Impact of Microfinance Credit Access on Household Income and Welfare: Evidence from Ethiopia

Abstract This study examined the impact of microfinance credit access on households’ income and welfare case study in rural South Gondar zone, Ethiopia. The main objective of the study was investigating the impact of microfinance credit access on households’ income and welfare. The study used cross sectional data. The study surveyed 422 households. Half of the surveyed households were credit takers but not the remaining. The treatment variable (D) of the study is credit access. The outcome variables of the study are households’ income and welfare. The study employed both descriptive and econometric model to achieve the objective of the study. The propensity score matching (PSM) was employed in the econometric part of the study to estimate the impact of the credit on outcome variables of the study. Among matching methods, kernel (0.1) was employed since it satisfies the criterion of best matching between treatment unit and controlled unit. The study found that average treatment effect (ATT) on the treated group in terms of income is less than its counterpart. However, average treatment effect (ATT) on treated group in terms of welfare is greater than its counterpart.