Microfinance means providing very poor families with very small loans (microcredit) to help them and to engage in productive activities or grow their tiny business. Traditionally, microfinance was focused on providing a very standardized credit product. The poor, just like anyone else, need a diverse range of financial instruments to be able to build assets, stabilize consumption and protect themselves against risks. Thus, we see a broadening of the concept of microfinance- our current challenge is to find efficient and reliable ways of providing a richer menu of microfinance products. An economically poor individual gains strength as part of a group. Besides, financing through SHGs, reduces transaction costs for both lenders and borrowers. Microfinance can help the poor to increase income, build viable businesses and reduce their vulnerability to external shocks.