It is generally assumed that credit has a positive effect on children's schooling among poor households. This paper shows that need not be the case when households obtain credit for investment purposes. In fact, investment loans may
not have any effect on the likelihood of schooling for children who work in their family business. Our estimates con¯rm that this is the case; credit used to enhance investments has no effect on the odds of schooling for employed children.
This may be because investment loans increase children's labor productivity, which in turn increases the opportunity cost of schooling. The results of this study suggest that improving access to credit may not, by itself, constitute a solution to the problem of child labor in developing countries.