This paper explores the roles, opportunities and challenges of the self help group (SHG)rnapproach to local economic development. As this SHG approach to local development is arnnew venture in the country, the study draws on case study research of 16 randomly selectedrnSHGs in Jimma town. The study has further contacted purposefully selected governmentrninstitutions, micro finance institution, implementing non-governmental organizations (NGO)rnand individual members from the selected SHGs.rnThe findings demonstrate that the SHG approach to local economic development hasrncontributed to improvements in the living condition of the target population, mainly throughrnemployment creation, awareness raising, and linking with other LED actors. The SHGrnapproach introduced regular saving, regular meeting and discussion, bookkeeping, internalrnlending, mutual support systems and links the SHG/CLA to development partners in the area.rnThe approach encompasses the social, economic and political empowerment process byrnorganizing the local people into their own institutions. The inclusion of health, child rights,rnwomen participation and education into its economic development agenda makes it importantrnin the process of poverty reduction and local development.rnIt is a pro-poor approach because it exclusively focuses on the organization and capacityrnbuilding of the marginalized women. As a result, destitute and marginalized women, whornwere not able to employ in any formal private andlor public enterprises have opened theirrnown and their family businesses.rnThe approach also installs democratic leadership style, equal participation and equalrnopportunity to all of the members. The approach can also be applied to other communityrngroups at a lager scale for greater impact. Hence, NGOs and local governments can adapt thernapproach for its positive contribution to local development and empowerment of the destitute