Impact of Microfinance on the Livelihoods of Rural Households

MF is one of the most useful development tools designed to fight poverty. Policy makers, resarchers, and others emphasized the importance of MF industry in their policy recommendations and actual measures. This study focuses on assessing the impact of MF services. The main objective of the study is to investigate the role of MF in poverty reduction. Analysis was based on quantitative and qualitative data. The study is based on a cross-sectional data obtained from a quasi- experimental sample of program participants and non- participants. The simplest way to estimate the effect of treatment would be to obtain the difference between the outcome of program participants and non participant. This would be valid if the participants of the program were randomly selected.In reality this is unlikely to be the case. Problems associated with self-selection will result in biased estimates. The study used PSM method to obtain unbiased estimates. Findings of the study show that the program hasbrought a significant positive impact on the welfare of its participants using household income, consumption and assets as impact indicators.