<p>Poverty remains a persistent challenge in developing countries, prompting targeted interventions such as the Tanzania Social Action Fund (TASAF), which aims to enhance household welfare through Community-Driven Development (CDD) programs. However, the impact of these programs on poverty reduction has been little explored. This study examines the impact of CDD on poverty reduction using a cross-sectional research design and randomized multistage sampling to survey 202 households across three wards in Babati District, Tanzania. The analysis employs a Probit model and Endogenous Switching Regression (ESR) to estimate factors influencing household participation decisions and to assess the impact of CDD on household income used as a proxy for poverty reduction while correcting for selection bias. Key factors positively influencing household participation in CDD include the household head’s age (0.1203), household size (0.2265), marital status (0.0867), and poverty status (0.3805). In contrast, access to credit (−0.4787) and social group membership (−0.2322) reduced the likelihood of participation. ESR results show that TASAF beneficiaries achieved a significantly higher mean log income (8.7857) compared to the counterfactual scenario without participation (7.8962), resulting in an Average Treatment Effect on the Treated (ATT) of 0.8895. Similarly, non-beneficiaries would have increased their income to 8.5849 from 7.9891 had they participated, yielding an Average Treatment Effect on the Untreated (ATU) of 0.5958. These findings confirm the program’s effectiveness in improving household income and reducing poverty. To enhance effectiveness, the study recommends tailoring support based on household characteristics, linking CDD initiatives with financial services, improving transparency and community trust, and targeting marginalized groups such as female-headed and asset-poor households. Strengthening monitoring systems and local governance will also support sustainable and equitable outcomes.</p>