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Giving a Market-Driven Perspective to Improving Working Conditions in Informal Sector Economies Image

Promoting Inclusive Markets and Financial Systems

Giving a Market-Driven Perspective to Improving Working Conditions in Informal Sector Economies: Exploring the application of value chain finance strategies-microinsurance and microleasing

Giving a Market-Driven Perspective to Improving Working Conditions in Informal Sector Economies: Exploring the application of value chain finance strategies-microinsurance and microleasing

Summary

While formal sector workers are protected by various laws and have access to safety net solutions provided by their employers, informal sector workers—especially working in urban value chains—are largely excluded as they are often not associated with any umbrella organizations. Most enterprise development programs, particularly value chain analytical frameworks, do not always look at socio-economic parameters, such as working conditions, as means of increasing productivity and complementing livelihood promotion efforts. Governments continue to be the most influential players in this space as they establish the overall enabling frameworks, but unfortunately exclude the bulk of people in the informal sector. Market driven models for improving working conditions within informal value chains are negligible and generally undocumented.
 
The Value Initiative, a global urban value chain action-research program (a joint project of the SEEP Network and the Bill and Melinda Gates Foundation) addresses some of these issues by answering one of its core action research question: How can you apply market development and private sector development principles to address working conditions challenges faced by the urban poor? This paper demonstrates how financial products, or interventions (here, micro-leasing and micro-insurance), can improve value chain productivity, lead to improvement in physical and social working conditions, and complement economic interventions.
 
The paper focuses on two different case study interventions: The Value Initiative Project in Indonesia which reduced the impact of poor physical working conditions for urban tofu and tempeh workers through micro-leasing; and them Value Initiative in India, which introduced micro-insurance to improve social working conditions for urban jewelry artisans. Both cases offer lessons in linking private-sector financial services that are often intended to increase productivity in a value chain context, but have also resulted in a significant reduction of occupational hazards and an increase in the overall well being of workers employed in the informal sector.


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