Micro finance being practiced in many developing countries to address the low income society
and thereby to improve their livelihood. Ethiopia is also one of the countries where microfinance
has been given due consideration as a safety net for the poor to help them to overcome the
adversities of poverty. There is a wider agreement about the goal of micro finance that is to
improve the welfare of the poor through enabling them to participate in income generating
activities, empowering women, creating employment opportunity etc. But this has not led to wide
agreement how best to achieve those objectives in practice. Hence, this paper is interested to
explore the practical impact of micro finance programs on urban poverty alleviation in
Shashemene town, Ethiopia. To address the objectives of the study, both primary and secondary
data have been used. Primary data was collected from 210 sample clients selected from three
MFIs namely SEYAMFI, Busa Gonofa and Wisdom by proportionate random sampling
technique. Secondary data was obtained from the selected MFIs. The collected data ware
analysed using SPSS (20 Version). Simple analytical tools such as percentages, averages and
frequencies were used to arrive the results. The results are presented in tables, charts and graphs
for easy understanding. The findings show that there is a positive and promising outcome in the
areas of credit operations (types, terms, conditions), saving mobilization (type and magnitude),
credit utilization and changing the living standard of the borrowers. On the other hand, the
program has its own shortcomings in the areas such as; outreaching the targeted urban poor,
practicing group lending methodology, lending interest rate, creating employment opportunities,
training and promotion to encourage the urban poor to participate in the program. Based on the
findings, suitable recommendations are forwarded to improve the microfinance activities in the
study area.