The paper examines the link between microfinance and the fight against poverty in developing countries. It explores the issues and the limits of the major approaches (welfarist and institutionalist) in microfinance and presents different forms of contract in microfinance. It further analyses the current status of microfinance in developing countries, its characteristics, and its articulation with the policies against poverty and inequality. Recent policies against poverty, advocated by both the donors and developing countries, view the microfinance sector as a key tool of public policy by establishing regulatory frameworks and framing national policies relating to microfinance.