The Bangladesh Bank (BB) taken initiative to include child labour in the banking system has been lauded in a write-up published in theguardian.com Wednesday.
It said the financial exclusion creates a particular paradox for working and street children in that their resourcefulness and industry may even undermine their security with their wages making them the target of thieves and cheats.
In Bangladesh, child labour is a fact of life: about 7.4 million children aged 5-17 are estimated to work to support their families, or simply to survive. Some of them return home at night while others live full-time on the streets, but all face an issue often overlooked by NGOs and policy makers focusing on their basic needs: how do they keep the money they earn safe?
"Permitting children to open bank accounts will hopefully lead to a higher level of physical security [for them], and bring relief from the fear of their hard-earned money being taken by others," adds Michael McGrath, country director of Save the Children, which had lobbied BB since 2011 to extend its financial inclusion programme to marginalised children.
The scheme pioneered by BB hopes to change their situation. The bank introduced a service in June that allows children to open a savings account with participating banks for as little as Tk 10 (7p). BB Governor Atiur Rahman said the initiative aims to "prevent the derailment of street children through developing their financial position".
The move is significant as it drops an earlier requirement for the co-signature of a parent or guardian - an impossibility if the child is an orphan or has been forced to leave home. The central bank is coordinating 10 banks that are piloting the scheme in partnership with approved, legally-registered NGOs working on financial exclusion of children. New accounts require a co-signature from an NGO, whose staff retains control of it until the child turns 18. For the poorest children, NGO involvement is aimed at ensuring the children's money works for all their chief needs: survival, emergencies and planning for the future.
McGrath says: "The accounts will increase the incentives for these street and working children to come into contact with community-based organisations (CBOs) and NGOs [who can then help with] building their skills in numeracy, saving and financial planning."
Having NGOs as co-signatories does raise new issues though: how do you prevent a vulnerable child from any corrupt behaviour by their NGO? What happens if the NGO who co-signed their account closes down?
For the initiative to have most impact, said McGrath, the backing of BB and Atiur Rahman, in particular, was crucial. "The private banks would not have agreed to bring children into the formal banking sector without BB saying that this was an initiative that they support."
The Bangladesh initiative may benefit uniquely from the support of the central bank, but it is built on a principle that underpins other financial inclusion schemes for street and working children: microfinance must incorporate financial education to offer a sustainable way out of poverty.
McGrath said: "The accounts will create a key and hopefully lasting connection between children and the banking system."
BB estimates that 1,700 bank accounts will have been opened by the end of November, six months into the project, but it is not the first street children banking scheme of its kind.
