Does Branchless Banking Reach Poor People? The Evidence from Pakistan
In this mini-series we explore new evidence from three countries on whether branchless banking is reaching poor people starting today with Pakistan.
Proponents of branchless banking, including CGAP, have for some time made the case that branchless banking has the potential to transform the lives of poor customers and in some instances is doing so already. With many more access points across the country and without the cost of expensive branch infrastructure, branchless banking – the theory goes – should be able to reach many more people and at a much cheaper cost. Financial services will be accessible and affordable to many poor people for the first time. But it is quite possible that in the first instance at least it will be richer customers and those who already have bank accounts that will make use of services that are cheaper and more convenient.
Until recently there has been very little data on the income levels of the users of branchless banking. CGAP commissioned Coffey International Development to carry out studies of customers of several branchless banking services. The first study to take place was with EasyPaisa customers in Pakistan. With over 10,000 agents across the country, EasyPaisa already has more access points than the entire banking sector of Pakistan combined, and allows customers to send and receive money to friends and family, to pay their bills and, more recently, to open an account on their Telenor phone. We wanted to find out whether poor customers and those that were previously unbanked were using the service.
327 interviews were carried out with EasyPaisa customers at 10 locations across both rural/semi-urban and urban Pakistan between January and February 2011. Customers answered questions about both their use of EasyPaisa, but also about their homes and their household that allowed us to work out their approximate income level by comparing their answers to a nationally representative household survey.
What did we find?
- When we looked at income levels we found that around two-fifths (41%) of EasyPaisa users live on less than $2.50 per day (in 2005 PPP adjusted dollars). The majority of customers (69%) live on less than $3.75 per day, but few customers (5%) were living below $1.25 per day. ◦When we looked at customers’ use of other banking services we found that just under half (45%) of all respondents did not have a bank account, with informal money lenders being the next highest provider of financial services (far above microcredit).
- There was also a strong correlation between the likelihood of being poor and the likelihood of not having had a bank account among users.
Customers from all walks of life seemed to value the service and felt that it was making their lives easier.
- When asked to rate the service, over 90% of respondents rated EasyPaisa as highly effective. Less than 10% rated it as moderately effective and almost no one rated the service as ineffective.
- Three-quarters of the respondents (76%) felt the service has a positive impact on their lives and a high majority of users (88%) thought the service was easy to use.
- There are a high number of repeat users: just under two-thirds (65%) of all respondents using the service to send money do so at least once a month.
These results are encouraging and seem to support the findings that are emerging from other studies that suggest that branchless banking services do reach poor people. A recent study by InterMedia in Tanzania found that nearly one-third of users of M-Pesa in Tanzania are poor (measured against a $2 per day poverty line).
Over the next few weeks CGAP will release the results of similar studies in India and Mali. We hope that they too will show that other branchless banking services are also reaching the types of customers that we have long hoped that they will.
- Chris Bold