An attempt has been made to quantify the targeting of the microfinance andits economic impact on the borrowers. The study has employed theDifference of the Difference Approach to find the net effect of microfinanceby employing data collected by Pakistan Poverty Alleviation Fund. The studyfound that about 30 percent of the borrowers were poor, while 70 percent ofthe borrowers were non-poor. The impact on the poverty status was found tobe marginal. The income of the poor borrowers hardly could grow by 2percent during the study period. However, the consumption of the poorborrowers increased by 10 percent, which indicates that poor primarilyborrow for smoothing their consumption. A significant net effect ofmicrofinance on the consumption (6.71 percent) and income ( about 6percent) of non-poor borrowers has been found. Results show that poornon-borrowers were better off in terms of change in most of their assetscompared to the poor borrowers. However, the net effect of microfinanceon households durables of the non-poor borrowers was marginal’ while thenet effect of microfinance on few household durable items like fan, bicycleand sewing machine , of the poor borrowers was found to be positive.Compared to the poor borrowers, the majority of the poor non-borrowersreported no change in their livestock. Similarly, some poor borrowersreported positive changes in their livestock as compared to poor nonborrowers during the study period, which shows positive net impact ofmicrocredit on the livestock of the poor borrowers. Expenditures on socialand other miscellaneous items were found to be very small.