Paper
Reducing Vulnerability Through Microfinance in Child Labor Communities
Can microfinance reduce child labor?
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5 pages
This paper explores the high incidence of child labor in the Philippines and the positive effects of microfinance on this practice. It suggests the integration of microfinance services with other interventions to reduce the vulnerability of the poor and to increase their household income.
The paper illustrates the case of the Punla Community Microfinance Strategy in the Philippines. The key features include:
- Converting child labor families into savings and credit groups;
- Encouraging families to invest their own financial assets in micro enterprises;
- Including voluntary savings and a fixed savings product for the youth members in the products offered;
- Having no provision of external credit funds;
- Forming linkages with a formal microfinance institution after a full operational year;
- Increasing household asset status due to a high savings and credit discipline.
Finally, the paper enumerates factors that can help in the replication of directed microfinance:
- Integrating microfinance with other interventions for an effective action program;
- Building a common understanding amongst all partners about microfinance;
- Using proven microfinance technologies and systems validated by the market needs;
- Training field staff;
- Having twin action at national and grassroots levels;
- Having a growing microfinance sector and a conducive policy environment.
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