villagefinance

In The End of Money (see citation, last entry) David Wolman suggests that poor people may taste the ‘cashless’ (i.e. digital) society early on, due to a ‘leapfrog effect’ that has already delivered mobile phones to over a billion people without bank accounts – many living in villages which have yet to be reached by national road or electricity networks.

“Almost overnight the phone has evolved from a one-trick pony – connecting two voices – into a Swiss Army knife of do-good power.” Mobile money for example, can deliver a range of financial products from payments to savings, credit and insurance.

But will billions of financially excluded people ‘leapfrog’ from saving in cows and building materials to saving in digital accounts? Unfortunately, the roadmap to get us there is still far from clear. There is no question that mobile money is taking off – with over 60 m active accounts in 2014. However, about 800 m adults in developing economies are illiterate or innumerate or both. The leapfrog effect can bridge the literate-digital divide, but can it bridge the oral-literate one?

To cross the oral-literate divide people need more than a mobile phone: they need soft capabilities like financial numeracy, and the practices involved with storing value in cash, and managing cash in abstract time. Where these capabilities are present the analogy may hold up, but for hundreds of millions of the financially excluded, the mighty frog is missing a leg or two.