For decades, Kenya’s infrastructure delivery has relied on balance-sheet borrowing. A fundamental reset is needed to move the country beyond public debt to bridge its financing gaps, argue Aleem Tharani, Edwin Baru and Qabale Guyo of law firm Bowmans Kenya.
For decades, infrastructure delivery by the Government of Kenya (GOK) has relied heavily on balance sheet borrowing. While this model has delivered transformative assets across transport, energy and urban development, it has also constrained fiscal space and left persistent financing gaps. Kenya now faces a clear inflection point – infrastructure needs remain high, but the capacity to fund them through public debt is increasingly limited.
Recent legislative developments indicate that Kenya is not merely responding to rising public debt but is pursuing a fundamental reset of its infrastructure financing mode via a coordinated institutional response. Through a suite of reforms anchored around the recently enforced National Infrastructure Fund (NIF), GOK is advancing a development finance approach aimed at making infrastructure commercially viable, self-sustaining and less reliant on the sovereign balance sheet.
From borrow-and-build to recycle-and-reinvest
Kenya is moving away from the traditional borrow-and-build model toward a more future-orientated recycle-and-reinvest financing model, built on three core principles.
First, large catalytic infrastructure assets that are commercially viable are financed off the sovereign balance sheet and supported by private and institutional capital. Second, mature or non-core public assets are monetised, with proceeds recycled into new infrastructure assets, effectively expanding the country’s asset base. Third, private and institutional capital play a central role in financing infrastructure development.
Under this new model, GOK is no longer positioned as the primary financier of infrastructure. Its role is evolving to project developer, capital coordinator and co-investor, operating alongside private markets.
New model
Kenya is anchoring its new approach around the NIF. Established under the National Infrastructure Fund Act, 2026, the NIF is empowered to originate projects, deploy equity and debt, establish special purpose vehicles and act as an investment agent for government institutions. The NIF Act introduces a significant legislative guardrail by expressly prohibiting the NIF from borrowing against its own balance sheet, reinforcing its intended role as a catalytic investor rather than a leveraged public entity. In parallel, the GOK is corporatising public assets under the Government Owned Enterprises Act, 2025. Here, state corporations are being converted into public limited liability companies with mandates to operate on commercial principles and achieve financial self-sufficiency.
Asset recycling is being institutionalised through the Privatisation Act, 2025, which establishes a dedicated privatisation authority and codifies divestment methods including initial public offerings (IPOs), competitive tenders and strategic investor placements. All privatisation proceeds are deposited directly into the NIF, where they are redeployed into new infrastructure projects.
The model is further reinforced by the proposed sovereign wealth fund bill, 2026, which seeks to channel petroleum and mineral government revenues into a structured long-term investment vehicle. At least one third of the sovereign wealth fund is earmarked for strategic national infrastructure development.
Transactions
This new approach is already visible. Emerging transactions, including the completed IPO of Kenya Pipeline Company, now trading on the Nairobi Securities Exchange and parliament’s recent approval of the sale of a further stake in Safaricom to Vodacom Group, illustrate how, under the new Privatisation Act, GOK intends to bring assets to market.
In March 2026, the Ministry of Mining, Blue Economy and Maritime Affairs issued gazette notices inviting competitive bids for the exploration and commercialisation of strategic minerals. The field development plan for Kenya’s first commercial oil project in the South Lokichar basin was recently approved by parliament, paving the way for oil and mineral revenues to form part of the broader infrastructure financing ecosystem.
Will it work?
The idea and direction of travel are compelling, but its execution is where the model will succeed or fail. One of the concerns is how projects are selected, structured and taken to market. While the NIF Act refers to an investment policy prepared by its board setting out priority sectors and a project pipeline, there is limited visibility on how the NIF will engage with private investors in practice, or whether its procurement and transaction processes will align with or operate independently from the existing public procurement and PPP regimes. This lack of clarity creates uncertainty around project timelines, risk allocation, procurement challenges and whether projects can be executed efficiently.
