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