Microfinance Institutions (MFI) promise to deliver poverty alleviation while being sustainable. However, in recent years, the idea of microfinance has been questioned. The study of MFIs or their business environment from a strategic management perspective has not been taken up. This is despite the fact that MFIs promise financial inclusion of the bottom-of-the-pyramid segment and, in turn, lead to sustainable development. Moreover, MFIs have to regularly negotiate various tradeoffs, the study of which could be interesting from a strategic perspective. For instance, empirical evidence suggests that MFIs face a tradeoff between profitability (financial sustainability) and outreach (reaching the poorest customers). A study of the ecosystem of MFIs from the strategic perspective would also be of interest to other stakeholders such as donors, investors, banks and government. For instance, subsidies can play an important role to help MFIs serve the poorest segment. Such subsidies may be in the form of donor and government grants, when MFIs have access to capital at below-market interest rates. This has important implications for policy makers as it shows one way where right kind of regulations could help MFIs. On the other hand, the rapid growth of microfinance has brought increasing calls for regulation, but complying with prudential regulations and the associated supervision can be especially costly for MFIs hurting their sustainability. In India, MFIs have been accused of seeking profits at the expense of the poor, attracting stringent regulations that stifled their growth. Regulatory interventions could help the MFIs to scale up and professionalize, or it may simply stifle their development. This paper attempts to approach the issue of regulatory impact on the microfinance industry from a strategic management perspective. The discussion in this paper entails a literature review that shows the importance of the industry and the regulatory effects on a firm; it then looks at some of the tradeoffs faced by MFIs and also looks at the literature on regulations of MFIs. An attempt has been made to identify the gaps in the existing literature and present them in the conclusion.

Microfinance Institutions (MFI) aim to attain the double bottom line by promising to deliver poverty alleviation while being financially sustainable. Inclusive growth focuses on economic growth which is a necessary and crucial condition for poverty reduction. It adopts a longterm perspective and is concerned with sustained growth. To ensure sustained growth, it should be broad-based across sectors and it should also be inclusive of the large part of the labor force. Here inclusiveness refers to equality of opportunity in terms of access to markets, resources and unbiased regulatory environment for businesses and individuals (Ianchovichina and Lundstrom, 2009). In India and in other developing and underdeveloped countries, the equality of opportunity is severely skewed. One example of this is financial exclusion of the bottom-of-the-pyramid segment of the society. There is a large overlap between poverty and permanent financial exclusion. Both poverty and financial exclusion result in reduction of choices which affects social interaction and leads to reduced participation in society. Without inclusive growth and development, growth cannot be sustainable. Thus, there is a deep relationship between inclusive growth and sustainable development.

Business Strategy, Journal, The Impact of Regulations, Microfinance Institutions (MFI), Millennium Development Goals (MDGs), Effect of Regulations, Microfinance Industry, A Strategic Perspective.