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The Role of Postal Networks in Expanding Access to Financial Services

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This Discussion Paper builds on the findings and conclusions of a study commissioned by the Global Information and Communication Technologies (GICT) Department of the World Bank and carried out by ING Bank in March 2004. The study comprised a review of about 60 developing countries in five regional landscapes. It provided a further in depth analysis of seven of those countries (Egypt, Kazakhstan, Namibia, Romania, Sri Lanka, Uganda, Vietnam) chosen for their most valuable features in terms of successful business model or reform failure, and the lessons that can be drawn from them. This paper provides a unique insight into the worldwide provision of postal financial services. It identifies the strengths, weaknesses, opportunities, and threats faced by the postal sector—from a financial sector perspective and from a communication sector angle. It also documents elements of best practice. Lastly, it offers a variety of strategic options covering several dimensions (policy, legal, regulatory, institutional, technology, capacity building, and corporate strategies). A limited number of country case studies are included in the discussion paper to present a concise story. The full descriptions of the five regional landscapes and the seven country studies can be found separately in Volume II.

The postal branch network with some 500,000 branches in the developing world, and twice the number of branches of commercial banks, has the potential to be a powerful distribution platform, especially in rural and remote areas. However building and maintaining a network of this dimension is costly and has rarely proven to be profitable. Therefore, the challenge for the owner of a postal branch network is to maximize the use of the network by increasing the number of services and products that are distributed through it. In many countries, financial services have been distributed through the post office but not always in an efficient way. In recent years policy-makers have questioned whether post offices can distribute financial services in a sustainable way. Yet some success stories (such as the Brazil’s Correios-Bradesco strategic partnerships, or Morocco’s Poste Maroc model of partnering with multiple financial institutions), show that the postal network can be an effective tool to leverage increased access to finance in rural areas and to the poor.

This paper attempts to determine the key success factors needed to achieve successful reform at a country level. There is no solution that is one-size-fits-all. Therefore a checklist of prerequisites is suggested to help policymakers and stakeholders have an objective debate based on facts and figures, and to look clearly into all options and solutions. This debate should lead to each country reaching a national consensus and a long-term vision on the way forward. Only with these in place will the implementation of policy measures have a chance to be successful, as is emphasized in the UN Blue Book on building Inclusive Financial Sectors for Development.

Based on the underlying regional and country reports, it is clear that the postal branch network can be leveraged to promote access to finance and that the divide between success and failure depends on the strength of a clear policy and a strong commitment from the government to deliver the proposed solutions.

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