Microfinance as an Intervention against Child Labour in Footwear Production in the Philippines

This paper analyses the use of microfinance as an intervention tool against child labour in the footwear sector in Biñan, Laguna Province, the Philippines. Based on a microfinance programme implemented as part of an ILO/IPEC project to eliminate child labour in the footwear sector, the study focuses on the structure of the sector and the division of labour within the households and analyses how these factors contribute to child labour and the impact of microfinance on children’s involvement in the sector. The footwear production is largely household based and characterised by being labour intensive with a traditional involvement of children from a very young age. While the nature of the children’s work depends on their gender and age, they are all exposed to the hazards of the work particularly from the fumes of the adhesives used. The sector has highly seasonal labour demands, and there are few alternative sources of employment or income in the area. The structure of the sector limits the household based producers’ profits, forcing them instead to rely on production volume to make ends meet. As a result, the effective elimination of child labour in the production would cause the household to forego income during peak season that is essential for them to meet expenses during the months with low production. While microfinance is intended to compensate for this income loss by enabling the households to create alternative income sources, limited opportunities restrict its impact and its ability to address the causes of child labour. 1 The author would like to thank the ILO/IPEC project in Biñan, the staff of the Open Heart Foundation, Punla Sao Tao and Rexander Fabellon for all their help and assistance. Working Paper No. 12 – Microfinance as an Intervention Against Child Labour in Footwear Production in the Philippines, Thomas Kring Melbourne University Private Working Paper Series 2 Introduction Poverty is widely accepted to be one of the main causes of child labour with children working to supplement family income or to assist in the family business. In some cases the children’s work is compatible with attending school and enable some of them to finance their own education at least in part. However, disadvantaged families often find themselves unable to meet the direct or indirect cost of children’s schooling, frequently resulting in the children working instead (Boyden et al 1998; Ravallion and Wodon 1999; ILO 1998). Furthermore, the children’s contribution in cash or labour, however small, often constitutes a significant part of the household income and are in some cases essential in making micro and small enterprises viable, thereby raising the opportunity cost of schooling. The effective elimination of child labour would therefore directly result in a fall in income for the affected households (Anker and Melkas 1996; Grootaert and Kanbur. 1995). One approach for compensating for the loss in household income has been providing loans through microfinance programmes to start a micro or small enterprise, a method also applied by a number of ILO/IPEC projects targeting working children. The strength of microfinance programmes is their apparent ability to reach the poor, particularly women, and raise the participants out of poverty (Kabeer 2001; Khandker 1998). The impact of microfinance has however been questioned by, among others, Goetz and Gupta (1996) and Hulme (2000). Some researchers suggests that children’s workload could be increased by microfinance (Boyden et al 1998:131; Indriyanto et al 1996), while others find that microfinance has a positive impact on the well-being of families and the aspirations for their children’s education (PanjaitanDrioadisuryo and Cloud 1999). This raises the question of what effect microfinance would have as a tool against child labour in labour intensive household based productions such as the footwear sector in Biñan.