Most of the community water supply systems in Nepal are not properly functioning. This is also shown by the statistical figures of the respected agency. It is utmost necessary to assess the performance in terms of technical, financial and institutional of the water supply system as well as to assess the contribution of the system. These both (performance and contribution) parameters are necessary to sustain the system. The contribution of the system builds local people‟s sense of ownership which further contributes in smooth functioning of the water supply system. Therefore, in this premise, the study was carried out with an aim to assess the performance and contribution of Lamki Small Town Water Supply System of Lamki, Kailali. The study adopted both qualitative and quantitative research approaches. The system‟s performance is assessed quantitatively evaluating various indicators for the respective performance indicators, whereas the contribution of the system was assessed both qualitatively and quantitatively. Focus group discussion and Key Informant Interviews were conducted to assess the contribution of the water supply system and the secondary data were analyzed for the Functionality assessment. Bargada Water Supply System, with an addition of tube well, was renamed as Lamki Small Town Water Supply System after official registration in 2005. This system has gradually increased the number of connections over the period of time. The functionality index of Lamki Water Supply System assessed in this study indicated satisfactory operation of the system. Indicators like Water Safety Plan (WSP) and reserve for fittings and tools are lagging in the system that pulled the functionality index slightly down. Though inclusive in the formation of the Water User Association (WUA) but none of the decisive position is occupied by the women, women are the general member only. The WUA is actively performing their tasks in managing the supply system. Meetings are regularly held as per the records available in WUA, however, whenever necessary or an issue arises, the WUA member come together and discuss on the issue. The number of employees required for smooth running of the system is less which indicates dearth in the easy availability of staffs for the maintenance work. Lamki Small Town Water Supply System has covered around 57 % of the total population but still there are unreached houses in the nearby wards. The water produced is not sufficient for all within the study area resulting lesser water consumption (67.74 lpcd) than the national average for the urban areas. All the tested water quality parameters of water provided from the system is within the national guidelines. Graded water tariff system – an equity approach, is adopted by the system. The households pay the tariff based on the volume of water they consume. The personal cost for the system is significantly higher than the normal, however, the system has been trying to decrease this cost. The unit water production cost has gone down significantly. Lamki Small Town Water Supply System has contributed significantly in local health. Due to water supply, the average Out-Patient Department (OPD) patients in the hospital records have decreased specially during the monsoon season when the water borne diseases are more common. The people are found in the position to pay higher amount for good quality water if the system can provide, which will help in the generation of funds for the regular operation and maintenance of the system. This can be achieved with the preparation and implementation of Water Safety Plan, which is lagging at present. This also provides momentum for the system sustainability.

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