The need for individuals and households to cope with risk and vulnerability can affect the
demand for financial services. Even though insurance appears as the most suited financial
product to cope with risk, other financial products can work as substitutes, such as emergency
loans, precautionary savings, but also longer-term savings for expectable lifecycle events. Thus,
financial services at large can have a vulnerability reducing effect, by smoothing consumption,
alleviating shocks, and planning ahead for expectable family and social expenses. In the longer
run, this vulnerability reducing effect can allow households to feel less risk-averse and to engage
in higher-risk higher-return activities (including activities requiring hiring wage labor). Yet, credit
can also make loanees more vulnerable if they find themselves unable to repay their loans,
whatever the reason. Bonded labor found in India is an extreme illustration of how indebtedness
can result in great vulnerability and dependence upon exploitative labor relationships. In this
context, microfinance can pave the way to untying those exploitative relationships, although it
must also be acknowledged that over-indebtedness can unintendedly affect microfinance users
as well. It must also be acknowledged that the social dimension of exploitative labor contracts
can significantly limit the scope of microfinance interventions. A special attention will be given to
the social dimension of money, debt and finance. Many informal financial links – including
exploitative labor contracts based on debt - however exploitative they may be, also include a
social and protective aspect which must be taken into account to understand the impacts of
microfinance