Does access to credit reduce child labour? New evidence from Bangladesh

This study examined whether access to microcredit reduces child labour in rural Bangladesh using data from 4,624 children surveyed in 2015 and 2018. The findings show that households with access to credit were less likely to use child labour and could instead hire adult workers. Child labour was most common in credit-constrained rural households. The research suggests that improving financial access is a policy tool to reduce child labour in Bangladesh.

Key points

• Access to credit reduces the likelihood of child labour for both boys and girls in rural Bangladesh
• Households with credit access can substitute child labour with hired labour
• Child labour is predominantly observed in credit-constrained rural households
• Household income, land holdings, parental education, household headship and family size all influence child labour prevalence
• The study analysed a panel of 4,624 children across two survey rounds (2015 and 2018)

Limitations

The study is observational and cannot definitively prove that credit access causes reduced child labour, as households self-select into credit programmes and may differ in other ways. The analysis is limited to rural Bangladesh and may not represent urban areas or other countries with different economic contexts.