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[IWS] ILO: PREVENTION AND ELIMINATION OF BONDED LABOUR: THE POTENTIAL AND LIMITS OF MICROFINANCE-LED APPROACHES [8 January 2015]

IWS Documented News Service

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School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor--------------------Stuart Basefsky

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International Labour Organization (ILO)

 

PREVENTION AND ELIMINATION OF BONDED LABOUR: THE POTENTIAL AND LIMITS OF MICROFINANCE-LED APPROACHES [8 January 2015]

by Smita Premchander, V. Pramella and M. Chidambaranathan

http://www.ilo.org/global/topics/forced-labour/publications/WCMS_334875/lang--en/index.htm

or

http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/publication/wcms_334875.pdf

[full-text, 78 pages]

 

This paper, authored by S. Premchander V. Prameela and M. Chidambaranathan of the Indian NGO SAMPARK, documents the learning processes of the NGOs and microfinance organizations that experimented with different approaches to microfinance and bonded labour. It highlights the importance of adopting a holistic and integrated approach, including social, economic, political and judicial interventions at individual, household, community and higher levels. In making the paper available to a wider audience, we hope to stimulate broader debate and experimentation on how microfinance can most effectively contribute to ending bonded labour.

 

Contents

Page

Foreword .................................................................................................................................................. iii

Acknowledgements ................................................................................................................................. vii

Executive summary .................................................................................................................................. ix

List of acronyms ..................................................................................................................................... xiii

1. Introduction ..................................................................................................................................... 1

1.1. Causes and nature of bondage .............................................................................................. 2

1.2. Methodology ......................................................................................................................... 7

1.3. Key assumptions and questions regarding microfinance and bonded labour ....................... 7

2. Targeting ......................................................................................................................................... 8

2.1. Why target? ........................................................................................................................... 8

2.2. Targeting criteria and methods ............................................................................................. 9

2.3. Challenges of targeting bonded labourers ........................................................................... 13

3. Product menu and design .............................................................................................................. 14

3.1. Products offered through bonded labour and extreme poor projects .................................. 15

3.1.1. Grain banks .............................................................................................................. 15

3.1.2. Compulsory savings .................................................................................................. 16

3.1.3. Flexible savings ........................................................................................................ 16

3.1.4. Loan products ........................................................................................................... 19

3.1.5. Micro Insurance ....................................................................................................... 22

3.1.6. Micro leasing ............................................................................................................ 24

3.1.7. Asset transfers .......................................................................................................... 25

3.2. Differentiated products for the extreme poor ...................................................................... 26

3.3. Variation according to type of enterprise ............................................................................ 27

3.3.1. Variation according to poverty level of household................................................... 29

3.3.2. Differentiated insurance products ............................................................................ 29

3.3.3. Summary ................................................................................................................... 30

3.4. Differentiated performance indicators ................................................................................ 31

3.5. Can the poorest graduate to commercial microfinance? ..................................................... 32

3.6. Microfinance for release from bondage .............................................................................. 34

3.7. Addressing the need for livelihoods finance ....................................................................... 37

4. Institutional arrangements ............................................................................................................. 38

4.1. Models at the grassroots level ............................................................................................. 38

4.1.1. The Grameen model ................................................................................................. 39vi

4.1.2. The village banking (VB) model, Nepal .................................................................... 39

4.1.3. The SRG model, Nepal .............................................................................................. 41

4.1.4. SHG bank linkage and cooperatives, India .............................................................. 43

4.2. Comparing group models .................................................................................................... 43

4.3. Models of microfinance delivery organization ................................................................... 46

4.4. Key institutional issues ....................................................................................................... 47

4.4.1. Graduation to mainstream credit organizations ...................................................... 47

4.4.2. Analysing financial and social performance ............................................................ 48

4.4.3. Shifting from one model to another is difficult ......................................................... 49

4.4.4. Strong facilitation is needed ..................................................................................... 49

5. Lessons and conclusions ............................................................................................................... 50

5.1. Financial strategy ................................................................................................................ 50

5.2. An integrated approach ....................................................................................................... 51

References ............................................................................................................................................... 57

 

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This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

 

 

 

 

 

 

 

 

 




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