Effect of blended finance approaches on the extent of implementation of water and sanitation projects in Kenya

Stephen, Eunice Mueni
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Strathmore University
Investments in water and sanitation are critical ingredients for the development and growth of economies. Blended financing is a structuring approach that enables different stakeholders to pool their resources together in investments for financial return, boosting economic growth in developing countries. The development of the blended financing market has led to eminent traction towards developing sustainable infrastructure, bridging the financial gap to attain the Sustainable Development Goals enabling the private sector's participation. However, little has been documented on the effectiveness of blended financing on the implementation of Water and Sanitation and Hygiene (WASH) projects in Kenya. As a result, information on funding blended and its efficacy on attracting commercial funding is not known and where it is known; that information is limited or has not been shared with the public, creating a gap in knowledge use of blending financing. Therefore, this study sought to evaluate the effectiveness of different blended financing models in Kenya's WASH projects. Specifically, the research was after investigating the effects of output-based approach, credit guarantee approach, technical assistance approach, credit rating approach and the moderating effect of type of investor on the relationship between blended financing approaches and the implementation of water and sanitation projects in Kenya. The research was anchored on the resource dependency theory. The study utilized a descriptive research design to collect both quantitative and qualitative data. The population of the study is 100, and the sample size of the survey is 80, comprising of representatives from donors of the projects, water service providers, staff members from the Water Sector Trust Fund, and officials from banks which provided credit towards financing the WASH projects from 9 projects in 6 counties namely; Murang’a, Nyeri, Kajiado, Embu, Kisumu, and Nakuru. The Water Companies in the selected regions have implemented World Bank projects funded through the blended financing approaches that form this research's objectives. The analysis was quantitative and utilized both primary and secondary data. Primary data was collected through questionnaires, while secondary data was sourced through secondary data collection guides. The data was analyzed through the use of descriptive and inferential statistics. The study was able to obtain a 64% response rate from the sample of 80 stakeholders in the WASH projects. The regression results showed that blended financing approaches predict 20.1% of the changes in implementation of water and sanitation project in Kenya. Further, the moderate regression indicated that 46.4% of the changes in implementation of WASH projects are determined by blended financing approach and the type of investor. The study concluded that credit guarantees, and technical assistance have a positive and significant influence on WASH projects. The research further concluded that output-based approach and credit rating approach have no significant influence on implementation of water and sanitation project in Kenya. Further, the study concluded that donors and water service providers investments had a significant effect on the implementation of WASH projects in Kenya. The study recommends that project managers should seek strategic alliances that will open the financing options to the WASH projects. Further, collaboration with donor agencies and devolved governments will help in expanding the capacity and implementation success of WASH projects in the country.
A Dissertation submitted to Strathmore Business School in Partial fulfillment of the requirements for the award of Master of Science in Development Finance Degree of Strathmore University
Blended financing, Water and Sanitation Hygiene (WASH), Result based financing