Microfinance for Decent Work: Action Research

How can microfinance institutions (MFIs) improve working conditions, contribute towards job creation, and assist in reducing child labour among their clients? Should MFIs have an interest in addressing Decent Work issues? The Social Finance Programme of the ILO intends to address these questions through an experimental action research project (2008-2012) in partnership with microfinance institutions from around the world.

Summary

Conditional loans, credit paired with financial education, incentives such as interest rate rebates, linkages to social partners and NGOs, as well as the provision of microinsurance, emergency loans or savings may be effective tools for reducing child labour, decreasing vulnerabilities, increasing formality and creating incentives to improve working conditions among microfinance clients.
In other words, access to a particular financial and/or non-financial microfinance product may enhance the welfare of clients and promote a “double-bottom line” for MFIs, all while mainstreaming the ILO’s Decent Work Agenda.

Objective

The Microfinance for Decent Work: Action Research programme will explore the linkages between microfinance and Decent Work with 16 microfinance institutions, testing adaptations to products, services, and deliver techniques that result in tangible increases in decent work for clients. Questions guiding this investigation include:

• What Decent Work issue (i.e. child labour, vulnerability, etc.) is the most pressing for clients?
• Can this issue be addressed by a microfinance institution?
• How can an MFI innovate to address this situation?
• What are the innovation costs and benefits for the clients and for the institution?

Timeline

The Microfinance for Decent Work action research includes the following phases:

1) Selection, introduction and diagnosis phase (April 2008-February 2009)

• Expression of interest, selection and introduction of interested MFIs to the project;
• Client survey and identification of areas for Decent Work improvement; and
• Decision reached on which Decent Work area each MFI will address through an innovation.

2) Implementation and testing phase (March 2009-November 2011)

• Development of strategies and interventions to address Decent Work areas;
• Baseline survey, implementation of innovations at target branches, follow-up surveys to monitor the impact and effectiveness; and
• Regular reporting (financial & narrative) and potential adaptations of the intervention.

3) Analysis, documentation and promotional phase (January 2010-June 2012)

• Final impact analysis of each innovation;
• Cost/benefit analysis at institutional level; and
• Documentation and promotion of effective strategies.

Where we work

The MF4DW action research project is operational in the following 14 countries: Honduras, Peru, Tajikistan, Kyrgyzstan, Jordan, Mali, Nigeria, Uganda, Burkina Faso, Cambodia, Viet Nam, Philippines, India and Pakistan.