microfinance for decent work a global action research european microfinance week 2010

[email protected] www.e-mfp.eu

Microfinance for Decent WorkA global action research

European Microfinance Week 2010

Bernd Balkenhol


Clients of microfinance institutions must cope with serious work challenges

Child Labour Working Conditions Informality

…and • vulnerability to income shocks• Over-indebtedness• isolation, no voice


Hypothesis 1: Financial institutions produce tangible work-related benefits to their clients.

Hypothesis 2: In the long term this is also good for the financial institution’s bottom line.

Hypothesis 3: There is a case for public policy to support financial institutions that go for decent work of their clients.

Assumptions


16 Partner MFIs


ASIAASIA CENTRAL CENTRAL ASIAASIA

MIDDLE EAST MIDDLE EAST AND AFRICAAND AFRICA

LATIN LATIN AMERICAAMERICA

CHILD LABOURCHILD LABOUR NRSP, Pakistan LAPO, NigeriaNYESIGISO, Mali

INFORMALITYINFORMALITY ESAF, IndiaIMON, Tajikistan

RCPB, Burkina Faso

SUBOPTIMAL SUBOPTIMAL WAGE WAGE EMPLOYMENTEMPLOYMENT

BAI TUSHUM, Kyrgyzstan

VULNERABILITY, VULNERABILITY, OVERIDEBTEDNEOVERIDEBTEDNESSSS

TYM, Vietnam VFC, Cambodia AMK ,Cambodia NWTF, Philippines

PRIDE, Uganda

CONFIANZA, PeruBANCOVELO, Honduras

UNSAFE UNSAFE WORKING WORKING CONDITIONSCONDITIONS

BASIX, India

Al AMANA, Morocco TAMWEELCOM, Jordan

Work-related problem

areas


What MFIs do to address to make work for their clients

1. Risk Management & Over-Indebtedness Financial Education of Trainers and Clients (AMK & VFC) Risk Mgmt. Training on Emergency Fund Product (NWTF) Introduction of Micro-Insurance & Training (Confianza, TYM &

Bancovelo) Entrepreneurship Training (NWTF)

2. Child Labour Extension of Micro-Insurance Product to Family (NRSP) Education Loan for Associated School Fees (LAPO) Training Package combining BDS, WIND, and CL awareness

components (Nyésigiso)


Who are these clients? N= 4748

Findings from the Diagnostic Tool:

90% reported to be “self-employed”; 50% have at least one employee and appear to have created nearly

8000 jobs; 54% of client’s business activities are classified as informal with only

41% of clients reportedly paying taxes; 483 child laborers were found among client’s employees; 11% reported dangerous working conditions or injuries; 8% reported cross-borrowing and 14% had repayment issues; 43% reported a large, unforeseen expense in the preceding year; Only 2-3% use a form of insurance to cover unforeseen expenses; and 73% do not belong to any association


Impact indicators

Decent Work Area

Innovation Common DW Indicators

Innovation Specific

Indicators

Impact

Child Labour

• School fees loan

• GERME/ WIND/ CL training

• Extended MI (health)

• Incidence of Child Labour• # of missed days of school• # of days working• # of days in school• HH income

• PPI Score• MI uptake• Use of MI• Exposure to trng. Materials• Attendance records• Changes in opinion on CL

Child Labour

Risk Management & Over-indebtedness

• FE of trainers/clients• Risk Mgmt. Training on Emergency funds• Intro. Of MI and training•Entrepreneurship trainning

• Ranking of unforeseen expenses• Means to cover unexpected expenses• Financial behavior• Planning horizons

• Accumulation of physical assets • Accumulation of financial assets (i.e. savings)•Renewal of MI•Claim ratio for MI• Sustainability of business venture

Vulnerability


What data is used to create these impact indicators?

Using Child Labour as an example:Common DW

IndicatorsData from surveys Common DW

IndicatorsData from surveys

Incidence of CL

• Age of child•Type of activity •Hours/day•Days/week

PPI Score

•Combination score from 13 questions posed by Grameen’s Progress out of Poverty Index

# of missed days

of school

•# of days/month your child misses school•Reasons why child misses school

MI uptake

•MIS reports Insurance. Product•Client acknowledges taking the product

# of days working

•Days/week child engages in work activityCross-checked with:•# of days/month your child misses school

Use of MI•# claims reported by NRSP•Clients claims use of product•Client describes incident covered

HH income

•Client reports monthly income and expenses•Client reports assets and business expenditures

Exposure to

Training Materials

•Client reports observing CL materials•Client attitude towards child work changes•Attitude profile questions


How do these indicators illustrate measurable and significant impact:

Randomization Research samples have been stratified to match the general portfolio of each MFI; In some cases, a specific type of client (with a certain financial product), gender, or

location was necessary; in which case, stratification occurred within this “sub-sample”.

Control and Treatment groups To control for external factors possibly impacting the research, Treatment and

Control groups were used, wherein innovations were offered to the Treatment group only.

In this way, significant differences between groups can be causally linked to the innovation.

Panel Data Sets Each MFI begins research with a baseline survey; subsequently, after

implementation of the innovation, surveys are conducted every six months to further inform research on trends and the direction of the data over multiple data points.


Indicators to signal changes in formality status

Knowledge about formality Registration Book keeping Bank account Tax payment Firm or asset insurance Membership in an association Participation in government promotion schemes


What do clients want? Design of loan products: “Increase credit ceiling…” “need more loans…” “Credit (increase limit)…”

Information on accident prevention: “Awareness, loan, saving, insurance…” “AWARENESS” “Yes MFI support to invest and improve working conditions” “awareness, training and insurance” “AWARENESS, MORE LOAN AND FINANCIAL SUPPORT.” “LOAN FOR CONSUMPTION PURPOSE ,SAVING AND INSURANCE” “Help improve the working conditions” “Living condition could be improved if continues providing MF services” “Awareness and capacity building” “awareness and information about income generating opportunities”


What do clients want?Advice on expansion: “To invest and expand activity. This will increase income and

improve livelihood” “To help expand my work” “Help me increase my work” “Increase loan amount so that I could expand my work” “Training in vocational skills” “Linkages with factories for work and information about

business opportunities “ “Give us some technical assistance and facilities” “Vocational skills training for son (mason)”


Next steps March 2011 - June 2012: Impact Analyses

finalization of panel datasets for each participating MFI; an econometric final impact analysis for each dataset.

June 2012: Dissemination Knowledge-sharing event with ILO constituents, SFN

members, and representatives from MF industry and participating MFIs;

MF4DW Best Practices & Case Studies; MF4DW monograph; Training Courses; Tracking tool (G 20 GPFI).


Questions?

microfinance for decent work a global action research european microfinance week 2010

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