The COVID-19 pandemic has dealt a mighty blow to millions of livelihoods in the textiles and garment industry. The negative impacts will likely continue: A recent report from McKinsey & Company predicts that the global fashion sector will contract by 27-30 percent in 2020. This will have major ramifications for workers in global fashion supply chains and will disproportionately impact women, who make up a majority of the supply chain workforce.
Such impacts are already being felt. In India, for instance, the nationwide lockdown and the subsequent issues of reverse migration of labor and blue-collar job losses have worsened food security, health, and well-being for low income workers. The IMF projects that the world economy will shrink by three percent in 2020, pushing 40-60 million people into extreme poverty; in India, this would push 12 million Indians below the poverty line. While both men and women are affected, there is a high likelihood of an over-representation of women in the “new poor”, because of an anticipated rise in unpaid care work, a prolonged dip in labor force participation rates for women, and consequent loss of income.
To better understand the most pressing financial challenges facing workers during these difficult times, the HERproject team in India conducted informal interviews with workers and factory management. These interviews, combined with valuable contributions from HERproject expert partners Kshitij and Swasti, helped the team to prepare a COVID-19 crisis response package for workplaces, centered on disseminating information on government social protection schemes and infection prevention and control. The package also seeks to provide psycho-social support for workers and management.
While factories have struggled with the cashflow implications of COVID-19 and with paying salaries during the lockdown phase, some managers participating in HERfinance programs shared their positive experiences of supporting their workforce. The peer educator networks used in HERfinance were leveraged to disseminate information on the social protection benefits announced by the government to a large number of workers, especially women and migrant workers. A Human Resources manager in a factory supported by HERfinance told us that the training helped them to realise the importance of digital financial skills and of supporting workers to set up online access to their retirement savings accounts. During the lockdown, this exercise proved its value when workers opted to take an advance from these accounts, instead of borrowing money from riskier informal sources. Factory management also observed a growing preference amongst workers for sending online money remittances to family members, topping up phone airtime, and paying bills. However, workers still sometimes need cash: for example, when buying goods at local grocery stores, where cash is cheaper than using internet data for digital payments.
A key learning that reverberates through the current crisis is the need to increase economic security for low-income workers, especially women. Building skills on budgeting and planning is critical to help these workers begin saving money, which will better prepare them to weather unexpected financial challenges. One factory representative told us that many female workers had saved for 4-5 months after attending HERfinance training sessions and had even invested in small deposit schemes to secure the future of their daughters.
Sushama, a HERfinance peer educator from Haryana, said:
“I am a single mother of three and have comfortably managed my family expenses during this lockdown without any external support. After experiencing positive changes in my personal financial habits, I motivated other women in my neighborhood to take up formal savings. They thanked me recently during the lockdown for guiding them to save for emergencies.”
Manoj, a migrant worker from Orissa working in Bharuch, Gujarat, said:
“After attending the first HERfinance training on financial dreams, I decided to save Rs. 4,500 over a period of three months to start a part-time street food business. This initiative helped me to earn an additional income of Rs. 750-800 per day for the two months leading up to the lockdown. I saved all my earnings from this side business, which helped me to pay regular installments towards my recurring deposit, life insurance, and home loan, and to send remittance to my parents. This was all possible despite the absence of regular work pay during the recent home confinement period.”
As this comment shows, it is important for low-income groups to create a capital cushion at the household level to weather financial crises. Certain trends help workers in this respect: growth in the usage of digital payments alongside cash transactions, an emphasis on formal savings, and encouragement towards increased investment in health and life insurance. Based on our experiences from HERfinance India, we believe that it is essential to ensure that workers, particularly women, have not just access to financial information, accounts, and resources, but information on how to use them to stimulate sound financial management.
Given this assessment, HERproject is currently working with the Bill & Melinda Gates Foundation to strengthen our HERfinance programming in India, which helps to build the confidence of workers (especially women) to access, use and benefit from financial and digital services. If you would like to find out more or get involved, please contact us.