Abstract: Microfinance and microcredit is a recent development issue and one of the mechanisms to empower poor people in rural Ethiopia. Microfinance interventions may empower women by increasing their incomes and their control over that income. This study evaluates the impact of microcredit program on female headed households’ annual expenditure in rural Ethiopian, Jimma Zone. Data were collected from 1092 female headed households from both participants and non-participants in microcredit program during 2013. Data was analyzed using the PSM technique. PSM results show that participant in microcredit program has a significant and positive impact on households’ annual expenditure. Furthermore, the Probit result sows that higher price of egg and sugar makes households more likely to participate in microcredit program. However, more educated households’, large land holders and higher income earners are less likely to participate in the program.