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2  THE DFS CONSUMER AND THE ROLE OF THE REGULATOR IN FINANCIAL LITERACY

            There is no typical DFS consumer. However, financial   icant percentage of youth did not appreciate the dis-
            literacy levels globally, are low.  In this regard, finan-  tinction between gross and net income. And a large
            cial inclusion rates are almost always significantly   number of youths failed to recognize the clear signs
            higher than financial literacy rates.  And, financial   of a potential financial fraud.  On a positive note, over
            literacy levels are particularly low amongst vulnera-  90% of respondents were very interested to partic-
            ble populations; including the elderly, youth, females   ipate in further financial literacy programs, if they
            and disabled segments of society.  For example,    were offered in an interactive and engaging manner.
            financial literacy levels in developing countries can   In  Kenya,  the  2019  FinAccess  Household  Survey
            dip as low as only 5 – 7 percent amongst these     conducted by the Central Bank and the Bureau of
            segments of the population, which may hinder their   National Statistics assessed a combination of aware-
            ability to adequately identify financial services that   ness, knowledge, skills, attitudes and behaviour nec-
            best suit their needs.  They may also be more suscep-  essary to make sound financial decisions and cov-
            tible to unfair financial practices and even financial   ered some 11,000 households. The main findings of
            fraud, which is growing exponentially, and increas-  the survey revealed that more males (40.8%) than
            ingly becoming complex and personal, with the rise   females  (38.7%) make  financial decisions  on  their
            of social networks. In fact, even in developed econo-  own.  The survey findings highlight the other emerg-
            mies where financial literacy levels are at their apex;   ing areas such as rapid uptake of unregulated digital
            such as in Norway, Denmark and Sweden, financial   apps loans, persistent reliance on family and friends
            literacy levels are at about 71 percent of population   for financial services information rather than profes-
            which is deemed financially literate.  Comparatively,   sional financial advisors, and generally low financial
            this figure drops to 57% in the USA, to 35% in Brazil   health and literacy.  Moreover, the survey also showed
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            and to 14% in Albania. 1                           that when it comes to computing the interest costs
               Yet, financial inclusion figures in all of the above   on financial loans, more men (48.8%) were able to
            countries easily surpasses financial literacy rates;   compute the interest costs correctly than women
            suggesting consumers may be using financial ser-   (36.9%). At the national level, this figure was 42.7%
            vices they do not understand or which are not appro-  of the population able to compute the interest cost
            priate to their needs, at a price they cannot afford,   correctly. When it comes to reading and interpreting
            and upon terms they cannot understand , often as a   transaction costs in an SMS, 58.1% of the population
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            result of mis-selling.  An example of a worst-case sce-  were able to do this correctly and again more men
            nario of consumers utilizing financial products that   (63.7 %) were able to make the correct interpretation
            they do not understand comes fromAndhra Pradesh    as compared to women (52.2 %).
            in 2010 when microcredit borrowers took on multiple   In fact, research findings by various entities, includ-
            short term high interest rate debt, causing a wave of   ing the National Bureau for Economic Research as
            defaults and countless debtor suicides.            well as the Asian Development Bank survey previous-
               In 2019, the Asian Development Bank (ADB) sup-  ly mentioned in Indonesia concluded that financial
            ported the financial sector regulator, Otoritas Jasa   consumers, in particular, the young and the old are
            Keuangan (OJK) in Indonesia to conduct an assess-  actually over confident of their own financial knowl-
            ment of financial behaviour, knowledge, sources of   edge and abilities  ; believing their knowledge of the
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            information regarding financial services, and the edu-  financial services to be more sound than it actually
            cation/career/life goals of the targeted group which   is.   This should be of concern to financial sector reg-
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            was youth ages 15-30.  Over 5,000 youth respond-   ulators in particular because DFS services, by virtue
            ed to the online survey and there were also over a   of their digital nature will have greater appeal to dig-
            hundred face to face interviews and separate focus   ital natives, who are not necessarily financially liter-
            group discussions to obtain further insights into   ate, but who tend to be users of the latest financial
            youth financial behaviour in particular. Results will be   apps, including the very popular digital credit and
            published in 2020 and illustrate that youth are very   P2P loans and online budgeting services, where con-
            likely to utilize DFS (including for online banking and   sumers share private, sensitive, financial data, with-
            e-commerce), and tend to be more confident in their   out having full understanding of provider’s privacy
            own competences and knowledge than their actual    protections (if any) .
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            performance on financial knowledge based ques-       Further, a recent CGAP study in East Africa con-
            tions indicates is truly the case.  For example, a signif-  cluded that DFS borrowers tend to be young, urban



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