The study examined the contribution of POCSSBO 's microfinancing scheme to povertyrnreduction (based on descriptive analysis) and investigated the determinants of loanrnrepayment peljormance (based on a recursive model) using primary data, collected fromrna sample of 241 individual beneficiaries in Addis Ababa. the results indicate that, therncredit scheme has contributed positively towards poverty reduction. by creatingrnemployment opportunities for many program beneficiaries the credit scheme hasrncontributed positively to a rise in household income, as verified by the wilcoxon nonparametricrntest. by increasing ability to pay, the credit scheme has also contributedrnpositively toward improved access to health and educational facilities as well as inrnimproving the nutritional status of householdshowever, the peljormance in the area ofrnsaving mobilization was not satisfactdly due to the non-attachment of saving facility withrnthe credit scheme and poor effort in encouraging savingrnPOCSSBO's loan repayment peljormance was not satisfactDlY and the binomial probitrnmodel results indicate the existence of several filctors that significantly influence thernprobability of full loan repayment. While loan diversion, loan size, and monthly incomernfrom business financed by the loan are found to be repayment performance underminingrnfactors, beneficiwy 's age, perceived cost of defilUlt and suitability of repayment periodrnare found to be repayment enhancing factors.For greater contribution towards poverty alleviation, there is a need for an effectivernsaving mobilization strategy as well as a more transparent selection criteria in order tornimprove targeting efficiency. For improved loan repayment performance and overallrnsustainability of the credit scheme, credit provision should be based on non-subsidizedrninterest rate since interest free credit has negative demonstration effect and incentivernproblems. Also the office should consider repayment enhancing and undermining factorsrnin designing a more effective loan repayment mechanism.