| Summary: | Microfinance institutions (MFIs) enable micro entrepreneurs to become self-sufficient economic actors instead of relying on charity or welfare to meet their basic needs. Loans are never gifts and must be reimbursed by borrowers. Hence microfinance clearly operates in a market economy. There are, however, two approaches: non-profit institutions that aim, sometimes unsuccessfully, to break even, and for-profit companies that involve IPOs and, if possible, profits. In both cases, due to the risk incurred by lenders and their considerable operating costs, interest rates are higher than those of bank loans. This article compares the two approaches anchored to the economic contexts of two countries that differ greatly in terms of development and living standards, i.e. India and the United States. Whatever the model, the paper concludes, the sustainability of MFIs must be guaranteed both in downturns and upturns of the economic cycle.
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