This document discusses the transformation of microfinance in India based on international experiences and the Indian context. It outlines challenges facing microfinance organizations (MFOs) in India related to size, diversity of services, financial sustainability, and tax status. Options for transformation include becoming a non-banking financial company (NBFC), cooperative, or local area bank. The document argues MFOs need flexibility to grow and offer diverse products while maintaining financial self-sufficiency through prudent costs and revenue targets. It suggests regulatory implications should allow MFOs organic growth, expansion in service areas, and NGO investment in for-profit MFOs.

3. The Setting