After years of consistently losing out to international players, Kenyan banks are seeking a bigger role in the financing of the on-going mega East African infrastructure projects estimated by regional governments to require about Sh60 trillion, ($60.671 billion).
Among ideas being mooted to cash in on the deals include loan syndication where a number of Kenyan banks will come together to make a loan for the execution of the large projects.
Kenya Bankers Association (KBA) Director of Research and Policy Jared Osoro told the Nation that commercial banks have often lost out of the mouth-watering infrastructural financing deals due to their inadequate capacity to execute the long term projects.
The situation is compounded by an assets–liability mismatch given that they depend on short–term deposits and are required to finance the long-term investments in addition to short–term projects.
“Syndicated financing for infrastructure development in developing economies has not been common. This is on account of the fact that infrastructure, typically perceived as a public good, has been financed largely though public resources raised either through taxes or official borrowing from multilateral lenders,” added Osoro.
According to Dr Paul Kamau, a senior Research Fellow at the University of Nairobi’s Institute for Development Studies, there is need for more consultative meetings between the banks and regional governments in order to sensitize the industry on the opportunities abound in the sector.
“Most banks do not participate in the Public Private Participation projects in Kenya. Even on annuity financing, banks have reservations about it for the fear of non–performing loans,” said Kamau.
In the last decade Kenya has embarked on a massive infrastructure project in order to transform itself into a middle-income country by 2030.
According to the third edition of the annual Deloitte African Construction Trends Report released last year, Kenya contributed the bulk of large capital infrastructure projects implemented in East Africa in 2014, followed by Uganda, Ethiopia, Tanzania and Rwanda respectively.
However, the report also showed that international development finance institutions — the World Bank, the African Development Bank, and China Exim Bank— were the top financiers of majority of the projects.
In Kenya, among the planned mega projects whose implementation are in various stages include construction of the Jomo Kenyatta International Airport’s second runway, Terminal 4, Greenfield Terminal, Isiolo Airport, Lamu Port and Mombasa-Nairobi standard gauge railway.
Modalities of how the local banks will out manoeuvre their international counterparts for the attractive but elusive infrastructure financing deals will be solved at the upcoming fourth annual research conference by the KBA Centre for Research on Financial Market and Policy beginning on Thursday.
The two day conference will explore various ways to increase private sector participation in infrastructure provision, the requisite financing needs and the role of the banking industry in meeting such financing needs in the context of Kenya.
The conference, will be officially opened by the Governor of the Central Bank Governor Dr Patrick Njoroge.