Microfinance Institutions (MFIs) have emerged as a significant player in supporting entrepreneurship across Africa, with Ethiopia being one of the countries where MFIs are actively involved. In Ethiopia, women entrepreneurs often face unique challenges due to socio-cultural norms and traditional gender roles. A mixed-methods approach was employed, integrating both qualitative and quantitative data sources to analyse the impact of MFIs on female entrepreneurship in Ethiopia. Secondary data from government reports and academic journals were supplemented with primary data collected through semi-structured interviews and focus group discussions among women entrepreneurs and MFI staff. The analysis reveals that while MFIs have contributed positively by providing financial support, they also face challenges such as insufficient awareness of gender-specific services, cultural barriers, and inadequate collateral requirements. These issues disproportionately affect female entrepreneurs, highlighting the need for tailored interventions. Despite progress, there is a clear gap in addressing the unique needs of women entrepreneurs within the MFI framework. This study underscores the importance of integrating gender-sensitive policies into MFI operations to enhance their effectiveness and inclusivity. Policymakers are encouraged to develop targeted programmes that address cultural barriers and improve access to collateral for female entrepreneurs. Additionally, there is a need for continuous training for MFIs on culturally appropriate business practices tailored towards women.