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Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
Microfinance for decent work   improving the working environment and addressing child labor
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Microfinance for decent work improving the working environment and addressing child labor

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  • Team needed to conductresearch in microfinance…-MFIs / practitioners (NWTF, PRIDE, ESAF)-econometricians (University of Mannheim)-facilitator (ILO)
  • => ILO engagedbecause clients of MFIs must copewithseriouswork challenges…Vulnerable to incomeshock – do not have safety net, no provisions for hard timesEtc.…summarising…=> Knowing about this reality of many MF clients, ILO wondered if MFIscan engage in improvingtheir clients «world of work» togetherwiththeir clients… ==> MF4DWWheredoesit come from:ILO Vision of Decent Work:“… opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and human dignity”Different people call itdifferentnames… decentwork,responsible finance, impact investment, social performance… but all mean more or less the samething – consider social elements in the business of extendingfinancial services=> Whatwas the « status quo »? Nextslide…
  • Diagnostic Stage (March 2008 to February 2009)-call for proposals,received feedback from some 60 interested MFIs-internal due diligence process: 25 MFIs selected, 22 MFIs in 20 countriesparticipated in the diagnostic stage-diagnostic tool (questionnaire, training of interviewers and enumerators, data entry form – surveymonkey)-result: per institution approx 200 clients interviewed (total 4,748 clients, 63% female and 37% male), analysis informed what is most pressing decent work challengeamong MFI clients
  • => Implement (decentwork) innovation and find out the impact of them on microfinance clientsGenerate knowledge on the contributions microfinance can make to the world of work (decent work)Demonstrate a business caseAdvocate for better policyWhatdidwe do?Phase I: Selection and diagnosisIdentification of decent work challenges among MFI clientsPhase II: Implementation and testingDeveloped strategy and innovationsBaseline surveyImplementation of innovationsFollow-up surveys every 6 monthsPhase III: Analysis, documentation & disseminationImpact analysis for each innovation Phase IV: Scale-upPromotion of effective strategies Capacity building of MF stakeholders=> But whywould an MFI beinterested in engaging in improving the « world of work » of their clients? Nextslide…
  • Veronicah, couldyouexplain a bit more on the very last resultduring the presentation? Webelievethatithinttowards an important point thatshouldberaised: While the MAFL seems to fulfilitspurpose of not diverting the funds to unproductive uses, itstillis an additionalloanthatincreases the repaymentburden of clients. The resultssuggestthatthisrepaymentburdencould not behandledequallywell by all clients.=> The lessonlearntis to improve the screening process in order to not over-burden clients withcredit.
  • We hope that similarly like-minded donors will join us in the next stage of MF4DW as we disseminate lessons learned from this innovative research. In the meantime, a phase II for the MF4DW project will be developed in order to begin disseminating key results, research methodologies, and lessons learned through regional and national MFI associations and networks, industry conferences and annual meetings, as well as through the ILO itself. As this new phase begins, kindly check the MF4DW homepage for additional developments
  • => If you have anyspecific question/s relating to the innovations presented, pleasehang on and keepthem for the poster session whereyouwillbe able to ask the presenter of the innovation directly.
  • Transcript

    • 1. Microfinance for Decent Work: Improving the Working Environment and Addressing Child Labour Experiences from ESAF, NWTF and Pride Microfinance Limited under an ILO experiment October 10, 2013
    • 2. What do we want to do in this session?     Introduction of panellists Guided questions and answers Opened questions and answers Poster session
    • 3. Panellists • Manuel Margate, Head Client Services Department, Negros Women for Tomorrow Foundation, NWTF, Philippines • Veronicah Namagembe, Managing Director, PRIDE Microfinance Limited, Uganda • Paul Thomas, Founder and Manager Director, ESAF Microfinance and Investments Ltd., India • Pia Naima Unte, Research Fellow, Chair for Econometrics, University of Mannheim, Germany • Craig Churchill, Chief, Social Finance Programme, International Labour Organisation, Switzerland
    • 4. Guiding Questions 1) 2) 3) 4) 5) 6) 7) 8) How did the project come about, what were its objectives? Why did you get involved? What was the research strategy? What innovation did you implement, why did you choose that particular innovation? What challenges did you encounter in implementing your innovation? What was the impact of that innovation on the livelihoods of your clients? What challenges did you encounter in carrying out the research work? How do you want to take this forward?
    • 5. Q1: How did the project come about and what were the project’s objectives?
