This paper analyses factors influencing effective service delivery at the grassroots level in Nepal, through a qualitative field study which includes in-depth interviews with 110 community-based organisations (CBOs) and five focus group discussions. The findings indicate that a wide range of governance arrangements have been deployed in the effort to achieve effective service delivery. However, many CBOs lack a solid governance system for their development undertakings, leading to poor performance and lack of accountability. A number of factors are identified as causing this weak practical application of community governance, notably institutional mechanisms, socio-economic structures, power politics and interests, capacity limitations and resource constraints.