'Subjects of Interest'  November 2009                                                                       

Article in Mobile Money Africa e-Magazine November 2009            

by Piet Biemans CEO POFIB Development BV

Use of Post office networks improves financial inclusion also through supporting mobile money transfers

Through the countrywide coverage the post office networks qualify for improving the financial inclusion for all people, including the rural and un- and under- banked.

About 60-80% of the people in the African continent are un- and under-banked but about 40% possesses a mobile phone at the moment. This is expected to grow to about 60% in 2012[1] . Mobile money transfer (MMT) services can be the main driver in increasing financial inclusion of the un- and under banked.

Through the postal networks in the African countries a co-operation modus should and could be developed to be able to cover one of the most critical aspects of success for modern efficient payments through mobile money transfers in Africa, namely the availability of secure, experienced and cost efficient agent networks to be regulated by the Central Bank.

In the field of low value, high volume cash payments in most (emerging) countries the post offices are handling already an important portion of operational payments, like cash in and cash out services for utility payments, pensions, etc. This often takes place under the approval and control of the Central Bank through a limited payment/settlement license.

The country wide post offices network can be contracted by mobile operators as a cash agent network, in principle via a contract with one party. In a number of African countries this is already taken place[2]. This makes available a distribution network all over the country, including procedures and means to handle in an efficient and prudent way the cash 'streams'.

Prudent and cost efficient cash management is one of the main issues to solve in the field of payments and financial services in emerging markets. This is needed because most 'modern' transfers like via mobile phones, often result in immediate withdrawal of cash via an agent network, at least in the starting period of the new service. In Kenya with the Mpesa Mobile Payment solution the cash-in and cash-out service represented about 53%[3] of the transactions during the first period (2007/2008) and still is an important component of the MMT service..

In 2006 an extensive report ‘The Role of Postal Networks in Expanding Access to Financial Services’ [4]clarified the status of postal financial services offered through the postal office networks in emerging countries in all continents. of the World bank

The study reviewed information on postal financial services in 24 of the 47 countries in the African continent. These countries are all actively involved in the provision of postal financial services albeit with a broad diversity in institutional structures, market performance, products and development. In these African countries, with a population of 682 million people and 14,750 Post Offices, the number of postal financial transactions were 6,9 million with a value of $ 1.6 billion per annum. These services are mostly composed of postal giro and savings accounts transactions, payments for utilities, pensions, remittances (local and international) and savings.

The services at the counters of the post offices have an operational character and are often based on co-operation with local financial institutions, like retail banks (e.g. post and postal savings banks) and giro and savings institutions.

Through these post office service networks the process quality has been defined and maintained under the responsibility of international postal institutions (like Universal Postal Union, UPU) and local governments (Ministry of Communication) and of local financial institutions, and often under the control of the Central bank.

The Universal Postal Union (UPU, an United Nations institute) is a multilateral institution to improve the quality and international co-operating of postal companies. A sub-institution for the African continent of the UPU is the PAPU (Pan African Postal Union)[5].One of the objectives of the PAPU is focused on advancing the poor through postal services especially via financial inclusion. Because of cross-boarder co-operation the African postal networks are an explicit candidate for mobile operators and banks to act as agent for mobile banking and mobile money transfer services, local and international.

Of course the local suitability and benefits of involving post office networks should be analyzed for the individual postal organisation per country. Per country the postal companies have a different position and background in the field of (mass) retail financial services.

The development of an overall applicable analysis-, development- and implementation approach for post office companies to be able to align with partners in a Mobile Money ecosystem can be supported via the postal multilateral African organisation PAPU.

Especially the expected booming development in the coming years of mobile money transfers and mobile banking can explicitly be supported through a co-operation model for (postal) agent networks, mobile operators and retail (post/ postal savings) banks.

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