Agriculture has been the backbone for any developing countries. Agriculture plays a key role in providing raw materials for the service sector and less developed world. But the finance is the major problem for agriculture sector so micro finance can help to increase production and growth. Amidst the issue, microfinance contributes great towards agricultural modernization and increased production in developing countries. This paper seeks to evaluate the impact of microfinance on agricultural production. The study recognized that microfinance is positively related to agricultural production and shows a significant impact on output levels. Major challenges identified with credit access include unavailability of collateral securities, small loan amounts and delay in the release of agricultural loans. The major challenge with credit administration is the lack of understanding of the loan acquisition process among farmers. The formation of active farmer-based organizations, educating farmers on the loan acquisition process, encouraging farmers to save, and encouraging Microfinance Institutions (MFIs) and other development partners to sufficiently finance agriculture were recommended. It is envisaged that such efforts have the potential to reduce income inequality thus contributing towards the achievement of the millennium development goal of poverty reduction.

KEYWORDS: Microfinance Institutions (MFI), Impact, Developing countries, Agricultural, Production.