ILO Study: MFIs Are ‘Pathways to Decent Work’

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Feb 2015
Global, February, 18 2015 - The ILO, which collaborated with 16 microfinance institutions in emerging economies, tested a range of approaches to foster social impact through the delivery of innovative financial and non-financial services.

In India, the spate of suicides in 2010 by women in Andhra Pradesh may have hurt the reputation of microfinance institutions (MFIs), but a new research report sees some positive impact made by such institutions in reducing child labour and pulling out women from informal work in emerging economies, such as India and Pakistan.

According to a research study by International Labour Organisation (ILO), MFIs can be ‘pathways to decent work’ if they have a clear target of identifying an issue and then focussing on helping clients. The ILO, which collaborated with 16 microfinance institutions in emerging economies, tested a range of approaches to foster social impact through the delivery of innovative financial and non-financial services.

Increased awareness

A majority of MFI clients are vulnerable women from the informal economy.

For example, Rukhiya owns and runs Punchiri catering unit in the Vadanapilly area of Thrissur. She has been doing this since over eight years, but her unit is still unregistered.

It is women like her that MFIs can reach out to, says the ILO research study, which collaborated with BASIX India and ESAF India and found that interven- tions increased awareness about formalisation by 93 per cent, which included registration of business, opening of bank accounts, getting government benefits, among others.

In India, training on productivity and occupational safety and health resulted in 11 per cent reduction of work-related injuries and enhanced productivity led to an increase in monthly net income of $37 (roughly ?2,500).

Mixed impact

The coverage of the entire family by a micro-insurance product decreased child labour incidence by almost 7 per cent and lowered the risk of hazardous occupations by 5 to 6 per cent in Pakistan, says the report.

Overall, the impact of MFIs on women was, however, mixed. The study found that while there were greater opportunities for women who were able to interact in markets, increase their skills and enhance their intra-marital status, there were also instances where women obtained loans but without having much say or control over their use. India, according to one estimate, has about 3,000 microfinance groups lending close to ?20,000 crore to 28 million people, including a large number of women.

The large profit margins and rapid rate of growth of the sector has also attracted corporate MF institutions.

While the previous UPA government had tried to introduce a Bill to regulate MFIs in India, it lapsed with the dissolution of the 15{+t}{+h} Lok Sabha in 2014.



 

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