This paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as an
effective tool for eradicating poverty and also the history of microfinance banks in Nigeria. It argues that while
microfinance has developed some innovative management and business strategies, its impact on poverty
reduction remains in doubt. Micro finance impact on poverty reduction in Imo state was studied by a stratified
sampling method in the selection of the customers. The study area was divided into 16 sample units based on
the various local government areas in Imo state. Four (4) MFBs were purposefully selected from each of the 3
Senatorial Zones, making a total of 12 MFBs. In order to have unbiased selection of samples, Three Hundred
and eighty two questionnaires (382) were randomly distributed to customers of these selected microfinance
Banks in the three senatorial Zones as follows, namely: Owerri (82), Okigwe (100) and Orlu (200). The result
revealed that majority of respondents were male constituting about 78% while women 22% and majority of the
respondents were married (65%), single (33%) divorced (2%). 137 of the respondents do not have any formal
education, 67 possess primary school leaving certificate. 81 indicated having secondary school certificate. 71
with diploma / NCE and its equivalent. 28 of them have first degree certificate and above representing 36%,
17%, 21%, 19% and 7% respectively. The monthly income brackets of the respondents show that One hundred
and eleven (111) respondents (29%) indicated earning N10,000 N15,000, 95 respondents or 25% indicated
N15,001 – N20,000 as their income bracket, 94 or 24% were earning above N20,000, while 84 (22%) indicated
earning below N10,000. From the result, high income class has more capacity to save than poor dwelling in rural
areas. The finding appears to support the predication of Economics theory of savings which argues that saving is
a function of the level of income. The implication of this study is that the federal government of Nigeria and
financial institutions in the country should take up the challenge of establishing bank branches in the rural areas
or make formidable arrangement for supplying more credit to the rural dwellers.