Relatively High Level of Trust Relatively Low Level of Trust Source: WEF (2010)

15. Why the Post? 2. The Trust Factor: a long-lasting institution • In the vast majority of countries Postal Operators have been established more than 50 years ago • Ethiopia: 1894 • Bangladesh: 1898 • In most countries the Post has been offering payment and saving services for at least half a century and the level of trust in those institutions is higher than that of banks • Posts have survived and adapted to revolutions, decolonization and economic crises

16. Why the Post? 2. The Trust Factor: Link between Government and its Territory • In most countries in Africa and Asia, and less so in Latin America, the Post Office has been and remains the channel of choice for Government Payments • Government payments are a point of entry into the financial system, hence we should use the door that people are already using • In Bénin, all government employees and retirees must receive their salaries and pensions through the Post Office giro accounts • In India the Government disburses the NREGA wages through the Post office in Rural areas. • In the CIS countries the vast majority of pensions payments are made through the Post Office • In Kenya, conditional cash transfers are made through the post and the post office provides last mile coverage for pensioners in rural areas

17. Why the Post? 2. The Trust Factor: 500 Million People already save at the Post Number of Postal Deposit Accounts per 1.000 adults Source: UPU (2009)

18. Why the Post? Conclusions • Post is better positioned than Banks in terms of network • Much more people use the Postal network than Microfinance • It has a strong rural presence • The Post is an integrated network vs. many networks that often do not talk to each other in the case of Banks • It is a trusted institution worldwide

19. Postal Financial Inclusion: The Business Case Why are posts the Optimal Solution for Financial Inclusion? Why are posts interested in Financial Inclusion? An Opportunity Map

20. Incentives for the Post to be Financially Inclusive Post Incentives 1. Viability -Mail is slowing down: Need for Diversification -Existing Infrastructure which needs to be sustainable -Economies of Scope

21. Why is the Post interested? 1. Viability: Diversification Share of Financial Services as a Percentage of Total Income Source: UPU (2009)

22. Incentives for the Post to be Financially Inclusive Post Incentives 1. Viability 2. Social Impact -Mail is slowing down: Need for Diversification -Existing Infrastructure which needs to be sustainable -Economies of Scope -Universal Service Obligation -Post is used to adressing the needs of the poor

23. Why is the Post interested? 2. Social Impact: Universal Service Distribution of Networks according to Population in Brazil Source: Ansón and Toledano (2010)

24. Postal Financial Inclusion: The Business Case Why are posts the Optimal Solution for Financial Inclusion? Why are posts interested in Financial Inclusion? An Opportunity Map

25. Half the World is Unbanked… Source: McKinsey 2010

26. and Half the Network is Postal Source: UPU and CGAP (2010)

27. … So there is a World of Opportunities for Postal Fin. Inclusion

28. Low inclusion-larger network Low inclusion-smaller network High inclusion-larger network High inclusion-smaller network Source: UPU and McKinsey(2009) A World of Untapped Opportunities

29. Postal Financial Inclusion Conclusions: -1.5 billion peoplehave access to one or several financial services through their post offices (Ansón) Today -500 millionpeople in the developing world have an account at the Post/Postal Banks -1 billion can be banked by Posts if we work together and build on the Opportunities Potential

30. POSTAL FINANCIAL INCLUSION OPPORTUNITY ATLAS

31. Opportunities in Arab countries

32. Opportunities in LAC

33. Opportunities in Asia-Pacific

34. Opportunities in SSA