Microfinance is promoted as a key tool for women's economic empowerment in developing economies. However, its impact on fostering genuine entrepreneurial agency and sustainable livelihood transformation remains contested, particularly within specific socio-cultural contexts. This study investigates how microfinance services influence the entrepreneurial empowerment of women in Ethiopia, specifically examining changes in perceived agency, decision-making autonomy, and livelihood strategies. A qualitative, interpretive methodology was employed. Data were collected via in-depth, semi-structured interviews with 32 women entrepreneurs who are clients of multiple microfinance institutions. Thematic analysis was used to analyse the data. Findings reveal a complex, non-linear pathway to empowerment. While access to credit was nearly universal, a significant theme was the conditional nature of increased agency, which was often contingent on initial business success and family support. A key concrete result is that over two-thirds of participants reported using a portion of their loans for household consumption or social obligations, challenging assumptions of purely productive investment. Microfinance contributes to women's entrepreneurial empowerment but does not automatically guarantee it. Empowerment outcomes are mediated by entrenched social norms, household dynamics, and the flexibility of loan usage. Microfinance institutions should design products that acknowledge and accommodate the diverse financial realities of women entrepreneurs, including hybrid loan structures. Complementary non-financial services focusing on business skills and gender norms are critical. women's empowerment, microfinance, entrepreneurship, agency, livelihoods, Ethiopia, qualitative research This paper provides novel empirical evidence on the nuanced and contingent pathways through which microfinance influences women's entrepreneurial agency, highlighting the critical role of intra-household bargaining and the diversion of loans for social reproduction.