The impact of microfinance on the lives of the poor is controversial and there is limited empirical understanding of its psychological effects. Our study endeavoured to explore the effect of microfinance on the self-esteem and self-efficacy of the poor in South Africa. The study was conducted using a non-experimental research strategy (within-subjects design) and quasiexperimental strategy (pre-post-test non-equivalent control group). Systematic and convenience sampling methods were used to select participants. Data were collected on 264 pre-test and 159 post-test participants using the Rosenberg self-esteem scale and General self-efficacy scale. The Pearson productmoment correlation coefficient, the ANOVA and the MANCOVA were used to investigate the effect of microfinance provision on self-esteem and self-efficacy. Our findings not only showed that the provision of microfinance is positively related to self-esteem, but they also showed that microfinance provision leads to an increase in the self-esteem of recipients. The results further revealed a decline in self-esteem for those who were denied microfinance. We argue that providers need to critically assess the psychological effect of their programmes especially on declined microfinance applicants.

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Keywords

Microfinance; Poverty, Self-esteem, Self-efficacy, South Africa.