In the present world we live in, practically everything revolves around money. With the growth of world economies different types of financial services have emerged to help people deal with the management of their money and other resources. In every country in the world both developing and developed countries, rich and poor economies, high-income or low-income countries, there exists some sort of financial institutions that serve people. The only difference and which is the main topic of discussion is that a large number of people in these different countries have little or no access to the financial services . The risks involved in giving loans without collaterals and also the high transaction costs involved with little loans, including the inability of financial institutions to operate in the very remote rural villages where low-income households live makes it difficult for the formal financial institutions. According to latest estimation by Financial access Initiative there are about “2.5 Billion adults in the world who do not use formal financial services to borrow or save” with about 80% of the total adult population of sub-Saharan Africa “unbanked”.[1]

This gap between demand and supply of financial services is being filled up by Microfinance which is the provision of financial services to the poor. There has been a global movement in favor of microfinance in these past two decades from the slums of Dakar in Bangladesh and Belen in Peru to the dark corners of the squalors of Ajengunle in Lagos, Nigeria. Due to the fact that access to financial services can go a long way to help the poor in managing risks and loss better and also gives them the opportunity to make decisions that affect their own lives on what to do with their money for example how to send money from the city to a poor family member who lives in a very remote area in the village, how to save for future investment like the school fees of their children, for emergencies like sickness or death, take opportunities that help them increase their income or start business. Governments, International institutions, development NGOs around the world have all in one way or the other being instruments to the spread of Microfinance. As the potential Market for Microfinance is huge, it is only but expedient that we get more understanding of Microfinance and its role in poverty reduction. Due to the nature of MFIs most of them depend on donor contributions to cover some administrative costs like salaries, rents depreciation of assets, loan loss and so on. In a situation where by there are moves by some MFIs to become financially self-sufficient[2], there is every possibility that those MFIs may have the tendencies to loan to borrowers who are on the poverty line or just slightly below or above the poverty lines of the country in question. In Serving the “poor” my main objective is to understand how these MFIs independent of donor funds cover their cost without comprising the goal of Microfinance which is providing quality services to the poor.