Global Panorama on Postal Financial Inclusion 2016 Published by the Universal Postal Union (UPU) Berne, Switzerland Printed in Switzerland by the printing services of the International Bureau of the UPU Copyright © 2016 Universal Postal Union All rights reserved Except as otherwise indicated, the copyright in this publication is owned by the Universal Postal Union. Reproduction is authorized for non-commercial purposes, subject to proper acknowledgement of the source. This authorization does not extend to any material identified in this publication as being the copyright of a third party. Authorization to reproduce such third party materials must be obtained from the copyright holders concerned. AUTHORS: Nils Clotteau Bsrat Measho TITLE: Global Panorama on Postal Financial Inclusion 2016 ISBN: 978-92-95025-87-5 DESIGN: UPU graphic arts Unit CONTACT: Nils Clotteau, UPU EMAIL: [email protected] TELEPHONE: +41 31 350 35 66 The boundaries used on the maps in this publication do not imply official endorsement or acceptance by the United Nations or the UPU Global Panorama on Postal Financial Inclusion 2016 Nils Clotteau Bsrat Measho AKNOWLEDGEMENTS This report was written by Mr Nils Clotteau and Ms Bsrat Measho, from the Financial Inclusion team within the Development Cooperation Directorate of the Universal Postal Union. We would like to thank Ms Nadine Chehade and Ms Alice Negre, from the Consultative Group to Assist the Poor (CGAP), and Ms Mehrsa Baradaran, Associate Professor of Law at University of Georgia School of Law, for their time and expertise during the external peer review process. We are also very grateful to Mr José Ansón, UPU Economist, for his comments during the preparation of the questionnaire and the internal peer review as well as the UPU colleagues involved in the preparation of this book, particularly Ms Sonja Denovski and Mr Rémy Pedretti for the final layout. We would also like to thank the 161 member countries that took the time to respond to the extensive survey. Lastly, special thanks go to the experts and representatives of postal operators that participated in conference calls and conversations over the last few years, which gave us valuable qualitative information for the case studies. The views expressed in this paper reflect the views of the authors alone, and do not necessarily reflect those of the Universal Postal Union or its development partners. ABB Al-Barid Bank AML/CFT Anti-money laundering / Combating financing of terrorism ATM Automated teller machine BAM Barid-Al-Maghrib BCEAO Central Bank of West African States ACRONYMS BHM Banque de l'habitat du Mali BM Business model B2B Business to business CEO Chief Executive Officer CGAP Consultative Group to Assist the Poor CI/CO Cash-in/Cash-out CM Cash merchant OF CONTENTS TABLE CTT Correios, Telégrafos e Telefones DFS Digital financial services DO Designated operator EAP East Asia and the Pacific ECA Europe and Central Asia FATF Financial Action Task Force FCFA CFA franc FinTech Financial technology GSMA GSM Association G2P Government to person IFS International Financial System ILO International Labour Organization IMF International Monetary Fund IT Information technology ITU International Telecommunication Union LAC Latin America and the Caribbean LDC Least developed country MENA Middle East and North Africa MFI Microfinance institution MIS Management information system MMO Mobile money operator MNO Mobile network operator MTO Money transfer operator MVNO Mobile virtual network operator OECD Organization for Economic Cooperation and Development ONP Office National des Postes PCK Postal Corporation of Kenya POS Point of sale P2B Person to business P2G Person to government P2P Person to person ROSCA Rotating savings and credit association SA South Asia SSA Sub-Saharan Africa SWOT Strength – Weakness – Opportunity – Threat UN United Nations USPS United States Postal Service SDG Sustainable Development Goal UPU Universal Postal Union WAEMU West African Economic and Monetary Union Executive 9 summary Global Panorama on Postal Financial Inclusion: 11 I an introduction Methodology 11 Financial inclusion: an overview 13 TABLE OF CONTENTS TABLE Definition of postal financial inclusion and the main challenges addressed 13 Financial products and services offered by Posts 17 Business models 25 II and institutional arrangements Business model typology 25 Institutional arrangements and ownership 27 Business models for mobile financial services 30 Key success factors 35 III for postal financial inclusion The network 35 Staff 39 Financial capacity 43 Trust 46 Digitization of processes 47 Risk management 48 Support of public authorities 49 Legal and regulatory framework 50 Marketing 52 Financial inclusion capacity index 55 IV and regional