MSMEs comprise essential elements in the lubrication and development of any economy. In Ghana, the story makes no remarkable difference as MSMEs outnumber the large businesses in the economy. Over the years the government of Ghana has devised a number of policies aimed at developing MSMEs including the establishment of NBSSI. While most policies actually failed due to poor implementation, others however, succeeded. Few studies have been made in the past to identify the role of MSMEs to the development of Ghana’s economy, its problems and prospects which created a vacuum on the role of government and other financial institutions in the development of MSMEs. This study evaluates the role of Rural and Community Banks as a powerful tool for the poverty alleviation and entrepreneurial development in Ghana. Relevant literatures were reviewed to bring out salient issues on the subject matter of this paper. It was discovered that Ghanaian MSMEs face many domestic challenges in achieving economies of scale. It was concluded that these challenges are question marks on the viability of the RCBs. Many factors were found to contribute to mediocre performance of RCBs. These factors include inadequate cohesive regulatory and supervisory system for the RCBs, shortage of human capital, lack of capital, inadequacy of IT knowledge and entrepreneurs’ personal shortcomings. The researchers recommend introduction of good legal, policy and regulatory environment for the RCBs. In addition, Government should pursue its decentralisation policies, particularly financial decentralisation, and ensure that funds meant for district assemblies are channelled through RCBs in their catchment areas. Keywords: Challenges, Employment generation, RCBs, MSMEs, Ghan