Microfinance also known as microcredit, is a service given to the people who are ignored from general banking and unemployed or earning very little. Micro financing is an important tool for economic development, reducing poverty and giving empowerment to the communities at low level. Microfinance is known as the poverty alleviation tool. Microfinance is having two major objectives: firstly providing cheap loans to those needy poor people who are ignored by the recognized financial sector, and secondly to remain itself financially sustainable. The main objective of this study is to examine the factors that influence the performance of microfinance institutes of Pakistan. This research focuses on the efficiency of the MFIs in Pakistan, and will be helpful in policy making to monitor and enhance the economic growth and development through MFI. Most of the researcher focuses on the clients exclusively but there in more than that, there is a wider impact on non-client beneficiaries as well. To examine the impact of microfinance institutions on economic growth of Pakistan, A mixed method approach is utilized. The study is based on both primary and secondary sources of data as. The data have been collected for the period of 2007 to 2016 from 11 microfinance institutions leading to total 110 observations. And semistructured interviews were conducted from the beneficiaries of MFI. The pooled OLS regression was estimated to test the significance and impact of microfinance institutions on economic growth of Pakistan. Furthermore, thematic analysis is used to analysis interviews. Gross domestic product is the dependent variables. The independent variables are, total number of clients, total deposit, inflation and broad money supply. The research shows that TC (total clients) is directly related with GDP. It reveals that more the clients of MFI‟s, higher would be the GDP. It is additionally seen that there is a positive relationship of TD (total deposit) with GDP. This shows that with the increase xiii TD (total deposits) GDP will also increase. Thus, the research shows that there is no such significant relationship of M2 with economic development of Pakistan. This demonstrates that change in M2 will not bring any significant change in economic development. The pooled OLS results show that TC and TD have positive impact on GDP though inflation has a negative effect on GDP in Pakistan. However, M2 have a no such significant impact on GDP. Effective MFI is one that targets poor members of community for giving them credit, makes sure that credit is used in effective way and having positive impact on lives of poor people of a community. Furthermore, an MFI is ideal one when it ensures financial sustainability of program over long run. In literature, it is assumed that once credit is provided it will definitely bring positive impact on lives of deprived people. Hence it is refers that it very important to study mechanisms which can improve financial performance as well as efficiency of MFI. So that social as well as economic objectives of MFI can be achieved. Over the years, microfinance has become an effective strategy for enhancing economic growth in developing countries. Supervisor:- Dr. Saud Ahmed Khan