Expanding and positioning postal networks as financial service providers can empower citizens in the Arab world to jumpstart their own economies.
By offering savings accounts and other financial services, post offices can not only help individuals achieve their financial goals, but also enable them to accumulate the capital necessary to invest in firms.
The potential for postal finance to transform economies in the Arab world is enormous, as private-sector growth in the region is stymied by the inability of companies to raise capital.
The Success of Postal Finance in the Arab World
While postal banks in Brazil, India and China may possess a larger overall customer base, the Arab region currently offers more postal financial services than any other region in the Universal Postal Union.
Currently, 30% of postal customers in the Arab world use postal financial services. These services account for 25% of postal turnovers in Arab countries. In the Maghreb (Morocco, Algeria, Tunisia, Libya and Mauritania), this share increases to 50%.
Much like postal banks in Europe, individuals who open an account may conduct financial transactions, such as bill-pay and money transfer, at post office branches throughout the country. Recipient beneficiaries can then access these funds through their own postal bank accounts. Increasingly, transfer notifications are sent via text and clients are able to monitor their account activity online as well.
By partnering with private service providers like Western Union and MoneyGram, international money transfers, such as remittances from abroad, an important source of revenue for developing countries, can also be processed at postal banks.
The expansive physical networks enjoyed by post offices—especially in rural areas—therefore have the potential to fill service gaps left by traditional commercial banks and microfinance institutions (MFIs).
MFIs face infrastructural constraints in servicing the rural poor, while banks lack the financial incentive to service this sector of the population. As a result, post offices are uniquely positioned to reach these low-income markets.
In Morocco, Poste Maroc has more branches (1,755) than the country’s two largest retail banks, Banque Populaire (690 branches) and Attijariwafa Bank (
Morocco’s Al Barid Bank (ABB) in particular is an excellent example of the success of postal finance for both the region and world. While Egypt, Yemen, Algeria, and Tunisia dedicate an internal unit of their respective postal ministries to postal financial services, ABB is a fully-owned subsidiary of Morocco’s postal network. The bank can thus offer a more diverse range of products, including savings, insurance, and money transfers. Because of this variety of services, ABB is also well-positioned to make a stronger overall contribution to financial inclusion.
Youth and Opportunities for Postal Finance
In 2012, ABB and Silatech, a social initiative targeting youth and economic opportunity in Morocco, launched an innovative savings program for Moroccans aged 18-25. Features of this program included a low minimum opening balance, a voluntary lock-in mechanism, and an account-matching facility, all of which effectively surmount common barriers to savings.
As the majority of the poor tend to be excluded from formal savings products due to lack of assets, a low-income balance component can begin to reach this market. Evidence suggests that lock-in mechanisms and account matching significantly increase savings, thus empowering youth to reach their financial goals.
Still, as is the case for MFIs and commercial banks, the very poor may continue to find savings opportunities out of their reach. Post offices can still be difficult to access—especially in areas with inadequate transportation infrastructure. Also, minimum balances may remain too high for the highly impoverished. Moreover, governments will need to commit to provide a clear financial inclusion mandate and work with donors to build capacity and upgrade management information systemsamong postal finance institutions.
Official ministerial visits to successful postal banks around the globe, such as the Savings Bank of China and Brazil’s Correios, which service 475 million and 11 million customers, respectively, can raise the profile of postal banking among citizens in the Arab world and ultimately promote learning from these institutions.
Conclusion: What’s Next?
Postal finance may not be a panacea for the economic stagnation and youth unemployment that plague the Arab world. The expansion and development of postal financial products requires significant resources and stakeholder coordination, in addition to civil participation. Nevertheless, the benefits of increased savings far outweigh the costs, and will accrue to the entire region through trade and investment. Most importantly, these institutions empower individuals to help jumpstart national economies that desperately need to provide more jobs.