Ethiopia is one of the least developed countries with high incidence of poverty. Povertyrnreduction has been the center of development strategy in the country. Microfinancernprogram on the other hand have been accepted as instruments in fighting against povertyrnrnthrough out the world. Since 1996, Microfinance institutions (MFIs) in Ethiopia havernbeen developed both in size and program out reaches. Currently there are 27 MFIs inrnthe country. Despite of its expansion, little is known about the impact of the program inrnchanging the life of the low income households. The study therefore, tries to fill some ofrnthis gap by taking Addis Ababa as a case study.rnTo meet the objective of the study, both primary and secondary data were used. For thernprimary data, two kebeles from Addis Kifle Ketema were selected. 200 households wererninterviewed using random sampling. For data analysis, descriptive statistical andrneconometric model were adopted both for the entire sample and for various incomerngroups.rnrnThe study indicates that micro finance improves low income earning households 'rneconomic status. Households' income, expenditure and asset are improved as a result ofrnprogram participation. But the result is not uniform for various income groups. Forrnrelatively better-off households the impact is comparatively high in expenditure, whereasrnfor low income households the impact is highly explained in terms of increase inrnhousehold asset this would imply that the relative success of the program depends on trnthe amount of the loan and its utilization. rnrnMoreover, in this study there is evidence that micro finance improves the non economicrndimension of poverty. It improves social acceptance and decision m{1king of women. But,rnthe result also indicates that credit alone does not improve the status of the poor if it isrnnot substantiated by other technical supports that help the low income households torncope up with short term problems and enabling them better competitive in the long run.