This study examines the impact of Village Community Banks (VICOBA) on household welfare in Kilosa District, Tanzania. While VICOBA is recognized for improving livelihoods, concerns remain about its effectiveness on the welfare outcome of the participants. Using data from a randomly selected sample of 99 VICOBA members and 203 non-members, the research employed Propensity Score Matching (PSM) and Endogenous Switching Regression (ESR) methods to control for observable and unobservable selection bias to examine the impacts of VICOBA membership on welfare status of the households in Tanzania. Results showed a significant positive effect of VICOBA membership on household consumption, a key welfare indicator, with a 1% significance level. The ESR analysis confirmed these findings. The study concludes that VICOBA membership statistically and positively improve household welfare and recommends that policymakers enhance operational systems and regulatory frameworks to better integrate these community banks into local development initiatives.