The Post Office could play a role in fostering financial inclusion by extending formal financial services to the unbanked in society.
Dr Steven Msosa, postdoctoral fellow attached to the Department of Marketing at Mangosuthu University of Technology (MUT), has published a study titled: Leveraging the Post Office Network to Foster Financial Inclusion, in the International Journal of Finance & Banking Studies.
The study offers insight that is relevant to the current South African context following calls for the Postbank to be remodeled into a state bank.
These calls come after cabinet approved the submission of the South African Postbank Amendment Bill of 2021, which makes provision for the establishment of the South African Postbank Holding Company to operate as a fully-fledged, state-owned bank in line with the prescripts of the Banks Act of 1990.
As far back as 2017, 86% of adult South African were considered to be financially included, but Dr Msosa – through his study – points out that major gaps in financial inclusion based on income, location, gender, education level, and age persist.
He views financial inclusion as the “provision of financial services and products to all segments of society in a way that is available, accessible and cheap”, and “critical in combating hardship and contributing to sustainable economic growth”.
The measure of such financial inclusion, he explains, rests on low-income customers having consistent access to financial services for their needs. This view positions financial inclusion as one of the key factors in entering the formal economy and a crucial step towards financial independence.
Dr Msosa believes that what gave Post Offices advantage as potential financial institutions was the fact that they had a network of branches that are closer to even the most hard-to-reach communities.
“Postal services have a large physical distribution network and a national reach,” says Dr Msosa. “Postal service providers can take advantage of these physical locations and postal workers to overcome a major hurdle to financial service adoption.”
He explains that Post Office branches are usually staffed with workers who can explain financial information in a manner that is understandable to local communities.
“For poorer rural communities that may be afraid to approach bank branches, the familiar, sociable ambience of post offices is appealing. Post Offices may serve as a ‘one-stop shop’ for a variety of important financial services, including e-commerce and e-government. This makes the post office an ideal platform for transacting various financial services and products,” according to the study.
However, transforming Post Offices into institutions of financial inclusion required an evaluation of what would enable the Post Office’s effect on financial inclusion and the long-term survival of the Post Office.
“A wide postal network, competent management and helpful workers, innovative and customer-focused products and services, and government support for postal financial inclusion are all important aspects of the Post Office’s effectiveness as a financial delivery channel,” he says.
However, Dr Msosa points out that turning Post Offices into effective financial institutions capable of promoting financial inclusion can be a complex and challenging endeavour. Barriers often stem from incomplete overhaul of the Post Office which can translate to “lack of sophisticated technology, poor power supply, broadband connectivity, [and] old and obsolete pieces of equipment”.
For the Post Office to succeed in carrying this mandate of fostering financial inclusion, an investment in digital technology and automation is required. Staff training and competitive salaries will be required to boost staff morale and improve customer satisfaction. The regulatory regime will also need to be relaxed to accommodate Post Offices.
“The universal social obligation which requires post offices to provide services to unprofitable segments and hard to reach areas distinguishes it from privately-owned financial institutions which prioritise the provision of services to affluent communities and profitable segments,” says Dr Msosa.