    • 6. Q1: How did the project come about…?  Clients of microfinance institutions must cope with serious work challenges: Child Labour Occupational Safety and Health …and • vulnerability to income shocks • overindebtedness Informality
    • 7. Q1: How did the project come about…? Findings from a diagnostic survey showed that: Child labour (5-14 years) constituted 5% of total employment created 11% reported dangerous working conditions or injuries 54% of client’s business activities informal, 41% paid taxes 8% reported cross-borrowing and 14% had repayment issues 43% reported large unforeseen expense in preceding year (main reason: accident, illness) Only 2-3% used a form of insurance to cover unforeseen expenses (N= 4748)
    • 8. Q1: …what were the project’s objectives? IMMEDIATE GOAL: To measure the impact of innovations on the welfare of microfinance clients Action Research Programme Timeframe: 2008-12 16 partner-MFIs worldwide
    • 9. Q2: Why did you get involved?
    • 10. Q2: Why did you get involved?  Pride’s mission - ‘To provide financial solutions to micro, small, medium, and upscale entrepreneurs in rural and urban areas through sustainable operations that promote social and economic growth of Pride’s customers’.  MF4DW presented a good opportunity for Pride; • To identify the most pressing work-related challenges faced by our customers (which was overindebtedness) • Develop an appropriate innovation to address the challenge.
    • 11. Q2: Why did you get involved?  ESAF believed that most of its entrepreneur clients who lacked information and know-how to formalize their business could not grow further or expand their business.  Specific BDS aimed at „formalizing‟ the business would ensure better reach in marketing the products and also get linked to the firms, associations that would support them in enhancing their business.  Strategy, if successful, could be replicated in other branches where „growth oriented‟ clients are in need of such services.
    • 12. Q2: Why did you get involved?  Assumption: clients continuously access loans so they are doing well and have improved their living conditions  BUT diagnostic study showed that: 4% of NWTF sample clients could not cover HH expenses 4% could not cover business expenses by business income 17% had experienced difficulties in loan repayment 19% of NWTF sample clients had already had late payments 35% used loan from other sources (most common: other MFIs (47%), cooperatives (25%) and moneylenders (12%) • Among the clients that took loans from other providers, 12% said they used the loan to pay back another loan • 50% of client businesses were not registered • 50% had been confronted with a large unforeseen expense in the past year (accident/ illness (75%), catastrophes/typhoon (13%) and death/burial (6%)) • • • • •
    • 13. Q3: What was the research strategy?
    • 14. Quantitative impact evaluation: Why is it important?  Create knowledge on what innovations work for which purposes and which clients.  Also learn about unintended side effects.  Quantify innovations‟ impact.  Oppose costs and benefits of innovations.  Inform decision makers, give decision guidance for improving future innovations.  Show results for public spending.
    • 15. Quantitative impact evaluation: What are the methodological approaches? Type of Experiment Methodology Experimental: Randomized Control Trial (RCT) Quasi-experimental: Differences-in-Differences (DiD) Propensity Score Matching (PSM) Regression Discontinuity Design (RDD) Instrumental Variables (IV)
    • 16. Quantitative impact evaluation: How to learn from empirical evidence? MF4DW Financial Education/Entrepreneurship TYM NWTF AMK VCF Financial attitude + o + o Financial behavior + o o + Asset building o + + + Over-indebtedness o + o o Vulnerability o o o o
    • 17. Quantitative impact Evaluation: Basic facts on evaluation for MF4DW Action Research. • Control and target group. • Panel data: Baseline with up to four follow-up surveys. • Data sources: Questionnaires (clients) and Management Information Systems. • Assignment of innovation at branch level (Number of branches in samples: 2 to 29). • Typical evaluation methodology: DiD (sometimes supported by PSM). • 2 main assumptions: no contamination, common trend in outcomes
    • 18. Quantitative impact Evaluation: Basic idea of the DiD approach. Example: Clients with repayment difficulties (in %) Target group Control group (1) (2) (1)-(2) After (A) 12 13 -1 Before (B) 15 13 2 (A)-(B) -3 0 =-3 “The percentage of clients with repayment difficulties in the target group reduced by 3 percent as compared to the control group after the innovation.”
    • 19. Q4: What innovation did you implement, why did you choose that particular innovation?
    • 20. Q4: What innovation did you implement, and why? WHAT:  ESAF chose to work on „formalisation‟ of the business enterprises of “ready-to-grow” clients.  ESAF introduced awareness raising campaigns on the registration and formalisation processes and targeted Business Development Services (BDS) to its clients. WHY:  To facilitate access to government support schemes, access to bank loans, membership in business associations and access to markets.  The long-term objective: to improve the social and economic performance of ESAF clients, which will lead to their economic and social empowerment.
