Microfinance is the provision of financial services to households, smallholders farmers and small and microenterprises of the rural and urban areas.

Microfinance clients are generally low-income people who do not have access to formal financial institutions. In rural areas, they are usually small farmers and others who are engaged in small income-generating activities such as food processing and petty trade. In urban areas, Microfinance activities are more diverse and include shopkeepers, service providers, artisans, street vendors, etc.

Microfinance help poor people or low-income earners to meet their basic needs, and be in a better economic condition.

A Microfinance institution refers to an organization that offers financial services to low-income population. Such organization include NGOs, credit unions, SACCOs, SACAs, Community banks, commercial banks and non-bank financial institutions.