Does Micro Credit Increase Child Labour in Absence of Micro Insurance?

This research aims to discover whether access to microinsurance might make any difference to the microcredit receivers in terms of reducing their use of child labour. The research decomposes households into three broad groups: microcredit participants with microinsurance, microcredit participants without microinsurance and non-participants of microcredit and microinsurance. Using household information in Monga (flood) prone areas in Bangladesh, we use regression models to examine determinants of child labour for the different groups of households. The households in the flood prone regions are forced to implement coping strategies like skipping meals, using child labour, or using microcredit services. In extremly poor households quasi health and/or microlife insurance in combination with microcredit has a significant effect of reducing the child labour supply, however, credit-life insurance has no significant influence. On the other hand, taking advanced payment from the employer or landlord has a highly significant positive impact on child labour supply. In moderately poor households microinsurance does not make any difference in determining child labour, microcredit has a strong negative influence on the child labour supply, no matter who are the clients of microinsurance. Micro finance has no role in determining child labour in the group of above poverty households, only decision maker's schooling and child's schooling are important determinants of child labour. Therefore, policy considerations should be made not only to provide adequate microcredit to extremly poor households but also to address the issue of microinsurance to protect against the high social opportunity cost of using child labour.