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As the name implies, microfinance institutions are bankers and lenders who provide microfinance services, such as deposits, loans, payment services, money transfers, and insurance. The importance of microfinance is that it provides much-needed financial services to poor and low-income households, entrepreneurs, and nascent businesses, who would otherwise not have access to such services.  

The role of microfinance in economic development is that it serves the needs of economically marginalized populations. In short, the purpose of microfinance is to finance the livelihood, health care, housing improvements, small business creation, and other needs in under served populations, specifically poverty and near-poverty level individuals in the U.S. and worldwide.

Put simply, the importance of microfinance, and thereby of microfinance institutions, is that microfinance is increasingly being considered as one of the most effective tools for reducing poverty, according to MicrofinanceInfo.com, a website that provides information and resources related to microfinance. 

The goals for microfinance institutions, and hence the function of microfinance is to:   

Be a viable financial institution developing sustainable communities.  Mobilize resources to provide financial and support services to the poor, particularly women, for viable productive income generation enterprises enabling them to reduce their poverty. Learn and evaluate what helps people to move out of poverty faster. Create opportunities for self-employment for the underprivileged. Train rural poor in simple skills and enable them to utilize the available resources and contribute to employment and income generation in rural areas.

What a microfinance company is has changed in recent years. Historically, the importance of microfinance was that it served a great role in alleviating poverty. According to Investopedia, "For many years, microfinance had this primary social objective and so traditional MFIs consisted only of non-governmental organizations (NGO), specialized microfinance banks and public sector banks."  The role of microfinance in economic development was that it helped struggling individuals, and even communities, gain access to financial services, and hopefully, rise from poverty. Microfinance companies, then, were generally nonprofit or governmental institutions that sought to help the poor.

Some non-profit MFIs (microfinance companies) are transforming themselves into profit-seeking institutions to achieve greater strength, sustainability and market reach. They are being joined in the microfinance marketplace by consumer finance companies, like GE Finance and Citi Finance. 'Big-box' consumer retailers, like Wal-Mart, Elektra and Tesco are beginning to emerge as consumer lenders and a few are venturing into microfinance. 

Whether for-profit or nonprofit, microfinance seeks to assist the poor, and indeed, microfinance institutions seek to be the bankers of the poor. For-profit microfinance companies see this sector as underserved and a great way to make a profit. By contrast, nonprofit microfinance companies seek to help the poor for altruistic reasons.