Microfinance is a financial institution that is involved in provision of small scale financial services to low income people Thus microfinance institutions (MFIs) enhance the ability of the low income people to be involved in sustainable economic activities that help to alleviate and improve the social welfare of the poor. In order to attain their goals, MFIs need to be sustainable. To some extent sustainability of these firms is dependent on their financial performance. The null hypothesis was that Interest rates do not exert significant influence on financial performance of MFIs. Given the sensitivity of financial issues to some organizations, the some respondents concealed some of the much needed information. The researcher however assured the respondents of the confidentiality of the information provided. This study adopted a descriptive research design. The location of the study was Imenti North Sub-County, Kenya. The target population was 42 respondents which included all the branch managers, operational managers and credit managers of the 14 microfinance institutions operating in Imenti North Sub-County. All the 42 targeted respondents were included in the study. This study utilized both primary and secondary data. Both descriptive and inferential methods were used in data analysis. Descriptive methods included measures of central tendency measures of dispersion. Inferential statistics included measures of relations and associations, correlation and regression. It was concluded that interest rates charged by MFIs significantly influence their financial performance. This conclusion is based on the finding that there is a positive correlation between the interest rate charged by MFI and liquidity. This implies that an increase in interest rates results in an increase in liquidity for the MFIs. MFIs should charge interest rates that are in the range of commercial banks to increase loan uptake. This will ensure maximization of liquidity. This recommendation is based on the finding that an increase in interest rate results in an increase in financial performance of a firm in terms of liquidity.