Developing sustainable infrastructure projects in Colombia requires special instruments leading to implementing Clean Development Mechanisms (CDM). For this reason, different financing alternatives to traditional methods for developing Small hydropower (SHP) projects should be evaluated. This analysis shows the country's potential for developing SHP projects thanks to the numerous mighty rivers that generate electrical power. Furthermore, CDM is a globally used method to finance SHP projects. Hence, this paper proposes that the Colombian domestic demand could be met through these projects. The large hydropower plants, besides complementing the domestic demand, can export the remnant power. Additionally, the SHPs development cycle, particularly their financial phase is also analyzed. The results of this study show that sustainable funding mechanisms encourage the development of infrastructure in Colombia. Also, CDM would increase the development of power generating projects and these can be used in other sectors such as water, waste management, and highways.