By Ayat Basma

MOSUL, Iraq (Reuters) - Yousef, 14, pushes a wheelbarrow through a sprawling camp in Iraq running errands for pennies, the only source of income for his family of 11.

On a good day, he makes 2,000 dinars ($1.70) but if business is slow he scrambles to find leftover bread and food to sell to sheep owners in the crowded Khazer camp, near Mosul, home to Iraqis displaced by the fight against Islamic State.

"Eleven people and I am the only one supporting them. My father is old," Yousef told Reuters, adding that he does some trips for as little as 250 dinars.

Like millions of children in the country, Yousef's hopes of an education ended when Islamic State swept through northern Iraq in 2014.

Many parents opted against enrolling their sons in Islamic State-run schools for fear they would be recruited to join the militant group, leaving the children to find jobs to help support their family.

A report by the U.N. children's agency UNICEF last year said that almost 3.5 million Iraqi children of school age were missing out on an education, with more than half a million estimated to be at work rather than in class.

The need for income was heightened after the World Food Programme said on Friday it had halved the food rations distributed to 1.4 million displaced Iraqis because of delays in payments of funds from donor states.

Ahmed Ali, a former factory worker in Mosul, said his children had to go to work as he could not find a job.

"It is a very painful situation. Of course I feel sorry for them. What did he do to deserve this? My son is eight years old now and he doesn't know how to write down his own name," Ali said.

With the recapture of eastern Mosul last month, there is hope that children will begin returning to school.

Twelve-year-old Mortada is one of those keen to ditch his work selling empty plastic bottles and catch up on three years of lost education.

"Of course, school is better than work. In the future, I want to be a doctor or a pilot," he said.

($1 = 1,181.0000 Iraqi dinars)

(Writing by Patrick Johnston in London; Editing by Alison Williams)