Rural areas in Nigeria over the years had suffered a set-back in terms of enjoying banking facilities because conventional banks prefer to locate and spread their branches across urban cities. The reason was that, banks are profit making institutions and could only make profit in urban areas where there is alot of economic and industrial activities going on. Consequent upon the above, the Federal Government of Nigeria during the Abacha administration introduced the community banking system which is later renamed as Microfinance banks. The major objective of the bank is to serve as financial intermediary in rural areas and operates within certain degree of flexibility as defined by the decree establishing it. In the light of the above, the paper examines the role of microfinance banks as well examine the challenges confronting the rural microfinance banKs among which include: low patronage, inadequate social infrastructure, lack of qualified staff poor attitude of people towards working in rural banks etc. The paper as well recommends that effort should be intensified by the banks staff to enlighten the community, the goals and aspiration of the microfinance banks as oppose to other miracle banks spring up. Also to win back the confidence of the rural populace and urban poor, the interest charge on loans should be very negligible. Government should as a matter of fact provide the enabling environment with which the banks can operate effectively.