Report: Development partners to scale down focus on Kenya

Development finance institutions (DFIs) are predicted to focus less on Kenya as their priorities shift to other markets in the region, which might further derail the country’s competitiveness.

Additionally, some of the areas the Kenya Kwanza administration has ="https://www.standardmedia.co.ke/business/real-estate/article/2001455700/affordable-housing-plan-can-president-ruto-deliver">highlighted as priorities< are not of significant interest to the development partners.

For example, blue economy and housing and urban development, where the affordable housing initiative falls, rank low—at 22 per cent and eight per cent respectively—when it comes to development partners’ current priorities.

And when future priorities of the partners are considered, they rank even lower at 16 per cent and six per cent respectively.

The new report by audit and tax consultancy firm PwC lists agriculture and food security, climate change adaptation, environment and forestry, youth and gender empowerment, health and nutrition, and education as top five sectors that are poised to be attractive to DFIs.

Country priorities

These findings are contained in the inaugural International Development Sector Landscape Survey-Kenya Report. The report shows shifting country priorities for both DFIs and private finance institutions (PFIs).

Apart from desktop research, PwC collected views from international and local implementing partners, multilateral and bilateral funding agencies, philanthropic foundations, DFIs, PFIs and government agencies.

Kenya, which is currently an interest to DFIs and PFIs at 100 per cent, has its future priority slashed to 80 per cent by the same institutions.

This is while Uganda and Ethiopia at both 60 per cent priority currently, will move up to 80 per cent. Interest in Rwanda has also been reduced to 60 per cent in future from the current 100 per cent.

Tanzania has remained constant at 80 per cent for both current and future priority.

“Kenya remains a top priority for 100 per cent of DFIs and PFIs currently. However, future projections indicate a decline to 80 per cent,” the report says.

“This dip may be attributed to market saturation, increasing geopolitical or economic risks, or a shift toward diversification in other emerging regional markets.” 

The same reason has been presented as well for Rwanda. “Rwanda, while currently a top priority for 100 per cent of DFIs and PFIs, is projected to decline sharply to 60 per cent, representing a 40 per cent drop.

“The steep decrease may be due to concerns over market saturation, limited scalability, or reallocation of resources to higher-growth economies.”  When it comes to funding agencies, Kenya’s future priority has been maintained at 94 per cent while Tanzania’s has grown from 72 to 83 per cent.

“Tanzania is the second highest country of operation with 72 per cent of funding agencies respondents present and with 11 per cent planning to provide funding in the foreseeable future,” the report explains.

“This is alluded to the country’s strong economic growth, stable political environment, and commitment to development initiatives.”

Kenya currently ranks highest as the most preferred country of funding by 94 per cent of funding agencies both now and in the foreseeable future, underscoring its stable and dominant role in regional development activities.

From the respondents, the report cites several areas poised for increased emphasis among them peace, security and humanitarian response, and governance and public administration. “This suggests growing recognition of governance reforms and peacebuilding as prerequisites for resilience amid uncertainty,” the report says.

On the flipside, blue economy and energy and extractives sectors have been deprioritised. The number of respondents focusing on blue economy drops from 22 per cent currently to 16 per cent in future, and energy from 16 to 10 per cent.

“Financial services also declines slightly from 12 to 8.0 per cent. This may reflect funding constraints or strategic decisions to concentrate on social sectors and climate over narrower economic initiatives,” the report says.