The Role of Microcredit in Sustainable Rural Development: A Case Study of Selected Villages of Torbat-e-Jam County of Iran

Limited financial capability of rural people causes an increased need for capital or credits in rural areas. Microcredits can provide the cash required for the rural people’s production activities. Therefore, this study aimed at evaluating the microcredit effects on rural sustainable development in selected villages of Torbat-e-Jam County of Iran. For this purpose, the Propensity Score Matching (PSM) model was used for analyzing the data collected from 309 rural households through questionnaire. The results obtained from the post estimation test for quality balancing covariate variables showed that the heterogeneous was improved, and average (mean) and median bias decreased to lower than 20 percent. Also, the PSM results indicated a positive effect of the microcredits on the sustainable development indicator; in another words, the sustainable development indicators related to the households accessed to the credits increased four percent, compared with the households accessed no credits. According to the study findings, it might be suggested to expand the institutions of the cooperative and extension services, to support local microfinance institutions, to create and expand participatory structures, and to increase the capacity of microfinance institutions to respond to increasing finance demand