This paper explores the reason for the existence of a gap between microfinance institutions’ (MFIs) demand for finance and the current supply of private sector funds, which are controlled by investors who remain cool to investing in MFIs despite the microfinance industry’s demonstrated profit potential. The authors argue that MFIs’ difficulty in attracting private capital is at partly a result of the industry having been created largely out of non-commercial capital. The paper uses a “lifecycle” framework to describe the ideal and actual capital needs that MFIs have as they mature. By comparing to MFIs’ lifecycles with those of traditional businesses, the paper highlights MFIs’ deviations from normal business development and how they likely impact the microfinance industry’s ability to attract true commercial capital. The paper explores specific challenges for the industry to mobilize commercial capital, including savings, debt and equity (both foreign and domestic), as well as the impact that continued donor subsidies have on microfinance commercialization. The document presents a vision for a truly commercial microfinance industry that is not dominated by transformed microfinance NGOs, but private sector driven. It concludes with suggestions to donors and other stakeholders on how to move the industry toward this vision as the best way to significantly expand outreach to the poor.