Microfinance for Decent Work: Action Research

Did you know that enterprises loans can be used to encourage small businesses to formalize? Or that modifications to an insurance product can prevent child labour? And significant improvements to occupational safety and health can be achieved by a microfinance institution?

The Social Finance Programme of the ILO explored these dimensions through an experimental action research project (2008-2012) in partnership with microfinance institutions from around the world. The results are detailed in the individual impact assessments as well as a through synthesis report presented here.


Credit paired with financial education or entrepreneurship training, awareness raising campaigns together with business development services on formalization, introduction of new loan products, training on productivity, child labour and OSH as well as the provision of microinsurance and emergency loans may be effective tools for reducing child labour, decreasing vulnerabilities, increasing formality of enterprises, enhancing business performance and creating incentives to improve working conditions among microfinance clients.

In other words, innovations tested if access to a particular financial and/or non-financial microfinance product have enhanced the welfare of clients and promote a “double-bottom line” for MFIs, all while mainstreaming the ILO’s Decent Work Agenda. To carry out such a challenging task, from 2008 to 2012 the ILO collaborated with 16 microfinance institutions to test a range of approaches to foster social impact through the delivery of innovative financial and non-financial services in the framework of the “Microfinance for Decent Work” (MF4DW) action research programme.

The programme was implemented in a three-step process. First, the selected MFIs conducted an internal diagnostic to identify the most pressing work-related challenges among their clients. Informed by these diagnostic results, the institutions developed an innovation to address the decent work deficit that most affected their clients, and started implementing the innovations in a pilot study. Lastly, the impact of these innovations on clients was tracked through a series of data collections.

By sharing the findings and experiences from this action research project, the ILO hopes to encourage microfinance practitioners, researchers, policymakers and donors to undertake intentional innovations, and evaluate their impact, because it is a promising way to enhance results for the betterment of all stakeholders involved.


The Microfinance for Decent Work: Action Research programme explored the linkages between microfinance and Decent Work with 16 microfinance institutions, testing adaptations to products, services, and delivery techniques that could result in tangible increases in decent work for clients. Questions guiding this investigation included:
  • What Decent Work issue (i.e. child labour, vulnerability, etc.) is the most pressing for clients?
  • Can this issue be addressed by a microfinance institution?
  • How can an MFI innovate to address this situation?
  • Does it require a modification in service delivery?
  • What are the innovation costs and benefits for the clients and for the institution?


The evaluation of the innovations’ impact was mainly conducted using the difference-in-differences (DiD) methodology, which compares changes before and after the implementation of the innovation in the control and treatment groups.
Some remarkable results by clusters include:
  • Child labour: the coverage of the entire family by a microinsurance product decreased child labour incidence for boys and girls by almost 7 per cent and lowered the risk of hazardous occupations by 5 to 6 per cent in Pakistan.
  • Formalisation: interventions increased the awareness about formalisation by 93 per cent and formalisation itself by roughly 70 per cent for clients in India.
  • Vulnerability: emergency savings reduced taking a loan to repay another loan by 22 per cent, plus resulted in a 7 per cent drop in repayment difficulties and a generally lower level of indebtedness of clients in the Philippines.
  • Business Performance: the package of women entrepreneurship training and start-up loans resulted in increased self-employment and business expansion for female microentrepreneurs in Tajikistan. In India, training on productivity and occupational safety and health resulted in an 11 per cent reduction of work related injuries and enhanced productivity.
The results highlight one key message: that MFIs can achieve desired results if they identify an issue and then focus on that area to help their clients.

Access the Synthesis Report in English, French and Spanish

You can also check the results by MFI here.


The Microfinance for Decent Work action research included the following phases:

Click on the timeline above for more details.

Where did the project take place

The MF4DW action research project was operational in the following 14 countries: Honduras, Peru, Tajikistan, Kyrgyzstan, Jordan, Mali, Nigeria, Uganda, Burkina Faso, Cambodia, Viet Nam, Philippines, India and Pakistan. Click on the countries on the map for more details.

Financiera Confianza - Peru Banco Popular - Honduras RCPB - Burkina Faso Nyèsigiso - Mali LAPO - Nigeria Pride Microfinance - Uganda Tamweelcom - Jordan Bai Tushum Bank - Kyrgyzstan IMON International - Tajikistan NSRP - Pakistan BASIX - India ESAF - India AMK - Cambodia VisionFund - Cambodia TYM - Vietnam NWTF - Philippines NWTF II - Philippines