MSEs are basically set up with the goal of poverty alleviation. This enterprise have a very important and effective role in both developed and in developing countries because it is considered the backbone of their economies. MSEs can play a role in improving the socio-economic condition of the poor, create employment opportunity, job creates greater utilization of local raw materials and improve the economic growth of the country. Which indicates that without the establishment of micro and small scale enterprise, no nation can achieve a viable economic growth/development or the reduction of poverty. Even if MSEs play a vital role in the livelihood of rural household by generating income, peoples become little attention to them because of lack of necessary conditions in order to run this enterprises. This review investigate on the importance of MSEs for poverty alleviation and the challenges of micro and small scale enterprises for the operation of MSEs. The review result suggest that major challenges and problems that faces the small scale enterprise in order to operating their business is influenced by lack of access to finance, lack of infrastructure, lack of training in entrepreneurial and management skills, lack of information on business opportunities, lack of access to premise, Lack of access to capital, inefficient financial market, problem of skilled manpower, Lack of clear and pragmatic national policy, Socio cultural constraints, Arbitrary and subjective tax system, high interest rates for borrowing, lack of production place, lack of market, lack of credit facilities are the major factors influencing on the operation of MSEs for the alleviation of poverty.