    • 21. Q4: What innovation did you implement, and why? WHAT:  Individual Emergency Fund (IEF) Modifications to Individual Emergency Fund (= savings account for emergency situations)  Entrepreneurship Training Entrepreneurship training of clients using ILO training modules “Generate and Start Your Business” WHY:  To answer to challenges in clients’ risk management strategies and overindebtedness
    • 22. Q4: What innovation did you implement, and why? WHAT  Introduction of a micro-leasing product - “Mortgage & Asset Financing Loan” Aim: reducing customers‟ over-indebtedness by financing them to acquire income generating assets WHY  Because the diagnostic study showed that: 38.7% took a loan to pay another loan therefore diverting loan money into other things not meant for the loan. 61% of the customers had been confronted with a large unforeseen expense
    • 23. Other MF4DW innovations… Formalization •Awareness raising and client sensitisation to benefits •Business development services Occupational Safety and Health •Client training on good working conditions and agreement on improvement plan •Specific loan product for work improvements Job Creation/ Women Empowerment •Organisational restructuring: new SME lending window •Client training on women„s empowerment Risk Management/ Overindebtedness •Insurance products: multi-risk for business loan clients, health, credit life •Leasing product •Financial education •Client risk management training Child Labour •Awareness campaign •Client training to increase production productivity
    • 24. Q5: What challenges did you encounter in implementing your innovation?
    • 25. Q5: What challenges did you encounter in implementing your innovation?  Individual Emergency Fund  High transaction costs for clients for withdrawals (only possibly at office)  Branch manager authorising withdrawal lead to neglecting other tasks  Entrepreneurship Training  Selecting eligible clients  Loan officers offering training lead to backlog of other work
    • 26. Q5: What challenges did you encounter in implementing your innovation?  Consequences of “Andhra Pradesh Crisis”: • • • • Speculations about impact of microfinance and effects on the lives of clients Restricted funding Reducing of loans => need to answer to clients WHY Sudden increase in dropouts among clients  Quick transition back to normality: many loyal and old clients retained their association and continued with ESAF  More than 90% of the clients participated in the programs conducted under this action research from beginning to end
    • 27. Q6: What challenges did you encounter in implementing your innovation?  Suppliers were not forthcoming in signing agreements to supply assets to the borrowers.  There was a slow buy-in process from staff who in-turn convinced customers to take on other loan products.  The extra processes involved in evaluating the microleasing product (i.e. transfer of property title into the borrowers name & inspection of asset) affected turnaround time. Purchase of land cases were the worst due to Uganda‟s land laws. This demoralized both the COs and clients.  Marketing/sensitization of the product was under-budgeted and yet it is crucial for client take-up.
    • 28. Other challenges…  External factors: regulation     Internal buy-in Time required for new product uptake Time required when an external partner is involved Transmitting new concepts to staff and clients (formalisation, occupational safety and health)  Staff turnover • contact person/team in MFI, • MFI staff implementing innovation (training)
    • 29. Q6: What was the impact of the innovation on the livelihoods of your clients?
    • 30. Q5: What was the impact on the livelihoods of your clients? “I am pretty sure that the GYB and SYB training was very timely for me and it was a need. The training benefitted me a lot. I just hope more training like these will come in the future.” Mildred bought the right to operate a small lot for salt making which can produce > 750 sacks of salt in one year valued at (U$D 2,616). She and her husband also acquired on instalment a motorcycle that her husband uses in their bread selling/delivery business.
