Financial Innumeracy: A Global Problem for Digital Finance?

I agree with the author having experienced this first hand in the Solomon Islands while researching on Savings clubs with Brett. And most recently, last week, while interacting with Kava farmers in Vanuatu as part of our informal sector micro pension research. While it is important to include financial numeracy in the school curriculum (example Fiji) for adults who have missed out on formal school educations financial service providers and development partners have a responsibility of imparting numeracy skills as it applies to the deployment.

When otherwise unbanked people set up financial services for themselves they choose devices that suit their numeracy skills. For the innumerate, for example, ROSCAs and similar repetitive and paperless mechanisms remain very popular.

A similar preference may explain why, in a daily financial diary research project we are running in central Bangladesh (https://sites.google.com/site/hrishiparadailydiaries/), the respondents do virtually all their DFS transactions ‘over the counter’ (OTC) even though many of them have opened accounts with mobile money providers. By choosing ‘cash-in/cash-out’, customers get immediate proof that the transaction has been properly completed. A son in Singapore phones his mum to tell her to expect 10,000 taka, or a sister at school in another district is told that 4,000 taka is on its way. When these sums are duly handed over the counter by the mobile money agent we have an ‘action audit’ as powerful as the successful pay-out of a ROSCA prize or the annual pay-out of a savings group. It probably explains why so few of our diarists have expressed lack of trust in mobile money even though many of them admit that they don’t understand how it works.

So when Brett suggests that “Financial numeracy challenges may help to explain why so much digital finance is cash-in/cash-out”, I’m inclined to believe he’s right.

Great to see the growing appreciation of the importance of orality - these issues will only be further amplified with the growing digitisation of financial (and other) services. Indeed they will be a key driver of the rapidly emerging (read "emerged") digital divide. See http://bit.ly/2zsylSi.

MicroSave worked with Brett in India on this to look at the issues and design a wireframe for an oral-friendly interface - the resulting report has both a great detail on the problem as well as potential solutions. See "Digital Wallet Adoption for the Oral Segment in India: Concept Development for MoWo (Mobile Wallet for Oral)" http://bit.ly/2q5AwGa

Great work, Brett. I remember talking with a friend who worked in Mozambique. He had trouble whenever he sent a staff member to the market to buy things. The quantity he received was always quite different than the quantity he had requested. He sat down with the staff member to do over counting and numbers. What he learned was that the staff member's range of numbers went, "One, two, three, many."

Your work points out how this challenge affects the goal of digital financial inclusion. Getting people to connect with digital services must be accompanies with basic financial numeracy. Otherwise, as you say, we leave those adopting the new technology vulnerable to those who would take advantage of those with limited ability to put visual quantities into words and numbers.

Thanks for this Brett. The more I've been learning about DFS, the more financial innumeracy seems like a bottleneck for so many other services.

I'd love to see this topic get more attention in the development space - I'll be keeping an eye on it for sure!

Thank you Mathew for this excellent narration ... Thank you also for our earlier (e-mail) discussion on this.....This is a great note for those who rush to digitize financial services to the very poor, and illiterate..... This has come out in our assessment of saving mobilization challenges of 12 microfinance institutions ... This discussion has made it very clear that if we actually want to serve the poor and illiterate in rural contexts and digitize such a service, we need more (not less!!) field officers, who can support the target group on the use of such a devise, as well as work on other infrastructure issues as well. ... Hope to hear more on this .... Thanks and Regards

For boosting financial numeracy towards comfortable financial accessibility and inclusion , besides government and financial institutions, why not Mobile companies take the social responsibility of imparting financial numeracy to the innumerate in the poor segment . This work helps both in terms of more sales of mobiles for the company and gaining financial numeracy for the buyer.

Another point towards prudential utilisation of accessed finance after DF inclusion, financial literacy on income generating activity from the accessed finance need to go along financial numeracy task. Otherwise DFS has no value except claiming number of people in informal sector financially included with many of their account unfortunately remaining inoperative ones.

i agree with Mathew on the imperative need for imparting financial numeracy skill using existing oral information management tools to the innumerate. But I am wondering who will take the benign responsibility to do the same among the actors in the game viz., the banks, mobile companies, network providers, Retail mobile shops in the last mile?.