Microfinance-led Strategies to Eliminate Bonded Labor

Publication Date: 2004
Published by: ILO (International Labor Organization)--Social Finance Unit
Document Type: Paper

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The need for financial services amongst the bonded-labor

This paper discusses the design issues that make financial services appropriate for the poorest sections of society. In particular, it discusses the efforts of the organization PEBLISA (Preventing and Eliminating Bonded Labor in South-east Asia) in this area.

The paper states that:

• PEBLISA began piloting microfinance – led schemes in Bangladesh, India, Nepal and Pakistan in 2000;
• In each country, it partnered with NGOs to develop and deliver a package of services designed to prevent debt bondage or to rehabilitate bonded laborers who have been officially released;
• It adopts an integrated, microfinance-led approach designed to address the cause of bonded labor;
• It designs diverse financial products and services that are suitable for the target group.

The paper is organized into two main sections:

• The first section describes in detail the conditions of the target markets for four of International Labor Organization (ILOs) partners in 3 regions.
• The second section summarizes the main microfinance lessons in serving the most vulnerable segments of the population.

The paper concludes that:

• The prevention of debt-bondage requires an integrated approach, combining microfinance with social awareness and skills training;
• Appropriate financial services need to be developed to cater to the specific characteristics of people vulnerable to bondage, with a strong emphasis on savings;
• The use of microfinance to prevent bonded labor, requires a new approach regarding repayment and sustainability.