Does Microcredit Increase Child Labor in Absence of Microinsurance?

This study examines whether access to microinsurance has an impact on whether microcredit recipients reduce their use of child labor. It divides households into three broad groups, namely microcredit participants with microinsurance, microcredit participants without microinsurance, and non-participants of microcredit and microinsurance. The study uses household information from flood prone areas of Bangladesh and regression models to examine determinants of child labor for different groups of households. Findings include:

• Quasi health and/or micro-life insurance combined with microcredit has a significant effect of reducing child labor supply in extremely poor households;
• Taking advance payment from the employer or landlord has a highly significant positive impact on child labor supply;
• Microinsurance does not make any difference in determining child labor in moderately poor households;
• Microcredit has a strong negative influence on child labor supply in all household groups;
• Microfinance has no role in determining child labor in the group of above poverty households.