Energy is the prerequisite for social and economic development of a community and country. In Japan, national government is promoting small hydropower (SHP) through a renewable energy policy by providing a high FIT price of 34 yen (≒0.32 US$/kWh) on energy generated from an SHP of less than 200 kW. Until now, the energy generation was controlled by national government agencies, but now independent power generation businesses are growing at the local community level in rural Japan. For the future growth of SHP, it is necessary to make electricity generation at the local community level. Therefore, these local communities will install and manage their renewable electricity by themselves. It will help to make the community self-sustainable and independent from the national government, and at the same time, it will also lead them to achieve the Sustainable Developments Goals (SDGs) target from community-based action. This paper aimed to discuss an SHP development business model in which local community will become the business owner of the SHP. It means “of the community, by the community and for the community”. The community identifies their renewable energy potential and needs, they borrow money from the financial organization or banks, install the power plant and do necessary maintenance and management by themselves. The revenue earned by selling electricity is used to repay the loan, and the rest is used for community development directly (such as local roads construction, agriculture land improvements, community hall maintenance, waterways maintenance, welfare, etc.). This paper also discussed a community-based 50 kW SHP installed in Miyazaki prefecture of Japan as a case study. This SHP is one of the best examples of a community ownership model (Community-based business model). A detailed explanation from planning to investment has been discussed. The local community is getting approximately 112,000 USD per year by selling the electricity, and 162-ton CO2 is estimated to decrease yearly, which will support the achievement of SDGs. Finally, installing this kind of SHP in remote areas will provide managerial skills to the local community directly, plant operation knowledge, and education to local students. Local communities learn the problem-solving skills, which lead them to solve the local problem on a community level by themselves.