Responsible finance and child labour: quo vadis microfinance?

Patricia Richter; Sophie de Coninck

doi:10.3362/1755-1986.2015.015

Responsible finance and child labour: quo vadis microfinance?

Despite a remarkable downward trend since 2000, child labour remains a reality for 168 million children worldwide (from 245 million in 2000). Of those children, more than half are engaged in hazardous work that directly endangers their health, safety, and moral development. These latest statistics from the International Labour Organization illustrate a pressing concern for today’s world and call for integrated efforts to tackle them. This article proposes a framework for development practitioners and policymakers to help them design interventions with a particular focus on financial service providers. We briefly describe root causes of child labour – including demand, social norms, access, costs and quality of education, vulnerability and risk exposure, and income poverty – and then propose innovative interventions that financial service providers can engage in to address, where possible, each of the causes. The article then presents evidence from recent experimental research in Pakistan which shows the significant positive effect that an innovative health and accidental death insurance product had on reducing child labour. Further evidence from experimental research with an associated school fees loan and an awareness campaign in Nigeria, and an integrated training package and sensitization programme in Mali, illustrate that the impact of interventions on child labour, education, and poverty are not always straightforward.

Augsburg, B., Haas, R.D., Harmgart, H. and Meghir, C. (2012) Microfinance, Poverty and Education, IFS working paper, London: Institute for Fiscal Studies.

Bauchet, J., Marshall, C., Starita, L., Thomas, J., and Yalouris, A. (2011) Latest Findings from Randomized Evaluations of Microfinance, Washington, DC: CGAP.

Blume, J. and Breyer, J. (2011) Microfinance and Child Labour, Employment Working Paper No. 89, Geneva: International Labour Organization.

De La Cruz, N., Crookston, B., Gray, B., Alder, S., and Dearden, K. (2009) ‘Microfinance against malaria: impact of Freedom from Hunger’s malaria education when delivered by rural banks in Ghana’, Transactions of the Royal Society of Tropical Medicine and Hygiene 103(12): 1229–36 <http://dx.doi.org/10.1016/j.trstmh.2009.03.018>.

Edmonds, E.V. (2005) ‘Does child labour decline with improving economic status?’ The Journal of Human Resources 40(1): 77–99.

Emerson, P.M. and Souza, A.P. (2003) ‘Is there a child labor trap? Inter-generational persistence of child labor in Brazil’, Economic Development and Cultural Change 51(2): 375–98.

Froelich, M., Landmann, A., Poppe, R., Unte, P., van Doorn, J. and Midkiff, H. (2012a) ‘Améliorer les conditions de travail et la productivité en milieu agricole pour réduire le travail des enfants: Etude d’impact de l’innovation de Nyèsigiso en matière de formation et sensibilisation’, internal report, Geneva: International Labour Organization, Social Finance Programme.

Froelich, M., Landmann, A., Midkiff, H. and van Doorn, J. (2012b) ‘School Support Initiative: an impact evaluation of LAPO, Nigeria’s school fees loan and awareness campaign innovation against child labour’, internal report, Geneva: International Labour Organization, Social Finance Programme.

International Labour Organization (ILO) (2009a) ‘Microfinance for Decent Work: results of diagnostic client survey’, internal report, Geneva: International Labour Organization, Social Finance Programme.

ILO (2009b) ‘Micro-finance au service du Travail Décent – Analyse des résultats de l’enquête auprès des clients de Nyèsigiso, Mali’, internal report, Geneva: International Labour Organization, Social Finance Programme.

ILO (2013a) Making Progress Against Child Labour: Global Estimates and Trends 2000-2012, Geneva: International Labour Organization, International Programme on the Elimination of Child Labour (IPEC).

ILO (2013b) World Report on Child Labour: Economic Vulnerability, Social Protection and the Fight Against Child Labour, Geneva: International Labour Organization.

ILO (2015) Microfinance for Decent Work: Enhancing the Impact of Microfinance – Evidence from an Action Research Programme, Geneva: International Labour Organization, Social Finance Programme.

