This study is to assess the credit risk management of MFIs exist in Adama town, Ethiopia.Sound credit risk management is a crucial for a financial institutions stability and continuing profitability, while declining credit quality, the most frequent cause of poor financial performance and condition. Micro finance provides financial support to the unbanked units of the society. Since microfinance is a system that allocates small credits to poor persons in order for them to provide income and start their own small businesses, it has the ability to lessen poverty as well as encourage entrepreneurship, social and economic development for poor people.In any financial institution, the biggest risks in microfinance is loaning money and not getting it back.  The study adopted a descriptive survey design.  The population of study consisted of serviceprovision sectors in Adamatown MFIs.The study utilized both quantitative and qualitative technic of data analysis. The study involves that customer’sevaluation; credit risk control and collection principle had effect on credit risk management of MFIs in Adama town credit and saving institutions. The study recommends  that  MFIs  should  improve  their  collection  policy  by  adapting  a  more stringent policy to a lenient policy for effective debt recovery.

 

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