The document discusses a project between several microfinance institutions and the ILO to implement innovations aimed at improving working conditions and addressing child labour through quantitative impact evaluations, with challenges including sample size reductions due to economic crises, translation issues, and high researcher turnover.
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Microfinance for decent work improving the working environment and addressing child labor
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
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%))
•
•
•
•
•
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
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
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
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
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
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.