Kenya’s development ambitions have long relied on large-scale infrastructure projects to drive economic growth, improve connectivity, and enhance productivity. From transport corridors and energy investments to water and housing projects, these mega developments are central to the country’s long-term vision. However, with Chinese lending to Kenya falling to an eight-year low and traditional external borrowing becoming more constrained, the country is being forced to rethink how it finances its biggest projects. This shift, while challenging, presents an opportunity to unlock new and more sustainable sources of capital.
One of the most viable alternatives lies in Public-Private Partnerships (PPPs). PPPs allow the government to share both the cost and risk of major projects with private investors, reducing pressure on public finances. Kenya has already made progress in this area, particularly in energy and road infrastructure, but uptake remains below potential. Streamlining procurement processes and offering clearer risk-sharing frameworks could attract more long-term institutional investors, including pension funds and insurance firms.
Another increasingly important avenue is the domestic capital market. Kenya’s pension and insurance sectors manage trillions of shillings in long-term savings, yet much of this capital remains under-utilized in low-risk government securities. By developing infrastructure bonds, project-backed securities, and asset-backed notes, the government can channel domestic savings directly into development projects. Instruments such as infrastructure bonds, especially those offering tax incentives, can mobilize patient capital while reducing reliance on foreign currency borrowing.
Development finance institutions also offer a more stable and concessional source of funding. Institutions such as the World Bank are increasingly supporting blended finance structures, where concessional loans are combined with private capital to lower overall project risk. For Kenya, deepening engagement with these institutions can help unlock funding for climate-resilient infrastructure, renewable energy and social projects that may struggle to attract purely commercial financing.
In addition, project monetization and asset recycling present a practical way to raise capital without increasing debt. Under this approach, the government can lease or concession mature, revenue-generating assets, such as toll roads to private operators. The upfront proceeds can then be reinvested into new infrastructure projects. This model not only unlocks immediate capital but also improves efficiency by bringing in private-sector management expertise.
Kenya can also tap into green and climate finance, an area of growing global interest. Green bonds, sustainability-linked loans, and climate funds provide access to investors specifically seeking environmentally responsible projects. Given Kenya’s strong renewable energy base and climate adaptation needs, aligning infrastructure development with Environmental, Social, and Governance (ESG) standards could significantly widen the pool of available capital.
Ultimately, the decline in Chinese lending should not be viewed purely as a setback. Instead, it marks a turning point for Kenya to build a more diversified, resilient, and transparent infrastructure financing model. By strengthening institutions, improving project preparation, and embracing innovative financing tools, Kenya can continue to deliver mega projects, without overburdening public debt, while laying the foundation for sustainable long-term growth.
