ABSTRACT
Most microfinance institutions focused their attention almost exclusively on outreach. For many, financial sustainability meant meeting cash flow needs. Much of the concern about financial sustainability came from the desire of donors to wean microfinance programs from the steady flow of subsidies. The most important key to financial viability, as revealed by the US Agency for International Development study, is the interest rate policy adopted by microfinance programs. The primary advantage of donor funds ultimately becomes associated with periodic restructuring of the microfinance institution’s liabilities. The key to long term financial viability is for programs to maintain very high portfolio quality standards. Financially viable microfinance institutions all demonstrate a strong corporate culture based on productivity enhancement. All viable programs maintain a fundamental focus on staff productivity and actively seek ways to improve lending efficiency. Successful programs incorporate community knowledge in the selection, enforcement and transaction processes.
