Impact of microfinance services on household income: the case of digaf micro financing company, Addis Ababa, Ethiopia

The study evaluates impacts of microfinance interventions on household income. For quantitative analysis both frequent clients and pipeline client respondents were drawn and cross-sectional survey data were collected from 180 households in Gulele sub city of Addis Ababa city administration. Propensity score matching method was employed to analyze the impact of the microfinance services quantitatively. This method was checked for covariate balancing with a standardized bias, t-ratio, and joint significance level tests. Furthermore, sensitivity analysis of the estimated participation effect to unobserved selection bias was checked using the Rosenbaum bounds procedure. Results show that participation in microfinance services has a significant, positive and robust impact on the outcome variables measured using different indicators. In addition to the above points, participation in microfinance services was positively related to household income, indicating that the probability of improvement in income increases with the increase in program participation. The coefficient was statistically significant at 1% significant level. It implies that frequent participants show higher income improvement than pipeline clients.