This study aimed at assessing the contribution of micro finance to poverty reduction in Batticaloa District of Sri Lanka. Specifically, the study had the aim of assessing the contribution of micro finance to the social development of entrepreneurs, to determine the impact of microfinance to poverty reduction and also finding out challenges facing entrepreneurs in the credit acquisition from micro finance. The study was carried out in Batticaloa District of Sri Lanka. The study employed descriptive statistical approach to describe the findings from selected case studies, with the aim on describe the data and characteristics about what is being studied. The target population was the Entrepreneurs who acquire loans and other financial services from various financial institutions such as Samurdhi Bank, BRAC Sri Lanka, Navagiraka and Commercial Banks. These were interviewed by asking them to answer both closed and open ended questions. The sample comprised a total of 120 entrepreneurs(Households). The study findings revealed that there is positive contribution of microfinance to the social development, in which there is better access to health, education and basic services and greater social respect. The contribution of education level and entrepreneurial skills has positive impact to poverty reduction. From the finding obtained it has been found that micro finance has a positive impact to poverty reduction in which there is increase in income, better living conditions and better access to basic needs. Lastly study found that challenges facing entrepreneurs are short time for loan repayment, low amount offered by MFIs, expensive collaterals and high interest rates. It is therefore recommended that government and other stakeholders should work together to make sure that, time given to repay loans is increased, to increase the amount which is borrowed, the collateral for loans should be that which most Entrepreneurs can afford and thirdly the interest rates should be lowered. Therefore, the major purpose of this study are analysis contribution of micro finance on poverty alleviation and lessons learn to future economic development.