Impact of Microfinance Institutions on Household Welfare in Tanzania: Propensity Score Matching Approach

Abstract

The impact of microfinance on the households ' welfare is investigated through comparing clients who had access to financial services through microfinance in Tanzania versus those who did not. Using the Tanzania Finscope Survey (TFS) of 2013 dataset and employing the propensity score matching approach and balancing score model the paper analyses the impact of Microfinance on welfare between borrowers and non-borrowers ' households in Tanzania. The empirical results revealed that the average treatment effect of monthly income on the treated was statistically significant among microfinance borrowers implying that borrowers tend to have a higher level of income than non-borrowers. These results imply that there is a need to ensure that operations of microfinance service are sustainable and there is better allocation of the available scarce resources in order to have a greater number of people who have access to financial service that can pull them out of poverty.Keywords: Microfinance, Poverty, Propensity Score Matching, Tanzania, Borrowers  Innocent M. Pantaleo, Lecturer, University of Dar es Salaam Email:innopanta@yahoo.co.ukAgnes M. Chagama, M.A Student, University of Dar es Salaam Email:agneschagama06@gmail.com