ABSTRACT The study sought to establish and evaluate the role of MFI in the development of SME in Meru district and was driven by four objectives of establishing whether there are any existing approaches by MFI's in developing SME, analyzing how small and micro entrepreneurs benefit from micro-finance institutions, evaluating challenges microfinance institutions face in helping develop SME's, identifYing the possible solutions of how to improve micro credit schemes in Meru district. To achieve these objectives, the researcher sampled 30 respondents from Equity Bank Meru branch Kenya and these included employees of the bank, manager of the bank. The study utilized two research methods, two data collection instruments. Structured questionnaire and interview guide. The collected data was presented in tabular form and presented statistically. In as far as findings are concerned, it was found out that small micro-entrepreneurs benefit from micro-finance institutions in Meru and it was found out that absence of serious social reforms probably guarantees continued poverty in large parts of the Kenya. It was also found out that, this can be a great help to poor people with good math skills, and some predisposition for entrepreneurship. The researcher recommends that Institutions providing access to finance for long term investment in capital goods and short term financing for the purchase of raw materials or other items of working capital should be essential for SME creation and development. He also recommends that there should be availability of assistance in the selection and acquisition of technology as a valuable service when investment decisions are to be made especially when starting a business or in the case of business upgrading and growth.
