(CNN) -- Nepal is seeing a surge in indentured child labor as the economy is hit by a decline in demand for its hand-woven carpets, according to leading children's groups.
"Many factories are once again beginning to hire children, and many of them are bonded," says Kul Gautam, the former deputy executive director of UNICEF.
"Brokers go to villages, talk to parents and say send us your boy or girl to work -- we'll lend you a certain amount of money. And for as long as that money is not repaid, they are in servitude."
Hand-woven carpet-making is a key industry for South Asian nation, nestled in the Himalayan mountain range between China and India. Soman Lama, a local carpet factory owner, recalls exporting "upward of 3 million square meters a year." Now, he says, the number is "hardly a million per year."
Almost 25% of Nepal's population lives below the poverty line and many seek work abroad to escape poverty. More families are turning back to Nepal's system of bonded labor, known as Kamaiya.
Bonded labor was officially abolished in July 2000, yet Gautam says the problem persists. "This is essentially modern day slavery," he says.
Non-profit group, Youth Advocate Program International, estimates that about two million workers in Nepal are child workers -- this accounts for one quarter of all Nepalese children.
Employing children under the age of 14 is illegal in Nepal, but enforcement is lax, according to YAPI. More than 80% of the population lives in rural areas, allowing much child labor to occur away from centers of law enforcement.
GoodWeave Foundation, an NGO for which Gautam acts as board member, works to combat child labor in Nepal's carpet industry. The group certifies factories that do not employ children, helping owners to sell carpets that bear the "GoodWeave" seal of approval.
GoodWeave regularly inspects factories to ensure that they maintain standards. It places children freed from indentured work into schools or vocational training.
"Eliminating child labor is something that corporations should feel proud of," Gautam says.
"They should consider it their duty and when they are successful they will earn a good name and reputation."
CNN's Gena Somra and Natalie Robehmed contributed to this report.