Financial inclusion is an essential pre-condition for sustainable economic development. The process of financial inclusion has been gaining importance for the overall economic development of the country. Exclusion of the people at the bottom of the pyramid without proper financial inputs will have negative impact on the economy. Informal sector consist of units engaged in the production of goods and services with primary objectives of generating employment and income to the person concerned. Micro finance became alternative source of loans to the poor people with the goal of creating financial inclusion and equality. Informal sector constitute an important part of the Indian economy. More than 90.00 per cent of workforce belongs to this sector of the economy. Informal economy contributes more than 50.00 per cent of the national products of the Indian economy. Most of the informal sector activities are highly encouraged by the Self Help Groups in the Coastal Karnataka. Micro Finance activities through Self Help Groups play crucial role in the development of the informal sector activities.