snapshots Financial inclusion capacity index: the global leader-board 55 Rankings by income group 58 Regional snapshots 60 Overview of business models 68 Annex1 adopted by Posts worldwide POSTAL FINANCIAL INCLUSION 2016 EXECUTIVE SUMMARY Two billion people worldwide are financially the less educated and those in the informal economy.6 excluded, i.e. have no access to formal financial services.1 As such, postal networks should be an integral part of dis- However, a growing body of evidence suggests that access cussions in which governments, policymakers and interna- to, and use of, financial services contributes to socio-eco- tional organizations design strategies for fostering financial nomic development. As a consequence, United Nations (UN) inclusion. member countries included a number of indicators related to financial inclusion in the newly adopted Sustainable A call for action: Development Goals (SDGs).2 The Universal Postal Union the necessity to digitize (UPU), as the UN specialized agency for the postal sector, is convinced that Posts can be key players in contributing to Our analysis has shown that, together, Posts in that agenda. 87 countries hold some 2 billion current or savings accounts on behalf of around 1 billion customers. Why are Posts important financial Thus, at the end of 2015, there were almost five times more inclusion players? postal accounts than mobile money accounts (411 million) worldwide.7 However, mobile money accounts are growing Since the creation of the first Postal Savings Bank in at a much stronger rate than postal accounts. Indeed, in Great Britain back in 1861, postal operators have been key 2012, this ratio was of 20 to 1 (1.6 billion postal accounts players in financial inclusion worldwide, in small and large against only 82 million mobile money accounts)!8 countries alike. This is the case in Namibia, for example, a country with 2.2 million inhabitants where 39% of the adult Posts are therefore at a turning point: they need to population (600,000 people) has an account with the Post. adapt in order to remain relevant as providers of sustainable The same is true for China (People’s Rep.), where 43% of and inclusive financial products – in the same way they the adult population (490 million people) has an account have had to adapt to the electronic substitution of mail over with the Postal Savings Bank of China. At the global level, the last 15 years. A perfect illustration of the urgency to out of a total adult population3 of approximately 5.4 billion digitize is the Postal Corporation of Kenya (PCK), which had people worldwide, 1.5 billion – or 28% – have access to a 27% market share for domestic money transfers in 2006. some form of financial services (remittances, govern- With the market entry of various mobile network operators ment payments, insurance, current accounts, savings, (MNOs) since 2008, including M-Pesa, probably the most etc.) through a postal operator.4 Among these, 1 billion impressive mobile money success story, this share has now people – or 19% of the world's adults – hold a current shrunk to approximately 1%.9 To be able to compete effec- or savings account with a Post. tively, Posts need to provide financial services at scale at minimal costs. This means that postal operators Currently, 91% of Posts worldwide (183 out of 201) that have not fully digitized their operations have to provide financial services, either directly or in partnership do so urgently, or risk being completely marginalized with other financial institutions. Recent studies reveal that as financial service providers. Posts are comparatively better than other financial in- stitutions in banking segments of the population that tend to be excluded, such as women,5 the poor, 1 Demirguc-Kunt, Klapper, Singer & Van Oudheusden, 2015, "The Global Findex Database 2014: Measuring Financial Inclusion around the World". Policy Research Working Paper 7255, World Bank 6 Ansón, Berthaud, Klapper & Singer, 2013, "Financial Inclusion and the 2 In particular, one or several targets allocated to SDGs 1, 2, 5, 8, 9 and Role of the Post Office", Policy Research Working Paper 6630, World Bank 10 make specific references to access to financial services. 7 February 2016, "2015 State of the Industry Report – Mobile Money", 3 Throughout this publication, adults refer to people aged 15 and above. GSMA 4 Ansón & Toledano, 2010, "Between Financial Inclusion and Postal 8 C. Pénicaud, 2012, "2012 State of the Industry: Results from the 2012 Banking: Is the Survival of Posts Also There?", UPU Global Mobile Money Adoption Survey", GSMA 5 S. Rao, 2015, "Gender and Financial Inclusion Through the Post", UPU 9 A. Berthaud, 2012, "Kenya Case Study: the Post and the cash merchant and UN Women. model in an advanced mobile