【正文】 ices of the poor thus increasing their ine. Directly, by increasing the access of poor people to financial services. Governments and donors may differ in their perceptions about the relative effectiveness and efficiency of the two pathways. Indeed, which one may receive more emphasis has to necessarily vary with country specific conditions. It follows that governments and donors also differ in their relative emphasis on the three objectives in micro and rural finance, . financial sustainability, depth of outreach, and welfare impact. This, of course, influences their view on the relative efficiency of different types of financial institutions, and thereby influences how financial policies are designed in practice and how the institutional landscape evolves. Because of market imperfections, the state has a legitimate role for investing in financial systems development. However, given the possibility of government failure(. governments may not be able to correct market failures), and social opportunity costs of public funds, there are of course also limitations of public investment in finance. There has been a shift in paradigm in rural finance in the late 1980s, and much of this can be traced to the failures of subsidized small farmer credit and the successes of a few MFIs. The objectives of financial policy have changed along with the paradigm shift. Initially, the focus was on improving the outreach of MFIs to the poor, that is, serve more of the poor (breadth of outreach) and more of the poorest of the poor (depth of outreach). Eventually, the objective of sustainability of financial institutions took on great importance. Following the work of Ohio State University and other institutions in the 1980s, the view emerged that the building of lasting, permanent financial institutions requires that they bee financially sustainable, that is, they cover their costs. Some analysts (for example, Christen et al. 1995。 Otero and Rhyne 1994) argued that increasing the depth of outreach and financial sustainability are patible objectives in the sense that increasing the scale of operations will also increase the absolute number of poor people among clients: “It is scale, not exclusive focus, that determines whether significant outreach to the poor will occur”. Several other authors present analysis that supports the notion of a tradeoff between improving depth of outreach, . reaching relatively poorer people, and achieving financial sustainability The tradeoff stems from the fact that transaction costs have a large fixed cost ponent so that unit costs for smaller savings deposits or smaller loans are high pared to larger financial transactions. This law of decreasing unit transaction costs with larger size transactions generates the tradeoff between improved outreach to the poor and financial sustainability, irrespective of the lending technology used. To cover the higher costs of these loans, interest rates need to either be set higher, or the MFI may follow a strategy of using economies of scale, scope and risk to cross subsidize smaller loans. Breadth of outreach (in terms of number of clientele) and depth of outreach (at present measured through the very imprecise, but widely used indicator of average loan size (or balance) in relation to percapita GDP are now regularly reported, . in the Microbanking Bulletin Wenner states that depth of outreach, specified as target maximum average loan size, has bee a criteria used by the IDB for certain instruments of (rural) microfinance policy. Financial sustainability of the financial institution and outreach to the poor are only two of the policy objectives of microfinance. The third policy objective relates to the impact of financial systems development, particularly on poverty reduction. When policy intervention and direct support for institution building requires public investments funded either by domestic or foreign taxes or donations, the question arises about the payoff or impact, for example in terms of economic growth and alleviation of poverty and food insecurity. Institutional innovation in microfinance following the new paradigm has relied on financial support by donors and governments and by other social investors such as philanthropic foundations. In fact, many, but not all, MFIs that reach large numbers of female and male clients below the poverty line require continued state or donor transfers to fully cover costs Moreover, most, if not all, of the MFIs featured in the Microbanking Bulletin that already reached financial sustainability have required public investment at some point in their existence, be it