The development of microfinance in Vietnam since 1990s has coincided with a remarkable progress in poverty reduction. Numerous descriptive studies have illustrated that microfinance is an effective tool to eradicate poverty in Vietnam but evidence from quantitative studies is mixed. This study contributes to the literature by providing new evidence on the impact of microfinance to poverty reduction in Vietnam using the repeated crosssectional data from the Vietnam Living Standards Survey (VLSS) during period 1992-2010. Our results show that micro-loans contribute significantly to household consumption.