Cross-sectional data was used that was collected from 181 households in 2011/2012, to estimate households’ willingness to pay for improved water service in Nebelet. The probit model was used to identify socio-economic factors that affect the willingness to pay (WTP) of households. Interruption, delay in maintenance, irregular/erratic availability of the public water supply, the price charged per unit, the unequal treatment households face while collecting water at the public supply were found to be the pressing water problem existing in the study area. The descriptive analysis result showed that 96% of the sample households were willing to pay for the provision of improved water service. The Probit model showed that income, distance, water expense, bid, education, level of existing water satisfaction, marital status and sex were associated with households’ willingness to pay for the provision of improved water services. Indicating, in designing water project/policy socio-economic factors (such as age, monthly income, educational level) should be considered for successful water project/policy at household level.
Key words: Existing water problem, contingent valuation method, improved water provision.