Water Utility Creditworthiness Course participants. Photo: Lucy Muhia, Kenya Water Services Regulatory Board
Kenya loses more than 0.9% of its GDP to lack of access to water. About 34 million Kenyans have no access to basic sanitation, 20 million lack access to basic drinking water, and 33 million to basic hygiene services. To deal with these shortcomings, the Government of Kenya has launched an ambitious National Water and Sanitation Investment Plan (NAWASIP) whose goal consists in achieving universal access to WASH (Water, Sanitation and Hygiene) by 2030.
While NAWASIP benefits from public financing, the Kenyan authorities have recognized that public resources alone cannot meet the immense investment required, with a financing gap currently estimated at $3.5 billion. To fill up this shortfall, they have taken a proactive approach with a series of initiatives designed to support water utilities by attracting private and commercial funding.
Creditworthiness is a key pillar for enhancing sector performance
For water utilities in Kenya, when it comes to attracting private and commercial financing, enhancing creditworthiness is crucial.
I was recently part of a cohort of water and sanitation professionals representing the national water sector institutions of Kenya, as well as select water services providers, who were invited to take a World Bank-designed Water Utility Creditworthiness Course. The objective? To enhance our understanding of water utility financing and the fundamental actions needed to improve creditworthiness. While the course is available online and open to all, we offered it in a facilitated manner to incentivize successful completion. All of us, 36 participants in total, completed the course and were excited to receive our certificates in July 2024.
The course is more than just a standalone proposal: it is part of a host of measures launched by the Water Services Regulatory Board of Kenya, which has been at the forefront of the creditworthiness initiative. The Board’s efforts are already bearing fruit: its annual Impact reports reveal a positive trend in the credit ratings of licensed water services providers, with 83 water providers rated “B” or above in the latest edition (2022–2023), up from 64 in the previous period. Despite this progress, the potential for improvement remains vast, since only a handful of utilities have achieved an “A” rating or above. Kenya’s Water Sector Trust Fund complements these endeavors by aiding water services providers in securing commercial and blended financing, with at least 12 providers already benefiting from such arrangements.
It is worth noting that improving the creditworthiness of water utilities is just one dimension of a larger policy framework designed to enhance the sector’s performance. The government’s overarching objective, via NAWASIP, consists of both bridging the financing gap and driving revenue-boosting reforms capable of enhancing the efficiency of Kenya’s water sector.
By implementing these reforms, the government aims to optimize the use of existing resources through capital efficiency improvements, ensure that investments yield the highest possible returns, reduce operating costs, and increase revenues through operational improvements. Tariff reforms are then slated to be introduced, with the objective of ensuring that the operating costs of water utilities are adequately covered by the revenue generated.
Foundation for a more resilient water sector
Having been part of the team supporting the Kenya water sector over the years, I cannot overstate the importance of the Water Utility Creditworthiness Course to empower water utilities with the knowledge and skills necessary to attract commercial financiers.
My dream is to see this course institutionalized within the sector to expand its reach to all those who need it and to ensure that the principles of creditworthiness become deeply enmeshed in the fabric of Kenya’s water sector operations. The government is also committed to this. The sector leaders who participated in the course saw it as an opportunity to facilitate change in how water and sanitation services are delivered by fostering a culture of efficiency, integrity, accountability, and good governance. Addressing non-revenue water, which averages almost 50% of the water produced , is considered a low-hanging fruit in increasing the financial efficiency of service providers.
Given the success of this first training, we are set to support the government in operationalizing the course through the World Bank-financed Kenya Water, Sanitation and Hygiene Program (K-WASH). A new performance-for-results program, K-WASH will support 33 water services providers in improving governance, regulatory compliance, financial performance, and creditworthiness, with the goal of leveraging commercial financing to the tune of $8 million.
By fostering financial acumen and creditworthiness among water utilities, the Kenyan authorities are addressing immediate financial challenges while laying the groundwork for long-term sustainability and resilience in the WASH sector. The ripple effects of their efforts are bound to be felt far and wide, as empowered utilities lead the charge toward a future where clean water and sanitation are accessible to all. I encourage all water and sanitation professionals to undertake the free Water Utility Creditworthiness e-course and acquire the skills needed to help utilities attract commercial financing as they work toward closing their financing gap.
Related blog:
Closing the financial gap: Take the new e-Learning course on Water Utility Creditworthiness!
Other resources:
Water Utility Creditworthiness Course
Water Utility Financing e-Learning
International Benchmarking Network of Water Utilities - New IBnet
Water Loss Reduction Performance Based Contract
Citywide Inclusive Sanitation (CWIS) Initiative
Water in Circular Economy and Resilience
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