Innovative finance to address bonded labour in supply chains

Migrant worker debt bondage is a complex and intransigent problem in Malaysia’s electronics sector. 

By Jane Newman and Sarah Churchill

Social Finance was commissioned by Humanity United to undertake a scoping study to identify what role innovative finance solutions could play in tackling irresponsible recruitment practices along major supply chains and prevent migrant workers from falling into bonded labour.

Migrant worker debt bondage, caused by worker-paid recruitment fees, is a complex and intransigent problem in Malaysia’s electronics sector. Workers who become indebted in order to pay recruitment fees often find themselves unable to leave their jobs, regardless of working conditions or pay. Some multinational brands have trialed different approaches to address this problem by requiring employers to implement globally established ​‘employer-pays’ recruitment, but the problem persists.

This report proposes an outcomes-based smart subsidy model as a new solution to complement and enhance the effectiveness of the important work that is already being done to address bonded labour.