Determinants of Private Finance Initiative for Project Financing; a Study of National Road Construction Projects in Kenya

Abstract

The aim of this study was to assess the determinants project financing for private finance initiative projects; a case of road construction projects in Kenya. The study’s aim was to answer the research question on what are the determinants of project financing for private finance initiative projects on road construction projects in Kenya? Target population were the six major partners including: World Bank, African Development Bank (ADB), Trade Mark East Africa Organization (TMEA), Japan International Cooperation Agency (JICA), The National Treasury (NT) and Ministry of Transport and Infrastructure (MOTI). The study specifically targeted those who are charged with the responsibility of assessing the proposed projects for funding. The study’s respondents were selected using the purposive random sampling. The main advantage of this sampling technique was that it allowed only those who are perceived to have the information required for the study to participate. A total of 10 respondents were targeted per organization resulting to a total target of 60 respondents. Out of the 60 targeted respondents, 44 participated in the study giving a 73% response rate. Questionnaire was used as instruments for data collection. Both descriptive and inferential statistics were used to analyze the data. Descriptive statistics such as frequencies, means, percentages and standard deviations were used. Inferential statistics such as regression and correlation analysis will be used to analyze the relationship between the study variables. The analyzed data will be presented in form of frequency tables, pie charts and bar graphs. The study found that project attributes is a major determinant of the financing of private finance initiative in Kenya. Aspects of project such as cost, scope and size of the project and project technical feasibility & maintenance influences the financing to a very large extent. It was also found that government attributes influences financing of private finance initiative in Kenya. Aspects of government attributes such as cost of the loan, tax policy, stable macroeconomic conditions, favorable legal framework, project development objectives (PDOs) and sound economic policy were found to influence financing of road projects to a very large extent. The study further found that political environment influences financing of private finance initiatives in Kenya. Aspects such as the stability of the political environment, social support from the general public and good relationship between the project team influences financing of road projects to a very large extent. It was finally found that economic environment influences financing of road projects in Kenya. Aspects of economic environment such as the economic viability of the project, economic stability and economic internal rate of return (EIRR) were found to influence project financing to a very large extent. The study recommends that the government should ensure stable political environment exists. It was finally recommended that another study be done on the challenges facing private finance initiative which was not the concern of this study