Recent observations of microlensing events in the Large Magellanic Cloud by the MACHO and EROS collaborations suggest that an important fraction of the galactic halo is in form of Massive Astrophysical Compact Halo Objects (MACHOs) with mass ~ 0.1 M_{odot}. We outline a scenario in which dark clusters of MACHOs and molecular clouds form in the halo at galactocentric distances larger than ~ 10-20 kpc, provide baryons are a major constituent of the halo. Possible signatures of the presence of molecular clouds in our galaxy are discussed. We also discuss how molecular clouds as well as MACHOs can be observed directly in the nearby M31 galaxy.
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