The post office as a strategic delivery channel for financial inclusion

Mobilising domestic financial resources such as savings is crucial for Africa’s developing economies. Savings are important because they permit investment, which in turn increases the productive capacity of an economy.

They also play a significant role in financial intermediation in a sense that savings intermediated by the banking system can be used as credit to finance development activities.

Unfortunately, due to different levels of financial sector development, access to financial services such as credit, savings, insurance and payment services remain limited in developing Africa.

Against this reality, Africa needs to explore other strategies and to improve financial access. In this regard, the role of the postal network is crucial.
With more than 600,000 branches worldwide and 286 post offices in Ghana, post offices provide alternative infrastructure to rural populations to access a wide range of financial services that traditional financial institutions cannot provide.

Considering the potential of post offices to expand financial services in urban and rural areas, the development of a postal insurance and savings system may be a good strategy for developing African countries to increase financial inclusion, reduce poverty and achieve higher economic growth.

Most developed countries’ post office systems offer financial or banking services.

A study by the author, “Why Canada Needs Postal Banking”, showed that banking services were profitable and effective in many countries such as France, Italy, New Zealand, United Kingdom and Switzerland, all countries with large and comprehensive banking systems. Thus, even when there are banks or credit unions in place, a new competitive service offered by the post office can deliver equal or cheaper and better services than existing banks.

A postal network can be successful in enhancing access to financial services if it combines capillarity across urban and rural areas, connectivity among its contact points and full use of the network.

One advantage of the postal financial services system compared to the banking system is its ability to use existing post offices to bring basic financial services to under-served areas and communities. By providing access to services such as deposits, payments and insurance, post offices increase competition for the underserved segments, thus generating a positive impact on employment and supporting rural and regional economic development (Boon 2016). Post offices also provide solutions to critical challenges in financial inclusion such as accessibility and affordability.

As postal financial institutions developed over the years, alternative models have also emerged, ranging from a simple cash-merchant post office that collects savings, to a partnership with financial institutions, to a licensed postal savings bank, and finally to a postal bank providing a wide range of financial services. In some countries, postal finance takes the form of a joint venture between the private and public sectors. In other countries, postal finance has evolved over time, from post office savings banks to licensed postal banks.

According to a database published by the Universal Postal Union in 2011, postal services in developed markets are mainly provided by a partnership between post offices and other financial institutions. In contrast, the majority of postal finance in developing countries is provided by post office savings banks or post banks. In general, the evolution of various business models for postal finance is influenced by the extent to which the government is involved with the operations of providing postal financial services. Each model has its own advantages and their appropriateness depends on the situation of each economy. Each model also has its own advantages in mobilising savings depending on the context.

Ghana Post has a very wide branch network of about 286 offices across the country, with about 60 per cent of the branch network in the sub-urban and rural areas who are mostly under- served. It is therefore an opportune time for banks and insurance entities to take advantage of this valuable asset of the physical branch network to establish mutually beneficial partnership with Ghana Post to leverage on their network by using the post office as a delivery channel to improve their accessibility and also expand financial inclusion.

Postal networks have much to offer for financial inclusion. Overall, there are two policy objectives necessary for postal financial inclusion to become a reality; the impact on financial inclusion on one hand, and the sustainability of the postal operator on the other. The key factors behind the success of the post office as a financial delivery channel include a wide branch network, a good management and staff team, innovative and customer-driven products and services and strong government support for postal financial inclusion.

The writer is the
Ag. Regional Head of Ghana Post,
Western Region