Household Income & Expenditure Survey (2006/07) data were used to estimate the impacts of ‘Samurdhi’ – the largest state-sponsored microfinance program in Sri Lanka – on the status of household income, health, education, and food and non-food consumption. Propensity Score Matching was used to minimize selection bias. Propensity scores were estimated using a Probit Model to match “treated” households with “control” group to identify the impacts. The results show that Samurdhi possesses a significant impact on household welfare on income, consumption and education, despite the inefficiencies and political interferences associated with distribution of intended services.