Micro-Finance Institutions (MFIs) play a vital role in the financial system by providing financialrnservices to those who cannot access from the conventional banking service in developingrncountries. The main objective of this study was to examine the determinants of financial distressrnin the case of selected MFIs in Ethiopia. Balanced fixed effect panel regression was used for therndata of ten microfinance institutions in the sample covered the period from 2006 to 2015 fromrnthe total population of thirty five microfinance institutions operating in the country . The studyrnused the Altmanâ€™s Z score of the MFIs as the proxy of financial distress to measure financialrnhealthiness of MFIs. The study finds that capital adequacy, earning ability, liquidity andrnmicrofinance institutions age have significant negative impact on financial distress of MFIs,rnwhere as portfolio at risk greater than 30 days has significant positive influence on financialrndistress of MFIs. Operational efficiency of MFIs which is measured by operating expense torngross loan portfolio has negative influence on financial health of MFIs but statsticallyrninsignificant. Macro economic factors GDP and inflation have no significant influence onrnfinancial distress of MFIs in Ethiopia. Based on the findings, the study recommends thatrnPAR>30 days which is found to negatively influencing the financial health of the MFIs need tornbe closely watched and taken care of. Thus, the managements of MFIs ensure strict adherence tornregular loan monitoring and also credit policies of MFIs must be regularly updated. Moreover,rnmanagements of MFIs should give great emphasis in properly managing capital to asset ratio.rnRegulators and policy makers also need to set the minimum capital adequacy requirements forrnMFIs because well capitalized MFIs are more flexible in dealing with problems arising fromrnunexpected losses.rnKeywords: Financial Distress, MFIs, Altmanâ€™s Z score