Why Kenya Created the National Infrastructure Fund and How Ordinary Kenyans Will Benefit

Kenya recently established the National Infrastructure Fund (NIF) as part of a shift in how the government finances large development projects such as roads and airports. 

Notably, for years, Kenya relied on public debt and annual budget allocations to finance major infrastructure projects. 

While the approach helped develop key economic infrastructure, it also led to rising debt levels.

The NIF aims to solve this structural challenge by changing the model from borrowing to build to investing to build.

As such, instead of relying entirely on government borrowing, the fund will act as a platform that attracts long-term investors to finance infrastructure projects. 

Infrastructure projects often require significant upfront capital, take many years to construct, and may need financing arrangements that last for decades.

Under the traditional system, these costs were largely carried by the national budget.

This meant that large development projects competed directly with essential government spending such as salaries for public workers, healthcare services, education programs, and national security.

Under NIF, the national budget will continue focusing on day-to-day government services, while the NIF will focus specifically on financing major infrastructure investments and long-term development projects. 

This separation is intended to protect essential public services while allowing the country to continue building critical development infrastructure.

How the fund will benefit ordinary Kenyans

Although the NIF is focused on large development projects, its effects are expected to reach ordinary Kenyans in their everyday lives.

Infrastructure directly affects the cost of living and economic opportunities. 

For example, roads influence transportation costs and food prices, electricity determines whether businesses can operate reliably, while water and irrigation systems affect agricultural productivity.

Ports, airports, and logistics infrastructure also influence the cost of imported and exported goods. 

When these systems are efficient and affordable, businesses operate more smoothly and goods become cheaper to transport across the country.

By creating a more sustainable way to finance infrastructure, the government hopes to reduce long-term costs while improving the systems that support economic activity.

Where the money will come from

Unlike traditional government borrowing, NIF will not operate as a government loan facility. 

Instead, it will function as an investment platform that mobilizes capital from institutional investors.

Potential investors include pension funds, sovereign wealth funds, development finance institutions and climate finance partners. 

These investors provide capital to finance infrastructure projects that are expected to generate revenue over time. 

This approach spreads financial risk and reduces the burden on taxpayers because the government is no longer solely responsible for financing every project through loans.

The type of projects the fund will support

For a project to qualify for financing through NIF, it must be bankable; this means it must have the ability to generate revenue that can repay investors over time.

Typical examples include airports, toll highways, energy projects and logistics infrastructure.

For instance, an airport expansion project could generate revenue through landing fees, passenger service charges, cargo handling and commercial operations.

However, some projects cannot be financed through the fund because they do not produce direct financial returns. 

Public parks, stadiums and similar social projects fall into this category and will still need to be financed through government budgets or grants.

Protection against misuse

Concerns about corruption and mismanagement have also been raised whenever large public funds are created. 

According to the framework guiding the NIF, several governance safeguards have been built into its structure.

The fund will operate as a corporate investment institution rather than a traditional government spending program. 

It will have an independent chairperson and board of directors, competitive recruitment processes, conflict-of-interest disclosure requirements and oversight by the Auditor-General.

In addition, the fund will be required to publish audited financial statements and provide quarterly and annual reports to ensure transparency and accountability. 

Project preparation and risk management

Before any project can receive funding through NIF, it must undergo extensive preparation and evaluation. 

This includes feasibility studies, financial modeling, environmental assessments and social impact reviews.

These processes help determine whether a project is economically viable and whether it can generate enough revenue to repay investors. 

Risk-sharing instruments may also be used to reduce uncertainty and make projects more attractive to investors without guaranteeing profits.

Investors' involvement in decision-making

Because investors provide much of the financing for projects, they will also have a role in governance and oversight within the fund.

Their participation introduces financial discipline, stronger scrutiny of projects and additional accountability. 

This model is commonly used in global development finance institutions where private and institutional investors participate in infrastructure investment decisions.

What should citizens watch going forward?

Even with strong safeguards in place, the success of the NIF will depend largely on governance and accountability. 

Citizens, Parliament, and oversight institutions are expected to play a critical role in ensuring transparency.

Public expectations include competent leadership appointments, transparent project selection processes, public disclosure of investment decisions, and strict oversight of any financial guarantees associated with projects.