A Dissertation Submitted in Partial Fulfillment of the Requirements for Award of Masters Degree of Science in Accounting and Finance (MSc A&F) of Mzumbe University.Poverty is a threat around the world. Almost every country has been faced with poverty irrespective of the level of development. Due to this, most countries find solutions in order to combat this disaster and Microfinance Institutions is among the solutions because they have the potential to alleviate poverty directly by providing financial services to household, The objective of the study was to examine the Role of Microfinance Institution in Poverty Reduction in Tanzania. Specifically, the study sought to find out the effect of National Microfinance Bank services and find out the challenges facing clientele of National Microfinance Bank in poverty reduction. The study was conducted at Ngara District Council in Kagera region. The researcher use descriptive statistical approach to describe the findings concerning the subject matter, target population was micro and small entrepreneurs who access loans as well as employees from bank and other sectors. The sample size was 44 NMB beneficiaries and 6 NMB staff. Purposive sampling technique was used to choose the respondent whereby questionnaire, interview and documentary review were applied as tools of data collection. Both qualitative and quantitative data analysis method with the aid of statistical package for social science (SPSS) was used in analyzing data. The study findings show positive significant relation of increase in the number of NMB employees, loans and advances, number of customers, number of branches and number of automatic teller machine for the period from 2011 to 2016, as well as an increase in the number of savings accounts and improved access to social development. The results reveal that there were some challenges such as the amount of loan was not enough, it was not easy to acquire loan, interest rate were too high and majority lack high value collateral Therefore, researcher recommends that microfinance institutions should increased the amount of loans, change policy and procedure in order to make acquisition of loans easier, reduce interest rate and find another alternative apart from collateral to secure loans.