PurposeThis 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/approachThe 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.FindingsThe 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 implicationsThis 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/valueThe 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.

Extant literature suggests that microcredit may improve borrowers’ social and economic welfare. This study aimed to investigate the microcredit accessibility of rural households in Indonesia. Binary Logistic regression was used to distinguish the characteristics of microcredit borrowers and non-borrowers, and the factors affecting the approval of microcredit application. Primary data was collected through a survey on 488 rural households in Bantul, Yogyakarta. The empirical results suggested that age, marital status and education attainment significantly affect the characteristics of clients and non-clients of microcredit. The results also revealed that age of borrowers, household income, interest rates, and loan duration are key determinants affecting microcredit accessibility. The implications of the findings were provided.