Posted by: Richard Carothers, PPIC-Work project and President of Partners in Technology Exchange Ltd.
Even items in a small family-owned restaurant can cause significant injuries, especially to young workers
In a previous post, “Defining Social Responsibility to the Community: Occupational Safety and Health,” guest contributor Dr. Richard Rinehart outlined some of the ways in which hazards might present themselves in businesses supported by microloans. In this post, guest contributor Richard Carothers explores an example of how an MFI can assist in improving workplace safety.
The PPIC-Work project, working with the Egyptian Association for Community Initiatives and Development (EACID), has begun to develop a pragmatic approach for improving workplace safety that can be incorporated into routine visits by loan officers. Dual purpose loans provide the basic support for the business as well as additional funds to cover the costs of improving workplace safety.
Initially, loan officers are trained on how to identify and analyze different types of occupational hazards. Once hazards are known, the loan officer and business owner discuss potential solutions and rank these according to their effectiveness. The preferred solution is one that eliminates the hazard altogether, but other types of solutions may be considered appropriate and affordable. It is also important that the loan officer and business owner work together and agree on the solution that is to be implemented.
Once a solution is identified and the costs are determined, the loan officer incorporates the cost of the solution into the dual purpose loan contract. Business owners are provided with the extra funds to cover the costs of safety improvements but will only be eligible for future loans if they implement the agreed changes and pay back the loan on time. New safety improvements are incorporated into subsequent loans so that occupational safety continues to improve over time.
In a recent survey, EACID found that over 90% of its clients that had been part of the dual purpose loan program were actively involved in improving occupational safety while only 25% of other similar local businesses were involved in improving safety. The dual purpose loan program has not adversely affected EACID's portfolio quality and only marginally affected lending efficiency. The next steps will involve working with rating agencies in the development of indicators that will help EACID and other MFIs assess the social impact of this type of programming. It will be important that improving occupational safety and health within microenterprises is also recognized by donors and socially responsible investors as an important aspect of the social impact of microfinance programs.
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Additional information on the EACID and PPIC-Work experience is available at http://www.ppic-work.org/.
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