Rural electrification to help rural communities improve their quality of life needs to be designed in a sustainable manner with the intention of keeping village culture and environment from eroding. Micro-hydropower systems (MHS), especially run-of river schemes, are examples of renewable energy projects that, if managed well, can be socially and environmentally sustainable. This paper presents the results of a field survey conducted in Ba'Kelalan, in Sarawak, Malaysia, where several MHS have been implemented by various funding agencies using different planning mechanisms as well as different design and operational procedures. Quantitative and qualitative analyses were used in a case study comparison of two MHS in Ba'Kelalan based on criteria such as system loads, electricity tariff, the level of community involvement in the project, and the arrangements put in place for maintenance. Several barriers to sustainability were found in the operation and maintenance of the MHS due to a lack of knowledge by unskilled operators. The key lessons learnt from the case study are that sustainable development of MHS requires financial and load distribution management at the beginning of the project, as well as capacity building for both operation and maintenance personnel, as well as the community.