Water companies in Kenya can now raise funds through the capital markets to bridge the Sh995 billion deficit required for water projects.
The financing will be undertaken through issuance of water and infrastructure bonds.
This follows Tuesday's partnership between Kenya Association of Stockbrokers and Investment Banks (KASIB) and the Eldoret Water and Sanitation Company.
The deal on alternative financing options through the capital markets paves way for water companies to raise capital through the bourse.
It is currently estimated that Kenya's Water Sanitation and Health (WASH) investments need Sh1.8 trillion and have a Sh995 billion funding deficit.
“The scope of this MoU will reflect the shared belief of using capital markets who are allocators of medium to long term capital and are able to get matching capital from other impact investors,” said Nairobi Securities Exchange chief executive Geoffrey Odundo.
The bonds are financial instruments that can be issued by governments and water companies to raise capital to fund water-related projects.
The proceeds can be used to develop or improve water infrastructure like treatment plants, sewer management systems and distribution networks.
Capital Markets Authority chairman Ugas Mohammed said the opportunity will help water companies fulfil their development projects on a larger scale without heavy reliance on government and development partners funding.
“The president is committed to raising money from the capital markets and this initiative and the issuance of green finance and ESG frameworks, these are the future of the capital markets,” said Mohammed.
Normally, Water Service Providers get funding from tariffs, taxes and transfers and repayable finances like loans, bonds, and equity investments.
KASIB chairman Donald Wangunyu said ELDOWAS has engaged the Water Services Providers Association on the opportunity to bridge the funding gap.
This is the government’s second attempt to raise funds in the financial markets for water and sanitation programs.
Previously, the State attempted to attract private contributions through the Kenya Pooled Water Fund, which was incorporated in the Water ministry's 2018-2022 strategic plan.
The project aimed to raise Sh10 billion from local bond markets but did not achieve its goal.
