One of the biggest 'voluntourism' companies in the world is cutting ties with all overseas orphanages, as momentum against orphanage tourism builds.

Key points: Many of the children in orphanages are not orphans, parliamentary committee hears

Many of the children in orphanages are not orphans, parliamentary committee hears Some children are stolen or trafficked to fulfil the demand created by tourists

Some children are stolen or trafficked to fulfil the demand created by tourists Orphanage trips are marketed as a way for people to travel, back to the community

Projects Abroad has been facilitating trips to orphanages in places including Africa and South America for the last two decades, but as of the end of the year will end all its partnerships.

The company is responding to research into the orphanage 'industry', which shows many children in orphanages have living family members, Australia manager Will Pashley said.

"It has become clear that there are a growing number of orphanage-type settings where it is effectively child trafficking," he said.

"We [are] confident we have not been working in those sorts of areas, but it is obviously a huge concern that there is such growth in that area."

Institutionalised care harms children's development, according to ReThink Orphanages. ( Flickr: Toni Verd )

A recent Australian parliamentary committee heard many of the children in orphanages are not orphans, and are being exploited to satisfy a demand from well-meaning Australians to volunteer.

Many of the children came from poor backgrounds and some were stolen or trafficked to fulfil the demand created by tourists, said West Australian Senator Linda Reynolds, who is on the parliamentary inquiry committee into Establishing a Modern Slavery Act in Australia.

Orphanage trips are marketed as a way for people to travel while giving back to the community they are visiting, and thousands of Australians visit orphanages every year.

But institutionalised care harms children's development, and volunteers on short stays compound abandonment issues, according to advocacy group ReThink Orphanages.

Up to 90 per cent of children in overseas orphanages actually have a living family member, ReThink's coordinator Leigh Mathews said.

"Most children in orphanages don't need to be there, and we also know that children are harmed by growing up in orphanages," she said.

Projects Abroad is the second company to exit the orphanage volunteer tourism industry in recent months, after World Challenge's September announcement.

There is momentum in the travel industry to change its practices, Ms Mathews said.

"I think seeing one company take the lead on this has made other companies understand that it is possible to do this, and it's not too hard," she said.

"There is still a long way to go, there are many companies still offering these trips. Many of them aren't ready to begin that process yet, and some are unwilling."

WA Senator Linda Reynolds has warned Australian groups that many "orphanage" tours exploit children. ( Supplied )

'They're paying for children to be trafficked, abused'

Projects Abroad currently has partnerships with "less than 20" orphanages in seven countries, including Tanzania, Bolivia, and Ethiopia, Mr Pashley said.

The company is in the process of ending those partnerships, though that does not necessarily mean the orphanages will shut down.

"Some institutions might say, 'Fine, there are other organisations around that are willing to place volunteers here'," he said.

"Other ones might seek to be a bit more constructive in finding alternatives for the children."

The highlighted countries have seen a rise in institutionalised children. ( Supplied: Cambodian Children's Trust )

Children living with their own families, or in family-based care is the best option, though Ms Mathews warns it can be difficult to achieve.

"The reintegration of children back into families is not a simple process, it is one that takes time and sensitivity," she said.

Fourteen per cent of Australian schools and more than half of all universities have associations with orphanages overseas.

Many people see visiting orphanages as a positive way to help a community, but there are moves to legislate against the visits.

Earlier this year, Australia became the first country in the world to recognise orphanage volunteer tourism as a form of modern slavery, following a parliamentary inquiry.

The next step is to legislate against the practice and raise awareness, Senator Reynolds said.

"Australians would be horrified to know that when they support these institutions, they are actually paying for these children to be trafficked and smuggled and abused," she said.

"We are setting up an education program so that church groups, schools, service clubs, all the people who do go overseas with the best intentions, do so in a much more informed way.