Abstract:
The number of people living underpoverty line is increasing from time time across the world. It
is worse in developing countries. The inadequate financial service is a serious handicap to the
fight against poverty in many developing countries. To solve the above-mentioned problem
Microfinance institution is one modality for financial service Provision. The paper investigated
the impact of microfinance on poverty reduction in Gondar, North west Ethiopia. To undertake
the study, data was collected from both primary and secondary sources of data. The study used
cross-sectional study design. A cluster sampling technique was used to get the samples for the
study. The study used 197 samples from microfinance participants and 197 from non participants. The data was analyzed by using Propensity Score matching method. Logit was used
for estimating the propensity score and analysis was done by Using STATA 14.0. The findings
from the paper shows that household monthly consumption expenditure of microfinance
participants is 8663.50 birr and nonparticipants are 7499.16 birrs. There was a statistically
significant difference between non participants and participants households in terms of
household monthly consumption expenditure at 1% level of significance. The household asset
ownership of microfinance participants is 24845.97 birr and non participants are 17677.48
birrs. There was a statistically significant difference between non participants and participants
households in terms of household asset ownership at 1% level of significance. Participants were
better than non participants interms of health, nutrition and education at 1% level of
significance. Finally, from the above findings, that participants of microfinance were better
than their counterfactual interms of asset ownership, consumption expenditure health, nutrition
and education. So measures which will strengthen participation of households should be taken.
Hence, the study recommended microfinance should be empowered through provision of
finances, microfinance should undertake regular training programs on financial management
and further research to be done.
