The Impact of Microcredit on Household Income: The Case of BRAC in Tanzania

Abstract

Microcredit is considered a potential tool for poverty alleviation. This study examines whether microcredit can contribute to an increase in the household income of rural households. We use two-year panel data obtained from a household-level randomized controlled trial (RCT) of microcredit service implemented in Tanzania. Our empirical results show that the provision of microcredit did not have a positive impact on household income. However, when the household income from different sources is examined, we find that microcredit had a positive impact on income from crops other than rice. Our findings are useful in designing microcredit products targeting agricultural communities in developing countries.