This focus note journeys through the emergence, history and present status of microfinance in India. It discusses the various stages of evolution while highlighting key challenges of each stage. It pinpoints the issues related to transaction costs of delivering microfinance services in Andhra Pradesh and their impacts. It gives lessons relating to resource constraints, transparency, efficiency in operations, and internal and external dynamics to the investors, promoters and to the practitioners in microfinance as well. The note makes a strong case of immense potential the MFIs have in terms of meeting the financial needs of the poor and also maintaining high organisational standards.

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