This thesis contains the findings of an examination of the relations ship between internalrnCorporate governance stricter' and the financial performance of Ethiopian microfinancernInstitutions, using a sample of 11 microfinance institutions' from the year 2006 to 2009 (a total of'rn44 Microfinance institutions -year observations) The corporate governance data was collectedrnDirectly from the microfinance institutions chief executive officer, a secretary o f board, and otherrnBoard members, while the financial performance data was collected from the association ofrnEthiopian microfinance institution's financial analysis report, the thesis seek to determinernrnWhether better-governed microfinance institution ions tend to be associated ,higher financialrnReturns than their poorly-governed counterparts. The internal corporate governance â€“ financial rnPerformance relation is investigated by applying the panel data regression analysis model. ThernResults based on this regression analysis are mixed First board diversity in gender, thernfrequency of board meeting and the existence of board committee has statically significant negative impact on financial performance of micro finance institution which was measured by return on asset (RAO) . Second board diversity in professional back ground. Percentage of share held byrnBoard members . board size and percentage of non executive director have no statistically significant impact on financial performance of microfinance institution which was measured by return on asset (RAO)