Microfinance has emerged as a transformative financial instrument in fostering economic inclusion and entrepreneurial development among marginalized communities. This article investigates the multidimensional role of microfinance in empowering small-scale entrepreneurs, with particular emphasis on access to credit, capacity building, social capital formation, and sustainable livelihood creation. Drawing upon a comprehensive review of empirical studies, theoretical frameworks, and case analyses from developing and emerging economies, the article examines how microfinance institutions (MFIs) bridge the gap between formal financial systems and the underserved entrepreneurial segment. The findings indicate that microfinance not only provides financial capital but also serves as a catalyst for human capital development, gender empowerment, and community-level economic growth. The article further highlights existing challenges such as over-indebtedness, high interest rates, and institutional sustainability, while recommending a holistic model of integrated microfinance that combines credit provision with non-financial support services. The study contributes to the growing discourse on inclusive finance and offers actionable insights for policymakers, development practitioners, and financial institutions committed to advancing entrepreneurial ecosystems at the grassroots level.
Lakshmi et al. (2026) studied this question.