Microfinance and the Millennium Development Goals in Pakistan: Impact Assessment using Propensity Score Matching

This case study examines the impact of Khushhali Bank (KB), Pakistan, on specific targets consistent with the Millennium Development Goals (MDGs). It uses Propensity Score-Matching to address selectivity bias. The study confirms that KB has been effective in reaching the poor and has rapidly expanded its outreach to remote rural areas, consistent with the government's poverty alleviation program. Findings include:

• KB lends predominantly to agricultural households with limited microenterprise activities;
• KB's lending program contributes significantly to income generation activities such as agricultural production and animal raising;
• Program appears to have limited significance on other MDGs like education, health, and female empowerment;
• Selectivity bias still existed in the sampled households;
• Borrowing households' increased use of pesticides is a cause for concern.

The study recommends that KB collaborate with extension agencies to make integrated pest management training and information available to their clients. The degree of impact of the program was less pronounced when the selectivity bias was addressed.