Today, women’s empowerment is considered as essential component of development and poverty reduction. The concept of women’s empowerment has gainedincreased attention over the past two decades. Nowadays SHGs are among the most popular programs that aim to stimulate the empowerment of women in Asia, Sub-Saharan Africa, and Latin America. Different factors constrained women’s empowerment and hence poverty hasimpacted on women more than on any other segment of the community. For instance,women in Ethiopia have lower levels ofaccess to, ownership of, and control over productive resources than men have.This study aimed to analyze the impact of SHG participation on the empowerment of rural women and problems faced during their empowerment process in Habru district of North East Ethiopia. The study has used cross-sectional data of year 2019.Three stage samplingtechnique has been employed to select a total of 350 women from both members of SHGs and non-member in two sub districts of the study area. Household Survey has been used as data collection method and a propensity score matching has been employed for analysis. The results of the study showed that participation in SHG interventions has a significant, positive impact on the outcome variables measured using different indicators and members perceived that they had empowered due to their SHG participation. Inadequacy of training, poorattendance of members at meetings, dependency syndrome, financial constraint, lack of linkages and networking with MFIs, illiteracy,absence of banks, dropout of SHG members were the problems faced by members. The paper concludes that SHG have been successful pathway in reaching empowerment of poor women and improving community life in the rural areas.Therefore, the government and other non-government organization should provide more support to expand SHGs to improve the livelihood and empowerment of the rural women. KEYWORDS: Women empowerment, Self-help groups, Impact, propensity score matching