The impact of microfinance on Indonesian rural households' welfare

Abstract

Purpose: This study investigates the welfare impact of microfinance on rural households in Indonesia. Its finding will bridge the gap in the Indonesian microfinance literature. Design/methodology/approach: The research was conducted by collecting primary data and administering a structured questionnaire to rural households in Bantul District, Yogyakarta Province, Indonesia. We employed the logistic model to measure welfare impacts of microcredit borrowers. Findings: The research finds that purpose of loan, monthly income, monthly expenditure, interest rates, loan amount, education and marital status have significant effects on the probability of increasing borrowers' welfare after accessing microcredit. Practical implications: This study will propose some policy recommendations for Indonesian policymakers that may yield better strategies to help improve the impact of their microcredit programmes on the welfare of rural households. Originality/value: The authors confirm that the article has not been submitted to peer review, nor is in the process of peer reviewing and nor has been accepted for publishing in another journal. The author(s) confirms that the research in their work is original, and that all the data given in the article are real and authentic.