The present paper has been devoted to discuss the problems and prospects of developing the rural poor through Micro Finance. Micro Finance has come to include a broaden range of service-credit, saving and insurance. Thus, the typical micro finance clients are low income persons who do not have access to formal financial institutions. Micro Finance is provided by NGOs, credit unions, co-operatives, private commercial banks and non-bank financial institutions. NABARD continued to provide 100% refinance to banks at an interest rate of 6.5% per annum for financing SHGs. It has been aptly observed that political interference and bureaucratic procedure are key problems in the working of MFIs. Lack of democratic functioning, delays in operational aspects, lack of appropriate legislation to regulate the credit flow to the poor, social exploitations by the private money lenders charging high rate of interest and by-passing the needy persons, weak banking system unable to access the poor, officials indulging in corrupt practices are the main problems faced by the beneficiaries. For improving the Micro Finance the suggestions include generation of awareness, encouraging FIs, expediting services, making policy changes and modification in NABARD Act, removing monopoly of government and making provision of social audit.