The Central Bank of Nigeria (CBN) in its effort to include all strata of the population in the financial sector has said that promotion of Microfinance is a vital strategy. This strategy of financial inclusion or inclusive financing according to Wikipedia, 2011 is the delivery of financial services at affordable costs to sections of disadvantaged and segments of low income of the society.
Even though experts say the definition is not wide enough limited. Many believe that financial inclusion is about including every member of the society to have access to financial products and services when he or she needs it, to leverage on opportunities that will lead to increase in their incomes. The main objective of financial inclusion is poverty alleviation. The deepening of access of financial services such as credit persons with low income would empowered to create wealth.
Microfinance is about providing financial services to the poor and the low-income earners.
It was on this note that the Central Bank of Nigeria in 2005, formulated the National Microfinance policy along the objective of the Millennium Development Goals and the National Economic Empowerment and Development Strategy (NEEDS). This is the coming of formal Microfinance sector in the country.
On the heels of the collapse of many Microfinance Banks, the CBN had begun to look at ways of improving the sub sector. The CBN had since undertaken review of the policy to address the identified challenges of the emergent sub sector.
According to Mr. B.D Umar, director, Special Insured Institutions Department, Nigeria Deposit Insurance Corporation (CIBN),  the objectives of Microfinance includes provision of diversified affordable and dependable financial services to economically poor which otherwise would have been excluded .
“Microfinance is supposed to create employment opportunities and increase in productivity of the active poor in the country there by ensuring effective systemic and focused participation of the poor in socio economic development and resource allocation.”
In Nigeria, credit has  recognized as an essential tool for promoting small and Micro Enterprises (SMEs) about 70 percent of the population are engaged in the informal sector or in agricultural production.
The Federal and State governments have recognized that for sustainable growth and development, the financial empowerment of the rural areas is vital, being the repository of the predominantly poor in society and in particular the SMEs. If this growth strategy is adopted and the latent entrepreneurial capabilities of this large segment of the people is sufficiently stimulated and sustained, then positive multipliers will be felt throughout the economy. To give effect to these aspirations various policies have been instituted over time by the Federal Government to improve rural enterprise production capabilities, one of which is microfinance.
According to Dr. Mustapha Muktar, department of Economics, Bayero University, the small and medium scale entrepreneurs in rural areas lack the necessary financial services, especially credit from the commercial banks; this is because they are considered not credit worthy. Consequently, they depended on families, friends and other informal sources of funds to finance their businesses.  However, the microfinance has failed to bridge the gap.
About 70 percent of poor people in the country live in the rural areas and 80 percent of them are farmers and artisans. Microfinance banks have therefore been the main sources of funding to these less disadvantaged groups. Rural people are empowered through microfinance loans and services, and hence small-scale agricultural practice and micro-enterprise is developed.
Even though agriculture and micro-enterprises contributes immensely to job creation, and are of particular interest to all Microfinance Banks in rural areas. Microfinance banks have so far engaged in extending credits and other services to many rural enterprise and hence generating employment and promoting entrepreneurship. But the promotion of employment in rural areas by microfinance banks has not been effective hence the needed result has not been achieved.
Another area in which Microfinance was expected to play a huge role is in the area of Skill Acquisition.  This is done through building capacities for wealth creation among enterprising poor people and promoting sustainable livelihood by strengthening rural responsive banking methodology and the introduction of simple cost-benefit analysis in the conduct of businesses.
Employment and income generation are important aspects of poverty alleviation efforts microfinance Banks.
Investigations reveal that some microfinance banks have adequate poverty alleviation programmes, while a lot of them have but are busy competing with commercial banks in urban areas. Other roles played by microfinance banks include; reorientation of the rural populace on a sound financial practices, as well as issues such as reproductive health care, and girl child education. All these areas have a direct link with entrepreneurial capabilities of the rural people.
However microfinance Banks have not been able to fulfill its role in delivering the needed services due to some challenges facing it; these include: high operating cost, repayment problem. Loan default is a major threat to microfinance banks’ sustainability. According to Muktar it is the deadly “virus” which afflicts the operation of the banks. It demoralizes staff and deprives beneficiaries of further valuable services.
Inadequate and inexperienced credit staff is another challenge facing microfinance Banks. Micro financing is more than dispensing loans, to be viable, microfinance banks require experienced and skilled personnel. As a young and growing industry, there is a dearth of experienced staff in planning, product development and effective engagement with clients.
Microfinance banks are playing great role especially in promoting entrepreneurs in rural areas, they are however facing problems of high operating cost.