In terms of bankability, mobilising private capital depends not only on policy ambition or project scale but also on whether projects are structured with clear revenue visibility, enforceable contractual protections and credible guarantees that support investment and debt recovery.
In the end, the NIF will be judged by whether the projects are investable. To crowd in private and institutional capital, its pipeline must be assessed through a commercial lens that reflects the disciplines of project finance.
Institutional coordination presents a further challenge. The model depends on a high degree of cohesion in policy and direction between multiple actors – the NIF, a future sovereign wealth fund, corporatised state enterprises, the privatisation authority, and the national treasury.
There are also concerns around governance and the degree of independence and discipline the NIF will maintain. There is a risk that project selection and capital allocation could be shaped by political priorities rather than commercial viability. Considering existing governance challenges in state-led vehicles, these factors may weigh on public and investor confidence until the model is tested in practice.
In terms of implementation capacity, converting statutory corporations into investable commercial entities will require balance sheet restructuring, asset verification, liability mapping and governance reform. These are complex and sensitive processes that require time and institutional dedication. In addition, operationalising the NIF, including staffing, building internal capacity and establishing investment processes, will take time.
The question is whether institutional capability, legal clarity and political discipline can keep pace with the ambition of this new model, or whether the system is being built faster than it can be credibly implemented.
Self-sustaining
At its core, the model aspires to create a self-sustaining system of infrastructure finance. This ambition holds if three conditions are met.
- Project selection must be sufficiently disciplined and thorough to ensure that only projects with demonstrable commercial viability and predictable cash flows enter the pipeline.
- These generated cash flows must be protected through credible contractual and governance safeguards. Project agreements must be built on bankable terms that offer external investors clear guarantees around debt recovery and revenue certainty. Without it, the NIF will struggle to attract the necessary private capital.
- Capital recycling must be both financially and socially viable. Beyond ensuring that proceeds from asset monetisation and resource revenues are strictly reinvested into new infrastructure, the model must secure and consider the social licence to operate. For example, monetising established public assets through user charges (such as tolling) is politically sensitive. Without transparent stakeholder engagement and clear evidence of public benefit, resistance over affordability and fairness could potentially stall the reinvestment cycle and undermine investor confidence.
Ultimately, the sustainability of the model will depend less on structure and more on execution discipline.
Opportunities
Despite the execution risks, the opportunities are substantial. The primary beneficiary is the public. If successful, the model would decouple infrastructure delivery from sovereign debt, freeing fiscal space for social programmes. A genuinely self-sustaining system would ease fiscal pressures and reduce the long-term cost of infrastructure by relying on recyclable capital rather than continuous borrowing.
The infrastructure and energy sectors stand to benefit next. A model that combines extractive revenues, asset recycling and institutional capital can provide a more predictable source of long-term funding, improving project planning, shortening delivery timelines and enabling scale in capital-intensive sectors.
A credible pipeline of commercially structured projects, anchored by NIF and supported by well-defined government support measures, could heavily reduce early development risks and accelerate financial close, including in sectors historically avoided due to high upfront costs and policy uncertainty.
For private investors, the opportunity lies in greater visibility over what government is prioritising. The NIF investment policy should provide a clearer and more credible pipeline of projects, allowing investors to engage earlier and more strategically. The NIF’s role as a co-investor also has the potential to accelerate projects by signaling government commitment and improving overall bankability. For lenders and other financiers, a more predictable pipeline of projects opens opportunities for structured finance solutions.
At a system level, the most significant opportunity lies in asset recycling. By combining extractive revenues, privatisation proceeds and disciplined capital deployment through NIF and the proposed sovereign wealth fund, Kenya can transition from a debt-driven delivery to a more scalable and repeatable investment cycle.
If executed consistently, this would mark a structural shift in how infrastructure is financed and sustained in Kenya.
Aleem Tharani is head of projects, energy and infrastructure, Edwin Baru is a partner and Qabale Guyo is an associate, all at Bowmans Kenya.
