Microfinance institutions (MFIs) play a critical role in fostering inclusive growth by offering financial services to marginalized communities, particularly in rural and remote areas. This paper investigates the impact of microfinance on small businesses, entrepreneurship, and economic development in North Bihar, a region characterized by financial exclusion and economic challenges. Using primary survey data and secondary sources, this study evaluates the effectiveness of microfinance in improving livelihoods, financial literacy, and socio-economic mobility. The findings reveal that microfinance contributes significantly to income generation, employment creation, and women’s empowerment. However, challenges such as high interest rates, repayment defaults, and regulatory constraints hinder its full potential. The paper concludes with recommendations for enhancing microfinance efficiency through policy reforms, digital technology integration, and financial literacy programs.