Ethiopia has a vast amount of hydropower potential despite the fact that its people are not yetrnbenefited as required, especially those in the remote scattered rural villages. The people inrnthese areas have a great tendency of using traditional energy production methods, whichrnresult in deforestation, environmental degradation, health problems, and so many otherrnunpleasant life styles. Small hydropower plants can solve the above mentioned problems. Butrntheir installation has not come into reality as required. Even though they are installed at somernplaces, they stop functioning before their service period. There may be many reasons behindrnthe above problems. One of the problems which results in slow growth of small hydropowerrnconstruction has been discussed in this study, which is the unclear financial and economicrnanalysis that results in financial and economic infeasibility. Before the installation of anyrnEngineering structure, it is crucial to analyze the financial and economic analysis of therninstalled project. Financial analysis is usually undertaken in order to evaluate the cost andrnbenefit brought about by the project to a person or business, while the economic analysis isrnundertaken in order to assess the overall impact of the project on the economic welfare of thernresidents of a specific region. This paper discusses the financial and economic status of smallrnhydro powers in Ethiopia. Four small hydro power projects which are found in differentrnregions of Ethiopia have been analyzed in order to assess their financial feasibility andrneconomic efficiency. The analyses have been carried out first at existing conditions whichrnshowed infeasibility. Then different possible ways and new approaches have been searchedrnand discussed in order to check whether they bring financial and economic feasibility. By therndifferent alternative approaches the projects have got appreciable results in financial viabilityrnand economic efficiency. Therefore, the approaches can be applied to both the case studyrnsites and other small hydro power sites.