DEBT FOR JOB SWAPS

Almost all countries participating in the HIPC initiatives have put micro-finance high on the list of measures in their Poverty Reduction Strategy Papers (PSRP): directing financial resources to micro-finance, either through an allocation or bidding process to micro-finance institutions directly or via nation-wide umbrella funds that refinance micro-finance institutions, like Social Funds. In both instances there is high expectation that such a strategy will make a tangible dent on the level and vulnerability of incomes of the self-employed and those working in small enterprises. The sound practices that flow into the design of debt-for job swaps are: 

• market-oriented pricing to ensure sustainability of the intermediary, 

• offer a range of financial services: not just loans but also savings and insurance,  

• do not target your clientele too narrowly, allow for cross-subsidization

• the poor save and expect safety to protect them against risk,

• allow for a variety of institutional models, from downscaling of bank operations, to upgrading of NGOs, to networking of member-based MFIs,

• poverty targeting and monitoring is indispensable to keep track of changes in incomes and employment,

• micro-finance can boost selfemployment, but also wage employment in dynamic micro enterprises, this needs to be reflected in the range of services.  

This ILO initiative DEBT FOR JOB SWAPS pulls together these and other practical conclusions from years of social fund operations, in which the ILO was also involved, to advise the stakeholders in Mali, Cambodia, Nepal, Tanzania, Honduras on how to improve the performance of MFIs in terms of poverty outreach, impact on wage employment, self-employment and financial sustainability.