ILO (n.d.) ‘Microfinance for decent work: action research’ [online] <www.ilo.org/empent/areas/social-finance/WCMS_168033/lang--en/index.htm> [accessed 15 April 2105].

Islam, A. and Choe, C. (2009) Child Labour and Schooling Responses to Access to Microcredit in Rural Bangladesh [pdf], MPRA Paper 16842, Munich Personal RePEc Archive <http://mpra.ub.uni-muenchen.de/16842/1/MPRA_paper_16842.pdf> [accessed 8 April 2015].

Khandker, S. R. (1998) Fighting Poverty with Microcredit, Oxford: Oxford University Press.

Koster, S. (2005) ‘Pakistan: UNICEF fears increased child labour in quake area’ [online], Relief Web, 6 December 2005 <http://reliefweb.int/report/pakistan/pakistan-unicef-fears-increased-child-labour-quake-area> [accessed 8 April 2015].

Kring, T. (2004) Microfinance as an Intervention Against Child Labour in Footwear Production in the Philippines, Working Paper No. 12, Melbourne: School of Development Studies, University of Melbourne.

Landmann, A. and Froelich, M. (2013) Can Microinsurance Help Prevent Child Labour? An Impact Evaluation from Pakistan, Microinsurance Research Paper No. 32, Geneva: International Labour Organization.

Landmann, A., Froelich, M., Midkiff, H., and Breda, V. (2014) Microinsurance and Child Labour: An Impact Evaluation of NRSP’s (Pakistan) Microinsurance Innovation, Social Finance Working Paper No. 58, Geneva: International Labour Organization.

Littlefield, E., Murdoch, J. and Hashemi, S. (2003) Is Microfinance an Effective Strategy to Reach the Millennium Development Goals? CGAP Focus Note No. 24, Washington, DC: CGAP.

Mayoux, L. (2000) Microfinance and the Empowerment of Women: A Review of Key Issues, ILO SFP Working Paper 23, Geneva: International Labour Organization, Social Finance Programme.

Mosley, P. and Rock, J. (2004) ‘Microfinance, labour markets and poverty in Africa: a study of six institutions’, Journal of International Development 16(3): 467–500 <http://dx.doi.org/10.1002/jid.1090>.

Nelly, B. and Dunford, D. (1999) Impact of Credit with Education on Mothers and their Young Children’s Nutrition: CRECER Credit with Education Program in Bolivia, Freedom from Hunger Research Paper No. 5, Davis, CA: Freedom from Hunger.

Nielsen, H.S. and Dubey, A. (2002) ‘Child labour in rural India: a micro-economic perspective’, The Indian Journal of Labour Economics 45(3): 479–96.

ProCredit (2012) Code of Conduct [pdf], ProCredit Bank <www.procreditbank-kos.com/repository/docs/Code_of_Conduct_eng.pdf> [accessed 8 May 2015].

Siddiqi, F. and Patrinos, H. (1995) Child Labour: Issues, Causes and Interventions, Human Capital Development and Operations Policy Working Paper No. 56, Washington, DC: World Bank.

Van Doorn, J. and Churchill, C. (2004) Microfinance against Child Labour: Technical Guidelines, Geneva: International Labour Organization, International Programme on the Elimination of Child Labour (IPEC) and Social Finance Programme (SPF).

World Vision (2009) Fact Sheet: Child Labour [pdf], World Vision <www.worldvision.com.au/libraries/dtl_fact_sheets/factsheet_child_labour.pdf> [accessed 8 May 2015].

Wydick, B. (1999) ‘The effect of microenterprise lending on child schooling in Guatemala’, Economic Development and Cultural Change 47(4): 853–69.

ILO Worst Forms of Child Labour Convention, 1999 (No. 182)

United Nations Convention on the Rights of the Child (CRC), 1989

ILO Minimum Age Convention, 1973 (No. 138)