Abstract: Policy-based micro-credit is an important credit tool to help and consolidate poverty alleviation. On the basis of reviewing the literature, this paper analyzes the influence mechanism of policy-based micro-credit on the income of the households just lifted out of poverty. Then, based on the survey data of the households out of poverty sampled in poverty-stricken counties, the propensity score matching method (Propensity Score Matching, PSM) is used to empirically analyze the effect of policy-based micro-credit on the income of the households. The analysis of the mechanism shows that policy-based micro-credit can enhance the production vitality of the households, meet the financial needs of poverty-stricken people for establishing a business, and motivate them to increase income by incentives and restraints, thereby creating and expanding their income sources. The empirical results show that policy-based micro-credit has effectively increased the income of the households just lifted out of poverty. The village attributes of the households, the age of the household heads, poverty alleviation employment projects and industry drive are important factors influencing the access of the households to policy-based micro-credit. The results of the balance test show that there is no significant difference between the characteristic variables of the treatment group and the control group after matching, which proves the robustness of the policy-based micro-credit in increasing income.

Key words: policy-based micro-credit, the households out of poverty, increase income, PSM method, balance test