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The purpose of this study was to investigate the determinants of financial performance of MFIs
in Ethiopia over a period of nine years (2010-2018) using data from eighteen micro finance
institutions selected using judgmental sampling technique. The study employed both internal
and external microfinance indicators. A quantitative research approach and a panel data
analysis were applied. The study used explanatory research design which was analyzed using
multiple regression. The finding of the study showed that capital asset ratio and size of micro
finance institutions have significant and positive effect on financial performance of MFIs. In
addition, earning ability had also significant effect but with a negative coefficient. Whereas
gearing ratio and liquidity have insignificant effect with negative coefficient. Market
concentration is significant with negative impact whereas GDP has statistically positive
significant effect. The external factor inflation was found to have insignificant effect on ROA.
The researchers recommend that focusing and reengineering the institutions in line with
indicators above can enhance the performance of the micro finance institutions in Ethiopia.