Kenya is mulling plans to advance a development finance institution (DFIs) policy with a view to mobilize resources for funding its ambitious infrastructure projects.
The move, if successful, could see the country have faith in a stable DFI structure whose absence had largely contributed to weak public financial management (PFM) systems and weak fiscal institutions in public agencies whose models operate like banks.
Head of Public Service Joseph Kinyua in a statement last week said such a move would help the recently merged three financial Parastatals depart from “traditional orientations and invest in local enterprises that have a huge direct impact to the common mwananchi.”
DFIs are specialized development banks or subsidiaries set up to support private sector development – a common model used in developing countries, Kenya being one of those.
They are usually majority-owned by national governments and source their capital from national or international development funds or benefit from government guarantees. This ensures their creditworthiness, which enables them to raise large amounts of money on international capital markets and provide financing on very competitive terms, compared to expensive terms by conventional banks.
“We should rally to come up with initiatives for positioning Kenya Development Corporation (KDC) as a DFI within the economic ecosystem by creating a purpose-led DFI for the citizen,” said Kinyua last Thursday during the launch of KDC brand and strategic plan 2021-2023.
KDC was formed by the merger of Industrial and Commercial Development Corporation, Tourism Finance Corporation and Industrial Development Bank Capital Ltd, and is mandated to provide finance and business support to medium and large-scale industries.
The National Treasury Cabinet Secretary Ukur Yatani in June this year collapsed the three financial State-owned enterprises (SOEs) to form KDC in a bid to make them lean, efficient and profitable.
In a gazette notice dated July 2, merged Industrial and Commercial Development Corporation (ICDC), Industrial Development Bank (IDB) and the Tourism Finance Corporation (TFC) following the enactment Kenya Development Bank Act, 2020 to from the Sh100-billion behemoth that will primarily lend to medium and large-scale businesses to spur manufacturing.
The reforms were part of the International Monetary Fund’s (IMF) conditions for the Sh256.3 billion ($2.4 billion) three-year the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) to Kenya signed in February.
In its first three years of existence, KDC will seek to lend small enterprises up to Sh25 billion as a move expected to promote job creation and sustainable economic growth.
“Our ultimate aim is to catalyze the transformation of Kenya’s socio-economic landscape and contribute to broad-based improvements in the quality of life for Kenyans in line with the Government’s Vision 2030 and Big four agenda,” commented KDC’s director general Christopher Huka.
In its Regional Economic Outlook – Sub-Saharan Africa, the IMF, while referring to Kenya’s domestic mounting debt, found that Kenya’s public debt estimated to be around Sh7 Trillion weakens private sector activity and undermines financial stability. In addition, arrears reduce the ability of fiscal policy to support the economy, by reducing the multiplier effect of government spending.
1,078 total views, 1 views today