Could Financial Inclusion Reduce Vulnerability to Modern Slavery?

9 March 2022
Research Innovation

Laura Gauer Bermudez  | Director of Evidence and Learning, the Global Fund to End Modern Slavery
Shukri Hussein  | Country Manager East Africa, GFEMS
Timea Nagy  | Founder of Timea’s Cause
Bart Robertson  | Senior MEL Manager, GFEMS
Dr Leona Vaughn  | Vulnerable Populations Lead, FAST

Approximately, 1.7 billion individuals — 31 per cent of the world’s adult population is “unbanked”, meaning they lack access to formal financial institutions. Addressing this issue has been part of broader development and poverty reduction strategies globally for many years, yet developing connections between financial inclusion and reducing vulnerability to modern slavery is relatively new.  

Over the past several years, GFEMS has begun to identify trends in their research data related to this connection. First, we noticed a lack of savings leading to an inability to weather economic shocks. In a study of construction workers in India, 34 per cent of workers did not have savings prior to the pandemic lockdown in 2020, creating extreme financial hardship for a sample of workers of which 52 per cent had no other monthly income during that period. Next, we noticed that financial hardship was a driving force behind risky migratory patterns for both adults and children. In a study in northern Uganda, 42 per cent of sampled adults believed that children should look for food and money in another town, despite the known risks of sexual and labour exploitation. Twenty-one per cent of sampled children from the region said that migration was the only way to survive. We also noticed that debt was a common experience among migrant workers and it had a relationship with forced labour conditions. In a study on Vietnamese migrant workers, migrant workers estimated it would take between 7 and 24 months to pay off recruitment-related debt, with financial constraints a primary reason for inability to leave an exploitative job. Further, in a forthcoming study on Filipino migrants travelling abroad for work, there was a positive correlation between debt and reports of forced labour. Similarly, in another research study on Vietnamese migrant workers, those who borrowed money to finance their trip abroad were 2.5 times more likely to report forced labour conditions than those who were not indebted. 

Collectively, this research is beginning to reinforce what we have known anecdotally: that financial stress is a driving force behind vulnerability to modern slavery and that indebtedness exacerbates exploitation. While more evidence is needed to understand the nuances of this relationship, there is sufficient data to suggest that action can and should be taken now. The Global Fund to End Modern Slavery (GFEMS) and the Finance Against Slavery & Trafficking (FAST) Initiative have identified financial inclusion as a critical intervention in this global effort and are mobilizing resources to address it. In collaboration with Timea’s Cause, below we have offered our thoughts on how to understand the connection between financial exclusion and modern slavery as well as recommendations for how actors in a diverse range of sectors can support financial inclusion.

What is financial inclusion?

The World Bank defines financial inclusion as:

“Access to useful and affordable financial products and services… transactions, payments, savings, credit and insurance — delivered in a responsible and sustainable way”

While digital financial services are helping to grow access for the underserved, barriers persist to achieving widespread financial inclusion. The high cost of opening accounts, expensive transaction fees, complex application processes, and lack of access to digital services leave many out of the formal financial system. Lack of financial literacy and gender norms that discourage women’s independent access to financial services create additional barriers to service.

These barriers limit the ability of individuals to safely save, invest or access affordable lines of credit, all with significant consequences. Individuals are left with little to no power over their own financial resources and their exclusion from the system perpetuates further marginalization, as lack of engagement places individuals in “high-risk” categories. The majority of those who are unbanked also face social exclusion based on age, citizenship, race, gender, disability, and socio-economic status, creating a mutually reinforcing loop. This is the heart of the connection between financial exclusion and modern slavery.

Financial exclusion limits ability to withstand economic shocks, necessitating risky labour and migration practices 

The inability to weather economic shocks is a defining feature in modern slavery risk. For those living on the margins, such shocks leave few options. The economically insecure have few options to cope with these hardships. Those who are unbanked and with limited access to affordable credit or micro-insurance are often forced to cover these expenses through high-interest informal loans. Others resort to irregular or risky migration, which can lead to exploitation. Some may also receive advance payments or loans from employers, facilitating a bonded labour relationship.

