Women's empowerment is crucial to improve their political, social, economic, health and sanitary situation. This paper estimates the effect of microfinance on women's empowerment in Djibouti. Using cross-sectional data of 692 households based in Djibouti's six major centres Djibouti-ville, Arta, Ali-Sabieh, Dikhil, Obock and Tadjourah, we construct original measures of women's empowerment index covering three dimensions (economic, social and interpersonal). We examine the extent to which access to microfinance, amount of loans obtained and their duration modifies women's status at home. Employing the instrumental variables (IV) estimations and a number of econometric techniques as robustness checks, we find a significantly positive association between microcredit and women's empowerment. Households with access to loans from MFIs are respectively 35.4%, 30.9% and 10.1% more likely to be economically, socially and interpersonally empowered. The effect of access to microfinance and the number of loans is also significant. However, women who took four or more loans from microfinance institutions are 27.7%, 23.5% and 6.8% less likely to be economically, socially and interpersonally empowered. The results of the study confirm generally positive socioeconomic effects of microfinance programmes.