Finance and child labour

The ILO’s Global Estimates of Child Labour show that on any given day in 2020, 160 million children were victims of child labour. Child labour is nothing to be taken lightly; child labour is depriving children of their childhood, their potential and dignity, and harming their physical and mental development. As such, it is a severe human rights violation. While the number of children in child labour has declined significantly from 245 million in 2000, 79 million still worked in hazardous child labour in 2020.

The financial sector should be concerned, as it can potentially fuel the demand for child labour. Growing microenterprises may resort to unpaid family labour, including underage children, to keep up with business demands. Initially missing school at times, children might later drop out of school, and evidence shows that they hardly return. A vicious cycle that perpetuates intergenerational poverty.

In sharp contrast, the financial services industry has many opportunities to positively contribute to eliminating child labour. All stakeholders, including banks and microfinance institutions, insurers and investors, can actively engage. Most importantly, before engaging blindly, stakeholders should understand what causes child labour in specific geographic areas and value chains. Intervention strategies will only be successful if they indeed address underlying causes, as we explained in our article "Responsible finance and child labour: quo vadis microfinance?". The below image summarises our yearlong experience and might inspire you to be engaged!

 

Social finance work on the topic:

• Financial inclusion. Through our action research programme Microfinance for Decent Work, Social Finance worked with three microfinance institutions to address child labour among their clients. In Nigeria, LAPO launched an awareness campaign against child labour coupled with a loan for school expenses. In Pakistan, NRSP extended its health insurance coverage. In addition, in Mali, Nyésigiso developed training for clients on entrepreneurship, financial management and child labour. While each innovation changed client behaviours, the health insurance in Pakistan had the most robust effect and reduced child labour by 7 percentage within 2.5 years (NRSP’s impact evaluation). More results can be found in our synthesis report. Currently, we are working in a number of African countries towards accelerating action for the elimination of child labour in supply chains (ACCEL). In Côte d’Ivoire, we have conducted field research to understand the root causes of child labour in the cocoa value chain and identify the most appropriate financial services to address them. The finance sector is moving from a cocoa-based and credit-driven approach to a more holistic and client-centric approach. In 2020, the social finance component of the ACCEL project will also focus in Uganda and Malawi in the coffee and tea value chains.
• Sustainable Investing.
  • Through our work with the Africa Agriculture and Trade Investment Fund, as well as the Common Fund for Commodities, we have developed tools that enable investors to integrate child labour screening into their investment decisions. Technical assistance attached to investments and tailored to smallholder farmers holds great potential to increase awareness and offer alternatives to engaging child labour, while increasing productivity and thus income for smallholder households.
  • Together with Grameen Foundation’s RICHES project (Reducing Incidence of Child Labour and Harmful Conditions of Work in Economic Strengthening Initiatives) we developed and tested tools to assist practitioners in evaluating safety and health risks to adults and children within women’s economic empowerment initiatives. Those tools include guides that target investors and microfinance institutions and provide advice on how their internal processes, products and services can mitigate the risk of child labour or harmful working conditions within their lending operations and investments.
  • In 2021, we conducted a study to assess the responsibility and legal obligations of financial sector actors in eliminating child labour in the cocoa supply chain in Côte d’Ivoire. It focused on actors that finance cocoa transactions at the level of exporters, buyers and cooperatives. This Social Finance Brief assesses current practices and the potential role of financial sector actors in addressing child labour in this context.
• Pushing the frontier. Since the beginning of 2020, the ILO is conducting a feasibility study of an impact bond or other innovative financing mechanism to address child labour in the cocoa value chain in Côte d’Ivoire. In the fight against child labour, we need to think out of the box and consider innovative forms to collaborate in order to achieve SDG target 8.7: end child labour in all its forms by 2025.

Broader ILO agenda on the topic:

• Since 2013, ILO’s Fundamental Principles and Rights at Work Branch (FUNDAMENTALS) houses the ILO’s International Programme on the Elimination of Child Labour (IPEC). For many year, IPEC had been the largest programme of its kind globally, with partners including employers’ and workers’ organizations, international and government agencies, private businesses, community-based organizations, NGOs, the media, parliamentarians, the judiciary, universities, religious groups and, of course, children and their families, all united in their fight to abolish child labour. In 2019, the IPEC+ Global Flagship Programme was launched with the objective to provide ILO leadership in global efforts to eradicate all forms of child labour by 2025 and all forms of contemporary slavery and human trafficking by 2030.
• The ILO serves as the secretariat to Alliance 8.7, a global partnership to achieving target 8.7 of the Sustainable Development Goals. The Alliance brings together actors to collaborate, strategize, share knowledge and ultimately accelerate progress so we can deliver on this commitment by 2030. In 2020, it counts over 400 partners and 37 pathfinder countries that commit to try new approaches and collaborate with others.