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

Asmamaw Getnet Wassie

Introduction: Welfare is the measure of the living standard of the society, and it is the other dimension of poverty. World has different groups of population in terms of living standards. Some of world’s population has been lived in luxuries house with many rooms. Hover, seven million people have been lived under extreme poverty. Above 40% of world population could not obtain $2 per day. The other recent studies indicate that about 900 million individuals in the world live in acute poverty based on income measurement of poverty. This indicates that poverty is at its high level all over the world but its concentration is very high at Sub Saharan Africa and South Asia.

Objective of the study: The main objective of this study is investigating the impact of microfinance credit access on households’ income and welfare case study in rural South Gondar.

Materials and methods: The study has used both inferential statistics and econometric model. Under the inferential section, the study has compared the socioeconomic characteristics of treatment group and controlled group in terms of mean, variance and T-test. The econometric part of the study has employed Propensity Score Matching method (PSM) of analysis. Limited dependent variable models are appropriate for PSM analysis to estimate the propensity score of treatment and control group.

Results and discussion: Sex of the respondent is one of the demographic variables that is employed by this study. Most of the respondents of the study were males (77.01%) but 22.99% were females. The mean age of females and males is 43 and 49 respectively. The mean income of females and males is 44912 and 57253 respectively. Even if the study did not test statistically, the average consumption of female headed and men headed households approximately same.

Conclusion: This study has examined the impact of credit access on households’ poverty reduction in terms of income and welfare case study in ACSI, rural South Gondar zone. The grand objective of the study is analyzing the impact of ACSI credit access on households’ income and welfare. The study has estimated the average treatment effect of credit access of ACSI on the borrowers (ATT) in terms of income and consumption. Since the nature of data in non-experimental, the study has used counterfactual.