Our econometric estimation of the Brazilian Banco Postal (BP) impact on local economic development did not identify a significant statistical impact of BP on the gross domestic product (GDP) of the communities under analysis while our model finds clear impacts on the creation of new firms and employment. Why?
A plausible explanation is that financial inclusion is above all a matter of numbers rather than value. While many individuals and small firms were financially included through BP, it is intuitive to understand that the monetary added value of all transactions was not large enough so as to have an impact on a macroeconomic aggregate – such as GDP – which is measured in value terms. This is the same when comparing these transactions to the overall financial system, as it was rightly pointed out by Ernesto Aguirre during the UPU-AFI Conference on Financial Inclusion and Postal Banking (as it can be seen in the video below).
Yet this constitutes another tangible proof of the inclusion power of BP, because if many new firms have been created locally thanks to BP (as tested econometrically) while the value aggregate (GDP) remains largely unaffected, this in turn means that the new economic activities created have been mostly involving the less well-off segments of the population – low-income households and micro-enterprises. The positive macroeconomic local impact of BP is to be found at the extensive (number of) rather than the intensive (value of) margin. It thus confirms that BP was an important factor of integration for those segments of the population – mostly rural or in small cities – in a time of stronger concentration of economic activities in large centers due to development. As highlighted by the World Bank (WDR 2008), more concentration also calls for more integration in order to prevent the periphery from becoming a de-stabilizing factor and jeopardize the sustainability of economic development.
Financial inclusion and local economic development in Brazil: a quantitative evaluation of the impacts of Banco Postal
By Dr. José Ansón, Economist, UPU