Prospects and challenges of product innovation
While there are many programmes and campaigns to stop child labour, the fact remains that they still continue to work. This is a common phenomenon especially in under developed and developing world. The latest survey on working children in Bangladesh which was conducted in 2013 by Bangladesh Bureau of Statistics (BBS) and International Labour Organisation (ILO) estimated that there are 3.45 million working children in the country between the ages 5 to 17 years comprising 1.75 million who are not child labour by definition and 1.70 million who are child labour that latter includes 1.28 million hazardous child labour. Many of them do save for their future while they are working hard for maintaining their sustenance in the present. However,there is no means for them to save for brighter future through accessing banking or trustworthy financial services.
According to one of the InM studies conducted in 2016 on 400 working children it is observed that around 25% of working children do save in various places. About 45% of them save the money at home or in a secret pot. Only 20% of the children trust their parent with the savings. Rest of the children keep their savings to friends, shopkeeper or neighbour. This indicates that they lack a secure place to keep their hard earned money. It is found that children with comparatively higher income, relatively sound financial and educational family background could able to save.
The study also observed that girls are better saver than boys in terms of head count and saving utilisation. The result shows probability of being able to save is expected to increase by 1.83 times for a female child compared to a male child.This may indicate that ‘Money psychology’ of a male child and a female child is different from one another. Their spending pattern can also be different. This may influence the female to save more.
In terms of utilisation of savings, female are found to be more productive than males. The study found that male savers utilise the savings more for consumption purpose. Around 60% of male child confirms that they spent savings on consumption. On the other hand, for females the pattern is significantly different. Around half of the female savers utilise the savings for meeting education expenses such as paying admission fees or exam fees for SSC or HSC exam.
The analysis of the study shows that being able to save, make the children better off in terms of coping with the shocks. It also enables them to attain more education. Now the question is: Is it possible to bring them under formal saving mechanism? The result of the survey confirms that around one fourth of the children who saves informally do not wish to save in formal institutions as they think its troublesome to go to bank and go through all the complex procedure for savings. Also they believe bank officials will be reluctant to provide them service considering their socio-economic status. The perception about formal financial institutions in the eyes of low income people is an important issue in this context. The rest of the informal savers wish to avail formal financial services but do not know the procedure. Also there are some regulatory and legal constraints. According to Bangladesh Bank’s regulation, minors cannot open a bank account without parent’s signature and operate it by themselves without parents’ consent even though it is legal to join work in specified occupations, for a limited number of hours per day, if they are more than 15 years old. However, majority of the parents of these children feels hesitated to visit banks and also they cannot afford to spare time to go to banks which often might lead to loss of their income considering their pattern of job. Also the scope for school banking is limited for these children as either they do not go to school or they go to only informal schools as they have to continue working to survive themselves.
To introduce innovative financial services for vulnerable working children initially a pilot can be done only on female children worker as they proved to save more efficiently. Later on it can be expanded to other groups irrespective of gender. Moreover, regulatory reforms such as allowing children to operate their own account at certain age (may be 15) if they are involved with any employment as they are responsible for their own or their family’s livelihood. The demand deposit products maybe the best option for them as it will allow them to deposit money and withdraw it for a certain number of times in a month. Providing the children with the access to mobile account can be another option to promote savings. Our data shows that more than 50% of the children could save less than BDT.2000 at the time of survey. Moreover, cost is also associated with the working children if they have to visit the bank frequently. Also they may hesitate to go to bank. Considering these issues, mobile banking might be a better option for them to save. They can save small amount in their account and withdraw the money during their need. However, the requirement of providing National Identification Card for opening a mobile account is mandatory in the existing regulation and it is only available for the adult population. To increase the penetration of savings through mobile account, NID can be made available at the age of 15 or some other identification document can be introduced such as birth certificate.
The study shows that the vulnerable working children do save though they are mostly micro and short run savers; however, they are very effective in utilising the savings. Therefore, proper policy and regulatory measures aiming to foster financial inclusion of children should be able to strengthen their entrepreneurial potential and financial capability.
The international FIN-B Financial Inclusion Conference scheduled to be organised on July 30-31 by Financial Inclusion Interwork-Bangladesh (FIN-B), an initiative of the Institute for Inclusive Finance and Development (InM), will discuss accelerating financial inclusion and its challenges, identify innovative solutions and share experiences among the representatives across all stakeholders covering other demand and supply side issues of access to financial services.
Farah Muneer is Senior Research Associate at Institute for Inclusive Finance and Development (InM).