Published Paper Details:

Microfinance Institutions (MFIs) have become pivotal agents of financial inclusion and socio-economic empowerment in India, particularly within rural and underserved regions. Originating from the Self-Help Group movement in the early 1990s, MFIs have evolved into key facilitators of access to credit, savings, and insurance for marginalized communities. Their expansion has been supported by institutional innovations, regulatory frameworks, and government-backed schemes such as MUDRA and CGTMSE, with over INR4.33 lakh crore in outstanding loan portfolios and more than 30 million active borrowers as of 2024. This study explores the financial sustainability of Indian MFIs defined as their ability to cover operational and financial costs without external subsidies. The paper analyses how MFIs achieve sustainability through diversified funding sources (e.g., equity, debt, securitization), efficient digital operations, robust risk management, and client-centric approaches. Challenges to sustainability include regulatory constraints, operational inefficiencies, financial volatility, and stakeholder resistance. Furthermore, external factors like economic downturns and technological disruption compound these risks. The study also highlights the transformative socio-economic impact of MFIs: enhancing rural household income, promoting women entrepreneurship, reducing reliance on informal credit, and fostering micro-enterprise development. Using empirical data from institutions like SIDBI and RBI, it underscores the importance of financial sustainability in enabling MFIs to maintain long-term service delivery and developmental impact. The research concludes by proposing strategic measures such as capacity building, diversified funding, policy engagement, and technology integration to strengthen financial resilience. By doing so, MFIs can continue to advance inclusive economic growth while staying true to their social mission. This paper contributes to the broader discourse on sustainable microfinance as a cornerstone of rural development and poverty alleviation in India.