This article examineswhether the family households participating in the microfinance programme experience positive changes in their real income. This article uses the individual data of 300 microfinance participating households, the data of 45 credit delivery groups in three sample branches of a microfinance institution (ESAF-MFIL/ESAF-SHG federation)in Kerala, India. The analysis has been conducted by using logistic regression model. This study finds that either (a) an increase in the number of working members in a family household, or (b) presence of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) employed members in a family household, or (c) an increase in the expenditure on assets by members of a family household, is likely to increase the real income of the family household. However, the presence of educated members in a family household is less likely to increase the real income of the family household.

Our study suggests that the employability of the educated members is crucial for achieving positive changes in the real income of a family household. This study finds no evidence for the impact of total loan amount of family households on changes in their real income, since most loans are drawn for non-income generation purposes, pointing out that the loan amount should be spent on economically valuable assets as itraises the real income of family households participating in the microfinance programme.

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