Purpose: This paper investigates impact of microfinance on household income and employment. It is a primary data research conducted in the Bahawalpur division, Pakistan. The study employed the tool developed by Assessing the Impact of Microenterprise Services (AIMS) and Small Enterprise, Education and Promotion (SEEP). The tool has been modified in local context. The sample consists of 1524 respondents, out of which 773 are established clients (treatment group) and 751 are incoming ones

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... group), belonging to different microfinance providers of Pakistan. Independent Sample T-Test and Multiple regressions have been used for analysis. The regression analysis shows that participation to microfinance program has strong positive impact on household income while very minute positive impact on employment. Other independent variables such as prior access to any other loan, micro saving, household assets, age of respondent, gender, education and household size have positive impact on household income but a mixed impact on income generating activities.