Investigating the Key Success Factors of Microfinance Institutions by Analyzing Their Characteristics

What are the main success factors of microfinance institutions in providing financial services to poor people in a sustainable manner? In this article we try to answer this question. In one hand, we analyze the core compatibility between microeconomics of asymmetric information, transaction cost and risk, and new different operational mechanisms applied by microfinance institutions. On the other hand, we investigate key success factors by performance indices of microfinance institutions around the world. These analyses indicate that, with high emphasizing on financial sustainability, without government direct involvement and with using innovative operational mechanisms, such as group lending, applied by leading microfinance institutions, we can develop this industry. The results have important policy implications when microfinance is being accepted as a solution for creating sustainable access to financial services for poor and low-income people.
JEL Classification: G21, G28.
Key word: Microfinance, Sustainability, Outreach, Regulation and Supervision, Group-Lending.