Using an econometric approach on panel data collected from 53 microfinance institutions(MFIs) in Uganda over a period of six years (annual), this study has identified thedeterminants of sustainability and outreach of MFIs. In addition, the study has also usedsurvey data from 31 non-Bank of Uganda (BOU) regulated MFIs or Tier 4 MFIs, fourBOU-regulated non-bank MFIs, 12 commercial banks and the BOU itself to assess theeffects of financial regulation of MFIs on their sustainability and outreach.The results indicate that sustainability is positively and significantly driven by real effectivelending rates and age of an MFI, and negatively by the ratio of gross outstanding loanportfolio to total assets, the ratio of average loan size to the national per capita income, theunit cost of loans disbursed, and a group-based delivery mechanism compared to anindividual-based delivery mechanism. Outreach is positively and significantly driven by anMFI being a savings and credit co-operative (SACCO) compared to being a privatecompany, effectiveness of governance, the age of an MFI, the ratio of gross outstandingloan portfolio to total assets, and the ratio of salary/wage paid to staff to the national percapita income, and negatively by the ratio of average loan size to the national per capitaincome and the unit cost of loans disbursed. In the short run, financial regulation negativelyinfluences the outreach of MFIs, but positively affects their sustainability. In the long term,financial regulation positively influences both the sustainability and the outreach of MFIs.The results suggest a number of policy options. First, the MFIs should focus on the realeffective lending rate, given its significance in their sustainability. Second, for a realeffective lending rate to be relatively low, the rate of inflation should be low. This calls forprudent monetary policy management by the government. Thirdly, the cost of doingbusiness should be kept low. This calls for prudence in business management by the MFIsand creating a cost-effective business environment by the government. While the results aretentative, in order to expand outreach more SACCOs should be established and the MFIsshould commit more funds to lending purposes compared to other investments. Finally,before enacting financial legislation, it is important that its benefits and costs are adequatelyassessed to ensure that the benefits outweigh the costs both in the short and long term.