Considering the widespread financing needs of small and medium enterprises and the need for empowering and enabling poor segments of societies to become self dependent, microfinance institutions have emerged out as the perfect guardians of such needs Although, the emergence of microfinancing concept is not very old and has not been shaped by a sizeable and structured form, the interest of investors and the effectiveness of the concept has undoubtedly triggered a significant rise in the number of microfinance institutions operating all over the world.
Consequent to this increase in commercialization of microfinance services and with the transformation of them into a whole new industry, there has been a significant increase in the number of people who are getting benefitted by the financial services offered by microfinance institutions all over the world As noted by there are not many developments and steps taken to reduce poverty all over the world in terms of effectiveness as compared to microfinancing institutions for financing needs of small and medium enterprises
As a general perception, financing needs of small and medium enterprises are viewed as tools for coping up with poverty and other social discriminations, which cannot be attended by larger financial institutions due to the lack of their penetration in rural areas and poor segments of society. One may also argue that these institutions are effective in developing or underdeveloped regions and it is therefore observed that microfinance institutions belonging to developed countries have largely set up their respective financing operations outside the countries of their origin. It is pertinent to mention here that microfinance institutions may have varying objectives and plans which largely depend on the economic, cultural and social condition and needs and preferences of people living in the area.
It can, therefore, be argued that with varying objectives and considerable differences in the demographics of regions of operations, the performance of these microfinance institutions differ from each other. Keeping in view these developments and the fact that there is a consistent increase in the number of microfinance institutions, it is interesting to investigate the performance of these institutions so as to understand whether their operational effectiveness and efficiency are such that it ensures a sustainable and stable future ahead. In this way, financing needs of small and medium enterprises proposed here are to understand the evolution of microfinancing industry and to investigate the performance of s microfinance institutions.