    • 31. Impact Results: NWTF Entrepreneurship Training Strongest results: • Business profit increased by PHP 2‟000, ownership of motorized vehicles increased by 3.5% (positive impact on asset building) • Incidents of late repayment decreased by 4%, take out a loan to repay another loan decreased by 10% (positive impact on overindebtedness) • 5% increase in use of microinsurance to cover unforeseen expenses (positive impact on risk management) Inconclusive results: • Debt- and precaution-related financial attitudes • Financial behaviour/risk management
    • 32. Impact Results: NWTF Individual Emergency Fund (1)
    • 33. Impact Results: NWTF Individual Emergency Fund (2) Example: Some loan and repayment indicators Impact Borrow informal -0.068*** Borrow other formal -0.150*** Took loan repay other loan -0.222*** Repayment difficulties -0.068***
    • 34. Q5: What was the impact on the livelihoods of your clients? Increased Asset Base to enhance business growth. -se of landownership from 64% to 76% used for agriculture etc -se of motorcycle ownership from 47% to 61% used in transport business Increased Business Revenues & Reduced Business Failures. -se in people that covered their business expenses from 31% to 60% Increased household incomes -se in people that covered HH expenses from 47% to 66% -slight se in repayment difficulties from 8% to 12%
    • 35. Q5: What was the impact on the livelihoods of your clients? Strongest results:  Increased formalised status of microenterprise by 70%  Improved access to benefits, e.g. government schemes and subsidies  Improved social security coverage for clients and employees  Increased number of employees  Better marketing and delivery of products  Improved use and management of financial services (repayment of loans, ownership of separated bank accounts, new financial products)  Improved business management practices (accounting, invest.) 15 % increase  Increased business profit, household income and assets Little/ no impact:  No impact on annual turnover nor on investments in machinery  Access to electricity improved but not significantly
    • 36. Other impacts: Child Labour (1) Health and Accident Insurance  High demand for voluntary insurance  Claim frequency and amount higher in the innovation area  Possible sustainable financial product found that may reduce child labour while being financial attractive  Decrease in % of child labour and % of children in hazardous labour
    • 37. Other impacts: Child Labour (2) Health and Accident Insurance Strongest results: • Reduction in child labour variables – – – – – Child labour incidence reduced by 3 to 7 percent. Average hours worked reduced by 2.5 to 3.5 hours per week. Hazardous occupation reduced by 5.7 to 6.5 percent. Monthly earning through child labour reduced. Reduction for incidence of child labour and hours worked stronger for boys than for girls (however, child labour clearly more common among boys) Inconclusive results: • Schooling: There is no evidence that schooling increased.
    • 38. Other impacts: Child Labour (3) Health and Accident Insurance .15 .1 0 .05 Hazardous occupation Example: Hazardous Occupations (5 – 17) 0 1 2 Wave Treatment 3 Control 4
    • 39. Q7: What challenges did you encounter in carrying out the research work?
    • 40. Q7: What challenges did you encounter in carrying out the research work?  External interviewers neither familiar with microfinance operations nor locations of clients  Interviews only took place when loan officers present => change of interviewer to loan officers  Questionnaire not translated in local dialect which double interview time
    • 41. Q7: What challenges did you encounter in carrying out the research work?  The action research suffered from a drastic reduction in the sample base in both control and target groups, with higher drop out observed in the target group due to the Andhra Pradesh crisis.  Reduction in sample size made it difficult to observe significant differences between control and target group in: • income levels, • number of employees, or • financial improvement in client businesses.
    • 42. Q7: What challenges did you encounter in carrying out the research work? Research assistants and customers became impatient Questionnaires were too long High turnover of Research Assistants Too many research interviews Increased errors in interviews and data entry Customers became uncomfortable A few customers with repayment problems more time spent in retraining new staff. Thought Pride was bothering them too many times Hide/refused to talk to Pride
    • 43. Q7: What challenges did you encounter in carrying out the research work (1)? Criteria for credible evaluation: (not always met)  Enough clients in target and control group  Baseline and follow-up surveys  Several follow-up surveys  Enough target /control clusters for randomization  Data of sufficient quality
    • 44. Q7: What challenges did you encounter in carrying out the research work (2)?  Researchers not involved from the very beginning  Problems with individual identifiers  Attrition in panel data  Not all important questions included at baseline
    • 45. Other challenges…  Understanding of research design • Concept of target and control group • Sampling • Interviewing the same clients over time • Business case  Staff turnover: research staff  External factors (political unrest, natural disasters...)  Client drop-out  MIS
    • 46. Q8: How do you want to take this forward?
    • 47. Q8: How do you want to take this forward?  Developing a sustainable BDS model which supports the ready to grow clients in other branches of ESAF who have shown readiness to formalize their business and also expand and diversify  The strategy shall be put into action along with the element of research so that the impact could be studied.  Other entities of ESAF such as the producer company, Retails as well as the SHG federation shall play a key role in the new model.
    • 48. Q8: How do you want to take this forward?  Rolled out the product to all Pride branches and PAR was at 3.9% as at end of August 2013. It will be integrated with the branchless banking channels still under development.  Monitor and modify it according to market needs without losing the objective of “reducing customers’ over-indebtedness”
    • 49. Q8: How do you want to take this forward?  Entrepreneurships training NWTF has decided to incorporate the GYB into the Compulsory Group Training to ensure that all clients upon entry must have business ideas. The SYB may be conducted only to clients who have concrete products that require a Business Plan.  Individual Emergency Fund Follow-up research with University of Mannheim
    • 50. Q8: How do you want to take this forward?  Scale-up • Dissemination of lessons learnt and keys results • Promotion of effective strategies • Capacity building of MF stakeholders  Additional research www.ilo.org/socialfinance
    • 51. Q&A Do you have any general questions to the panellists?
    • 52. …Poster Session…

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