Microfinance & child labor

I’ve seen some interestingly conflicting reports lately on the impacts of microfinance upon education.  Someone directed me to one which showed that microcredit clients were more likely to pull their children out of school to do the domestic work which parents gave up in order to run their microcredit-supported businesses, but I’ve also seen another which found that the children of microcredit clients were actually more likely to be in school, as their parents could more easily pay their school fees.  I can think of several different ways in which these elements of small businesses, children’s labor, and schooling could interact:

  • Maybe the parents who pulled their children out of school to cope with successful businesses worked far from their homes and didn’t have the time to handle both business and domestic work, while successful clients whose children stayed in school worked closer to home and were more easily able to balance the two.
  • Perhaps there’s some sort of U-shaped curve of parental income (as supported by microcredit) and the likelihood of children’s schooling.  Parents who are suddenly busier with work than previously, but are still too poor to afford to hire domestic help, may be the ones more likely to pull their children out of school – the low point of the U.  Parents whose businesses are quite successful, on the other hand, might better be able to pay for both domestic help and school fees.
  • This is probably also correlated with whether parents were successfully able to repay their loans.  There must be some exogenous shocks to parental earnings that affect both their ability to repay their loans and their financial capacity to send their kids to school – drought, for instance.  So one might find microcredit clients pulling their kids out of school for reasons unrelated to their loans.

On an unrelated note, I came across a sentence I totally loved whilst rereading Understanding Poverty recently – “these essays presage what we feel is an important new trend in the economics of poverty: a willingness to take the social and psychological environment of the poor seriously.”  This is probably the most fruitful interaction possible between qualitative and quantitative disciplines in the study of development – a genuine respect for the psychosocial lives of the poor.

2 thoughts on “Microfinance & child labor

  1. Hi Meike,

    Sorry for the slow reply! I’m going to add references to all of my posts as soon as I have time – hopefully in the next few weeks – and I’ll let you know when I do. Thanks very much for reading along!

    Cheers,

    Rachel

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  2. Dear Rachel,

    What an interesting webpage you have. I am currently researching microfinance and its potential impact upon human capital investment for my Master thesis. Do you have any links to the reports mentioned above? Maybe I’ve already read them but you never know. Thanks in advance! Kind regards,

    Meike K.

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