NAIROBI, Kenya – Kenya is preparing to roll out a National Infrastructure Fund (NIF), a flagship financing vehicle the government hopes will transform how the country pays for roads, energy, irrigation and transport projects — while easing pressure on public debt.
President William Ruto is expected to chair a Cabinet meeting at State House on Tuesday to, among other issues, approve the proposed Sh5 trillion fund, which the government has described as a cornerstone of its long-term economic reform agenda.
The fund is part of a broader strategy that includes state asset sales and the creation of a sovereign wealth vehicle, with infrastructure investment positioned as a key driver of economic growth, job creation and industrialisation.
According to the President, the move is designed to mobilise long-term capital, attract private sector investment and fundamentally change how Kenya finances national development — reducing reliance on traditional borrowing at a time when public debt remains under strain.
What is an infrastructure fund?
An infrastructure fund is a pooled investment vehicle used to finance, build, upgrade or operate long-term assets that underpin economic activity.
These typically include highways, ports, railways, power plants, water and irrigation systems, airports and digital infrastructure.
Unlike conventional government spending, infrastructure funds are structured to operate on commercial principles, with professional management and clear investment mandates.
Their goal is to attract capital from outside government, particularly from pension funds, insurers and development finance institutions that prefer long-term, stable returns.
Global institutions such as the World Bank note that infrastructure funds can be fully public, fully private, or structured as hybrid vehicles combining public and private capital.
How infrastructure funds work
In most countries, infrastructure funds begin with seed capital from government, which helps establish credibility and absorb early-stage risks that private investors are often reluctant to take on alone.
Once established, the fund defines priority sectors and builds a pipeline of well-prepared projects, complete with feasibility studies, environmental and social assessments, land acquisition plans and revenue models.
Public capital is then used strategically to crowd in private finance, through co-investment, guarantees, concessional loans or first-loss arrangements that lower risk for investors.
Returns typically come from user fees such as tolls, power tariffs or port charges, or from government availability payments.
Where projects are not fully commercially viable, targeted subsidies or viability gap funding may be required.
Strong governance, transparent procurement and independent oversight are widely seen as critical to success.
How Kenya’s fund is expected to operate
Kenya’s proposed National Infrastructure Fund is expected to follow a hybrid model, combining public anchor capital with private and institutional investment.
The government plans to capitalise the fund using proceeds from selected state asset sales, freeing up value locked in public enterprises and redirecting it toward new infrastructure development.
Priority sectors are expected to include energy generation and transmission, transport infrastructure, irrigation and water systems, all viewed as essential for economic transformation, food security and industrial growth.
Officials argue that by sharing risks with private investors and spreading costs over longer periods, the fund can finance development without sharply increasing public debt.
Why governments are turning to infrastructure funds
Globally, infrastructure funds have gained traction as governments seek alternatives to debt-financed public spending.
One advantage is faster project delivery, as professionally managed funds can move projects from planning to implementation more efficiently than traditional procurement systems.
Another is reduced fiscal pressure. By leveraging private capital, governments can preserve budget space for social services such as health and education.
Infrastructure funds also bring technical expertise in project structuring and risk allocation — skills that are often scarce within public agencies.
For countries like Kenya, they also offer a way to tap into large pools of domestic savings, particularly pension and insurance funds that need long-term, inflation-linked investments.
Lessons from other countries
Several countries have adopted similar models.
India’s National Investment and Infrastructure Fund (NIIF) operates as a government-anchored platform with professional independence, attracting global institutional investors.
Canada’s Infrastructure Bank uses loans, equity and guarantees to make revenue-generating public projects commercially viable, though it has faced debate over transparency and user fees.
The UK Infrastructure Bank, launched in 2021, focuses on crowding in private investment while aligning projects with climate and regional development goals.
These examples show that while infrastructure funds can mobilise large sums, success depends heavily on governance, clarity of mandate and accountability.
Risks and concerns
Despite their promise, infrastructure funds are not without risks.
Weak governance can lead to politically motivated investments with poor economic returns. Off-balance-sheet guarantees can also create hidden liabilities for taxpayers if projects fail.
Project bankability remains a challenge, with land disputes, weak feasibility studies and uncertain revenue streams often deterring investors.
There are also social concerns, particularly where projects rely on user fees that may exclude low-income households unless affordability safeguards are built in.
A tool, not a silver bullet
Kenya’s proposed National Infrastructure Fund marks a significant shift in development financing.
If well designed, it could accelerate growth, improve planning discipline and unlock private capital at scale.
But experts caution that such funds are not a cure-all. Their success will depend on a clear legal framework, independent governance, transparent use of asset sale proceeds and rigorous project preparation.
Ultimately, the impact of the National Infrastructure Fund will be measured not by its headline size, but by how effectively it delivers infrastructure that serves the public interest.
