Fragmented settlement structure of Slovakia results in a large number of small municipalities. Such settlement structure is very rare troughout the Europe and it is related to many difficult challenges. Our paper deals with the topic of insuffucient performance of small municipalities. Majority of the municipalities do not provide services to their citizens. Our paper investigates the most fragmented districts of Slovakia in terms of providing local services. We use a comparative approach to point out to differences of functioning small municipalities in Slovakia and Czech Republic after the dissolution of Czechoslovakia. The main research question we want to examine is how to launch a process of municipal amalgamation in such a way that it would be acceptable for representatives of municipalities and their citizens. This can be answered by precise analysis of current situation in the districts that are affected the most. In the article, we are going to propose which municipalities of the most fragmented districts should be amalgamated in the first phase of a reform, which could possibly help to raise their overall performance.