Microfinance provides small loans to poor families and individuals. It targets low-income clients who lack access to traditional banking services. Loans typically range from Rs. 5,000 to Rs. 10,000 and are used by entrepreneurs and households to invest in businesses according to their own priorities. The microfinance sector works mainly in rural areas, where 70% of Indians live. It faces challenges in evaluating creditworthiness for small loans and covering costs, but has potential for growth in India's large rural economy and developing financial system.