Financial exclusion hinders reintegration of survivors

For survivors of human trafficking and modern slavery, financial exclusion represents a continuation of their trauma. Official identification documents such as passports are often stolen by their assailants, and in some cases their identities are used to defraud or amass debt. This can present a barrier to financial recovery, as survivors struggle to open basic banking accounts for wages or even access legal compensation they may have been awarded. Financial exclusion is not only a form of re-victimization, but negatively impacts survivors’ financial reintegration, advancement to financial independence, and well-being. This damages future opportunities for housing, mortgage, credit and employment, leaving survivors vulnerable to re-exploitation and abuse.

Financial exclusion perpetuates systemic risk of exploitation

Market risk and volatility can be pushed down the supply chain to actors who are least prepared to cope. Such is the case in the construction sector in India, representing over 60 million jobs. The sector is highly dependent on low-paid, migrant labour and a system of subcontracting construction orders to micro-contractors (MC). MCs are the primary employers of these migrant workers. They often operate informally, have limited access to affordable credit, and have to manage day-to-day business operations in a highly volatile market. Delayed payments are common and work orders inconsistent. These and other challenges can limit MC’s ability and willingness to treat their workers ethically. Worker exploitation and withheld wages are the norm. 

Financial exclusion limits access to social protection schemes

The unbanked may be limited in their ability to access social protection schemes. Initial evidence has shown that people without bank accounts or access to mobile money were most likely to be excluded or receive less monetary support from governments than those with digital financial access during the ongoing COVID-19 pandemic. This particularly affects rural populations, indigenous communities, young people, and women — groups who were primarily in informal work and more likely to borrow from informal lenders, placing them at higher risk of abuse and exploitation. 

Financial district. Photo via Unsplash / Sean Pollock.

Expanding financial inclusion — what’s next?

If financial exclusion can be characterized as a lack of power and control over one’s economic resources, financial inclusion can be associated with greater financial power, control, independence and agency, all of which are necessary to be fully free from exploitation. 

So what are the products, services and opportunities for access necessary to reduce modern slavery vulnerability? We offer several recommendations below:

Prioritize financial inclusion and financial literacy as forms of protection against slavery and trafficking — Institutional funders and philanthropists can mandate financial inclusion and financial literacy activities within their portfolios to address slavery and trafficking. Governments can integrate the same into their policy strategies for vulnerability reduction. NGOs and CSOs can enhance collaboration with financial service providers, mobile money operators, and government agencies that offer safety net programmes. The private sector can consider innovative ways to improve access to financial products and services to workers along their supply chain with an intention towards eliminating debt bondage. 

Provide guidance to financial institutions on how to expand inclusion efforts while complying with relevant AML/CFT laws — Guidance should detail how considerations made for vulnerable populations are within banking risk assessment and management processes. Guidance should also address “derisking” practices, including how and when they are an appropriate response to human rights concerns and when they unintentionally exacerbate risks to vulnerable people. 

Expand digital financial services and digital financial literacy campaigns — Mobile finance platforms, enable users to seamlessly access savings accounts and loan opportunities. This ease of access creates a convenient option for at-risk groups as well as survivors and has been shown to reduce poverty and increase financial resilience in a study of Kenyan households Significant expansion of mobile money offerings alongside digital financial literacy has the potential to exponentially increase access and participation in the financial system.

Incentivize ethical business practices through the provision of financial services — Mapping the employment structure of an industry prone to modern slavery can uncover stressors that may be making it difficult for employers to abide by ethical business practices. GFEMS is currently partnering with several organizations to provide micro-contractors in India’s construction industry with business training and conditional loans, contingent upon a minimum set of ethical business practices. It is anticipated that the loans will help micro-contractors better manage cash flow and work orders, enabling them to adopt ethical business practices. 

Include survivors in the design of products and services — In order to most effectively serve those at risk of slavery as well as survivors, designers of financial products should consult individuals and groups with this lived experience. GFEMS invested in SafeStep, an online platform for migrant workers from Bangladesh relocating to Gulf Cooperation Council (GCC) countries for employment. Extensive consultations were held with workers to understand what would meet their needs, resulting in a comprehensive budget calculator, helping migrants understand the “true” cost of migration. 

More about us

For more information about the Finance Against Slavery and Trafficking Initiative, please visit

For more information about the Global Fund to End Modern Slavery, please visit

This article has been prepared by Laura Gauer Bermudez, Shukri Hussein, Timea Nagy, Bart Robertson, and Leona Vaughn as a contribution to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the author and do not necessarily reflect those of UNU or its partners.

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