Microfinance is the provision of financial serves to the poor people with very small business or business projects. These Microfinance institutions (MFIs) face the challenge of sustainability and outreach. As the MFIs industry grow in size, the need for increased financing coupled with unpredictability of donor funds trigger the issue of building a sustainable MFIs that stand on their own leg that is MFIs shall start covering their own cost of operation from their program revenues. The paper is an attempt to understand the operational difficulties faced by MFIs and commercial banks and shall discuss simple means of reaching the noble credit to vast majorities of the rural population. Workable strategies developed to meet the challenges and effectively implement the micro finance delivery modes. This study is based on both primary and secondary data. The primary data was collected through extensive interviews held with Micro finance institutions like the Gujarat based NGO, SEWA (Self Employed Women's Association) which is carrying out extensive micro credit activities through both SEWA Bank and its various micro credit trusts, and micro credit associations. Extensive interviews were held with the Head – Rural Operations –‘Rural Operations Group’, Central Operations, Mumbai of ICICI