NAIROBI : Kenyan banks should source credit from international financial institutions to boost their funding capacity for infrastructure projects under the public private partnerships, Central Bank governor Patrick Njoroge said yesterday.
“Beyond the partnerships between banks and development financial institutions, I see a need for an analytical exploration of the potential of partnership amongst banks for example through syndication, and with capital markets players,” he said during the launch of the fourth annual banking research conference in Nairobi.
The conference focused on how banks can invest in infrastructure through the public private partnership model.
Njoroge said collaboration with other financiers will enable banks to invest in infrastructure beyond subscribing to government infrastructure bonds.
“As of July 2015, the National Treasury had approved 71 PPP projects in transport, energy, education, water, health, agriculture and the hospitality sectors. These projects present a pipeline of investable opportunities for the Kenyan financial sector,” he said.
Research by Kenya Bankers Association has established that infrastructure development has a financing gap of about Sh37 billion annually. It says most funding comes from donors and bilateral sources as commercial banks are not willing to lend due to the high risk of default in the sector.
KBA chief executive officer Habil Olaka said most banks only have short term deposits which would not sustain their balance sheets if they lend to big infrastructure projects.
He said they see the issuance of corporate bonds as another viable option for boosting lending capacity of the banking industry in such projects.
“Corporate bonds will attract insurers and pension funds who are looking for instruments to invest in the long-term,” he said.