Counties are considering fundraising through the capital markets to reduce dependence on funding by the national government.
County governments currently face financial challenges due to underfunding by the national government and the inability to raise their own source revenue. It is estimated that counties need more than Sh 5 trillion annually.
In an effort to bridge the funding gap, the Kenya Association of Stockbrokers and Investment Banks (KASIB) plans to work closely with county governments to create alternative financing options.
Nairobi, Nakuru, Mombasa, Machakos and Laikipia have already expressed interest.
The new model will see counties and KASIB work jointly with rating agencies to categorise counties based on their risk of default to determine the funds each devolved unit can access from the capital markets.
The credit rating will determine a counties ability to access capital markets to raise funds necessary for development financing.
“County executives, having well established their financial landscapes are well equipped to review alternative financing options, that can be used to bridge the gaps and enable counties to achieve their development objectives,” said KASIB Chair Donald Wangunyu.
Through the capital markets the counties can access up to Sh60 billion by floating infrastructure bonds, water bonds, municipal bonds and pending bills bonds.
“KASIB is at the forefront of linking private capital with these projects, particularly in the sectors of health financing, water and sanitation, water for production, university education, sports facilities, affordable housing, and urban development,” said Wangunyu.
The programmes chief advisor, John Mwaniki said late disbursement of the equitable share from the National Treasury and low own source revenue collections have stalled operations at the counties making them unable to deliver services.
Through the initiative, county governments shall be able to raise funds from financial markets for the purposes of establishing credit guarantee schemes for their local SMEs.
According to the association, the structuring of the initiative will be set to ensure that the county executives can balance between ongoing obligations and new visions that they want and must deliver.
“The multiplicity of actors involved in public investment is large and their interests may need to be aligned. The process of budgeting and resource allocation is highly political,” said Mwaniki.
He however warns that cross-sector, cross-jurisdictional and intergovernmental co-ordination are necessary, but difficult in practice.
Ten year data compiled by KASIB shows that counties continuously suffer from lack of sufficient funds to finance development and by extension offer efficient service delivery.
This is despite having received in excess of Sh2.7 trillion and average of Sh380billion of own source revenue over the ten year period.
Mwaniki, who is the former deputy governor for Laikipia County says Public-Private partnerships have become essential in financing development for both national and county governments.
County governments prepare and approve their annual budgets between April and June of every year.
The association plans to hold several engagement meetings with the counties in order to identify those that are ready to come to the market in the financial year 2023/2024.
