RATING

Makueni and Bungoma ranked high in inaugural county credit rating

The Capital Market Authority (CMA) is targeting 20 per cent of county funding to be raised from the market this year and 30 per cent by 2023.

In Summary
  • The BBB rating means the borrower has adequate capacity to meet its financial commitments.
  • According to Jane Kiringai, chairperson CRA, the main objective of the programme is to assist county governments to access financing through capital market
Chairlady commission on revenue allocation Jane Kiringai
Chairlady commission on revenue allocation Jane Kiringai
Image: EZEKIEL AMING'A

Makueni and Bungoma counties have received high scores in the inaugural Global Credit Rating (GCR) putting them in good stead to borrow locally and externally.  

The two received BBB ratings for long term loans and a much stronger A3 rating for short term loans, meaning they are stable enough to repay loans.

The inaugural country credit rating initiative conducted by GCR on behalf of the National Treasury, World Bank and Commission on Revenue Allocation (CRA) took the S&P rating model for the long term issuance and Moody's standards for short term loans.

 
 

The BBB rating means the borrower has adequate capacity to meet its financial commitments.

However, conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

With this rating, the two counties are well endeared to would-be creditors even as devolved units of government seek new sources of funding away from traditional national government allocation, scanty local revenue, and donor funding.

The A3 rating for short term loans, defined as Upper medium grade by Moody's means, the two counties have a strong capacity to meet their financial commitments but are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than borrowers in higher-rated categories.

Kisumu county, on the other hand, got BB for a long term and B stable for short term credit, meaning it is less vulnerable to default in the near term than other lower-rated obligors.

However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to it's the inadequate capacity to meet financial commitments.

Speaking while unveiling credit scores for the three counties, Senate Speaker Ken Lusaka said the credit rating will enhance counties' competitiveness in the debt market, access finances to better lives of people.

 
 
 

''This is a worthy initiative that is expected to help answer tough credit questions. The rating will do the talking as counties seek ways to diversify revenue collection,'' Lusaka said.

According to Jane Kiringai, chairperson CRA, the main objective of the programme is to assist county governments to access financing through capital markets for public infrastructure development and service delivery.

''The county creditworthiness initiative is a multi-agency platform aimed at shepherding devolved units towards self-sustainability. It also aims at achieving strengthened financial management in counties,'' Kiringai said.

The Capital Market Authority (CMA) is targeting 20 per cent of county funding to be raised from the market this year and 30 per cent by 2023.

CMA regulatory policy and strategy director Luke Ombara said only two counties are using the market to raise capital, appealing to more to follow suit.

The rating combed at the operating environment for risks, business, finance and comparative profiles for participating counties.

Sylvia Chahonyo, general manager GRC rating applauded the three counties for clean audits and data management, which was vital in the rating.