SPECIAL REPORT: Are MFIs Making Child Labor Worse? Willing to Test a Risk-assessment Prototype? How Can Schools Boost Child Protection? Why Buy Disposable Sanitary Pads When You Can Sew Reusable Ones?

During Thursday’s “Risky Business” session at European Microfinance Week, Patricia Richter of the UN’s International Labour Organization (ILO) led the audience through a poll of audience members’ personal work histories and how they think microfinance institutions (MFIs) can help reduce child labor. The audience voted that MFIs should do more to “raise awareness among clients and households” about the issue. The ILO’s Minimum Age Convention of 1973, which has been ratified by 172 countries, specifies the youngest acceptable ages for various types of work, ranging from 12 years old for fewer hours of light work in developing countries to 18 years old for hazardous work in any country.

The motivations for adults to engage children in age-inappropriate work include: (1) the family’s need for more income; (2) social norms that encourage child labor or the passing down of skills from parents to young children; (3) insufficient educational opportunities; (4) market demand for manual labor that may be easier for workers with small hands; and (5) illness of a family member, resulting in a backlog of work or a need for replacement income.

One problem with a child filling in for a sick family member is that children who leave school to enter work very rarely return to school, even if that is the plan at first. MFIs can help in several ways beyond awareness-raising, for example by insuring the health and lives of families’ earners. Savings accounts can also help fund education or emergency living expenses in case of economic shock.

Alex Ahabwe of Opportunity Bank Uganda Limited (OBUL) discussed child protection efforts in his country. After the daughter of a client was raped on her way to school, OBUL became involved in working with school administrators to train them about child protection and to designate a point person within the school to work on improving the protection of students. It also established a toll-free number for reporting child abuse.

In addition to training administrators, OBUL has a program using songs, drama and poetry to encourage parents to keep their kids in school. Related products include savings clubs, free child savings accounts and 600 scholarships this year for brighter kids from poorer families.

Mr Ahabwe stated that child labor most often is a result of families needing more income. Group loans for farmers can help families reduce their need for child labor. Loans for school fees can help families keep their kids in school. When the distance to school is too far, OBUL’s loans to schools can enable the purchase of school busses or the construction of additional schools in areas of greater need. Once at school, the children can generate income by (working limited numbers of hours) gardening, weaving and baking. OBUL-funded schools also have sewing machines that students can use to make reusable sanitary pads, which is particularly relevant, as girls often leave school when they begin menstruating because they cannot afford sanitary products.

Amelia Kuklewicz of the Grameen Foundation described her organization’s Reducing Incidence of Child Labor and Harmful Conditions of Work in Economic Strengthening (RICHES) project, which is funded by the US Department of Labor. She showed the audience drafts of four of the 20 tools her organization is creating under the program. One of these tools is the “Child Labor Risk Assessment for Women’s Economic Empowerment Initiatives,” which consists of eight questions. Based on the number of points assigned to each multiple-choice answer, the MFIs’ risk exposure to child labor is assessed as low, medium or high.

Ms Kuklewicz argued that child labor is a global problem and that more data is needed to learn the extent of the problem. Within a given family, older children and female children, regardless of birth order, are more likely to be engaged in age-inappropriate work. She agreed with the other speakers that poverty is a driver of child labor as is a lack of sensitization to its consequences. She added that the informal sector and rural markets have higher incidences of child labor, indicating that MFIs have a role to play in reducing the phenomenon, as MFIs are disproportionately active in these areas. In addition to helping to mitigate child labor, MFIs need to be aware that their policies could exacerbate it. For example, Ms Kuklewicz argued that MFIs should be flexible with repayment schedules when families experience economic shocks. Collections practices should not be overly aggressive. Also, MFIs should be aware that helping a farm expand or a household enterprise to acquire a new piece of machinery is sometimes correlated with an increase in child labor. Another issue is that microenterprises may be hesitant to hire employees from outside the family due to the associated regulatory requirements or fear that employees will learn the family’s methods and then leave to engage competition against them.

As MFIs can help reduce child labor, Ms Kuklewicz said, so can microfinance investment vehicles (MIVs) support them in doing so. MIVs can encourage MFIs to prohibit child labor in their policies and loan contracts. They can also use rubrics such as the RICHES tools, which the Grameen Foundation is inviting MIVs to test now.

This feature is part of a sponsored series on European Microfinance Week, which took place from November 20 through November 22, 2019. The event is held each year by e-MFP, and MicroCapital has been engaged to promote and document the event on-site each year since 2012.

Sources and Additional Resources

European Microfinance Week 2019
https://registration.european-microfinance-week.eu/emw2019

MicroCapital coverage of this year’s European Microfinance Week and past years’ since 2012
https://www.microcapital.org/category/european-microfinance-week/