Microfinance promises to trim down poverty. To achieve this noble objective micro financerninstitutions (MFIs) have to become steadily profitable because donor constancy is not arngiven. Thus important question is: what factors drive the financial sustainability of MFIs?rnSeveral studies have been conducted to determine the factors affecting financialrnsustainability of micro finance institutions using large and well developed MFIs in variousrncountries. However, no such study has been conducted in Ethiopia where majority of MFIsrnare small. This study followed a quantitative research approach using panel datarnregression as the data analysis technique. The study was based on six years secondaryrndata obtained from 12 sampled MFIs in Ethiopia. We reported three important findings.rnFirst, we show that a high quality credit portfolio, coupled with the application ofrnsufficiently high interest rates that allow a reasonable profit and sound management arerninstrumental to the financial sustainability of MFIs. Second, we show that the percentagernof women among the clientele has a weak statistically non-significant negative effect onrnfinancial sustainability of MFls. Third, we find that the client outreach of micro financernprograms and the age of MFIs have a positive but lesser impact on attainment of financialrnsustainability. The policy implication is that MFIs have to emulate profit-making bankingrnpractices by implementing a sound financial management and good managerialrngovernance to assure their financial sustainability.