Going Postal to Deliver Financial Services to Microclients

This article, directed toward microfinance theorists, discusses the role of post-office savings banks (POSBs), which function as microfinance institutions in many developing countries, particularly Asian countries, which form the basis for this short study. POSBs have many attractive aspects: they are accessible even in remote areas, they accept even tiny deposits, and have longer hours than most microfinance institutions (MFIs). Moreover, they generally have a good relationship within their neighbourhoods (everyone knows their mailman or mailwoman), their deposits are protected by the government and can even provide tax benefits. Despite these and other benefits, major issues restrict the use of POSBs as a viable alternative to expand microfinancial services to the unbankable. First, as POSBs are generally owned by governments, bad governance means a poorly-functioning POSB, and political issues may affect the POSB more than other MFIs. Second, POSBs are generally passive receivers of deposits, and do not offer a wide range of financial services, and are often heavily subsidised by governments, both of which tend to de-emphasise the goal of POSB self-sufficiency and viability as a microfinance institution.

The author discusses ways of helping POSBs to provide an expanded series of effective services. One suggestion is to create an autonomous board of directors from the private sector, so the POSB is able to act independently of government financial policy. Financial services and products need to be diversified; the author suggests that POSBs join forces with other local MFIs to offer more services cost-effectively. Staff need to be better trained in financial services rather than just as postal workers. In the end, the article poses some questions that should be asked before development of POSBs should begin, all concerned with viability and the need for expanded services in the regions under consideration. This article comes complete with fact boxes comparing the experience of POSBs in different Asian countries, and though sketchy, it is both interesting and thought-provoking.

Related Resources