Mini and small hydropower is a renewable, clean and efficient resource for the production of mechanical and electrical power. By offsetting thermal generation, it can be a leading technology in climate change mitigation and sustainable development. Small hydropower plants combine the advantages of hydropower and decentralised power generation. There are limited environmental costs, marginal costs for the electricity transport, minor need for expensive maintenance and independence from imported fuels. Small (and mini) hydropower can be combined with other infrastructures, such as flood protection, potable and irrigation networks. Compared to other renewable energy sources SHP has a significantly higher energy payback ratio and in average lower production costs. The technology is mature although the projects are not cost-efficient under the current framework conditions, characterised by the non-internalisation of external costs of energy production (e.g. GHG emissions). SHP therefore requires adequate frameworks (e.g. streamlining of procedures, adequate financial mechanisms, etc.) to be implemented under economically viable conditions. There is also a demand for a strategy that includes sustainable spatial planning in the process of large scale implementations of SHP, to reduce the risk of irreversible environmental impacts in large regions. The paper aims to identify and develop policy shaping institutional mechanisms (including spatial planning) to facilitate mini and small hydropower. SHP can contribute strongly to electrification, to improve the local economic situation (e.g. jobs), to reach the Millennium Development Goals and to protect the environment.