Earlier this year The Economist proclaimed the coming “Planet of the Phones.” Predicting that “by 2020 80% of adults will have a supercomputer in their pocket,” it added that smartphone ownership could bring large populations into the financial systems of developing nations, substantially boosting economic growth.
The opportunities of the emerging mobile era are breathtaking. But lack of financial numeracy is an underlying obstacle that will cause a digital divide to persist, even when 100% of adults carry supercomputers in their pockets. This is due not just to the lack of hard numeracy skills required to track mobile money transactions without help, but also due to the lack of effective incentives to acquire them.
Today, nearly a billion adults are stranded in an ‘oral’ or pre-literate world. The behavior and practices of this poorest segment of the financial excluded population may help to explain both the scale of account dormancy in mobile money (nearly two in every three accounts), and the prevalence of over-the-counter (OTC) mobile money services: a preferred practice in many countries.
‘Orality’ refers to the capabilities, habits and practices of illiterate individuals, and of communities in which most people are illiterate. Among other matters, oral cultures rely on – and trust – traditional solutions to household financial management that compete directly with modern financial services, including mobile money.
Financial numeracy is weak among oral populations. Furthermore, oral lifestyles and practices shift incentives away from learning new financial numeracy skills, let alone adopting the practices that depend on them.
My Oral Village, Inc. recently completed studies in Tanzania and Cambodia that map the financial numeracy skill gap more precisely, in order to identify solutions that make financial services more usable for the oral segment.
We asked a sample of eighty illiterate individuals, mostly women members of small financial groups, to count 107,500 units of their local currency (equal to about $60 in Tanzania or $25 in Cambodia). Our sample was small and meant to be indicative, not randomized. Nevertheless, a clear pattern emerged.
Three quarters of the sample could count money – typically 15 to 20 notes and coins – and correctly state the sum in their local language. Most appear to have acquired thisfluency by selling produce in village markets, rather than in a classroom. However, only 12 out of 80 could identify the number in a written list of similar multi-digit numbers (see Diagram 2). The positioning of numerals and the role of zero are not taught in early primary school, and village markets avoid text in both countries.
It’s possible for a person to understand the positioning of numerals orally but not in writing. Oral and written numerical understanding are actually quite different, and are learned independently of one another.
Respondents confronted with a list of multi-digit numbers struggled with the number of zeros to include, and their location in the numeral string. Oral understanding offers few clues to either of these matters. For example, an English speaker does not utter the word ‘zero’ three times to speak ‘107,500’, although all three zeros are in the text. The situation is almost identical in Swahili, and similar in Khmer, the languages of most of our sample.
Towards a bridging architecture
If validated through larger scale testing, the ‘multi-digit divide’ has important implications for mobile financial inclusion: inability to understand a multi-digit written number cripples real-time awareness of transactions. Not only does it help to explain account dormancy and the rise of OTC practices, its impact will likely be compounded on the path to mobile savings and insurance – because with these financial products, both trust and incentives become even more salient.
My Oral Village, Inc. has been testing solutions that generate a more usable, user-friendly interface for oral populations, and a more user-friendly bridge across numeracy gaps that are critical to financial inclusion, including the multi-digit divide.
Building basic financial numeracy, grounded in the study of related oral behaviors and practices, should be done scientifically. Basic financial numeracy can be tracked systematically by integrating simple, standardized numeracy and literacy tests into Global Findex and regional studies like FinScope.
Currently several factors are slowing oral acquisition of financial numeracy skills. It may be fruitful to conduct some country-level studies of these factors, along with their impact on financial inclusion, and interventions that can accelerate learning. Similarly, empirical analysis of OTC and PIN-sharing transactions with agents in oral contexts, and the causes of dormancy in mobile accounts, may also yield fruitful results.
CGAP is emphasizing the need to empower customers of digital financial services and has identified three ways to do it: by enabling better customer choices, enhancing product usability and amplifying customers’ voices. Addressing the multi-digit divide may go a long way towards enhancing all three.