Counties in Kenya are struggling to attract significant access to green financing due to multiple barriers, including complex regulatory requirements, limited access to diverse financial instruments, and a lack of capacity to develop investable projects.
This is despite the potential of green finance to help counties unlock funding for environmentally friendly initiatives that drive socio-economic development and also the existence of regulatory framework to facilitate county-level access to green financing instruments.
According to the Financial Sector Deepening Kenya (FSD Kenya) Trust, the main reason for counties paralysis in unlocking green financing is continued heavy reliance on grants rather than exploring other financing models such as green bonds, concessional loans, and blended finance.
Additionally, most counties struggle with financial stability and creditworthiness, making it difficult to attract investors. Weak revenue generation and debt management further limit their ability to mobilize the necessary resources for green initiatives.
Another hurdle facing counties is a lack of adequate expertise amongst county officials needed to structure projects that meet investor requirements. Additionally, most projects lack detailed feasibility studies, environmental impact assessments, and financial models, making them less attractive to investors. Competing priorities and bureaucratic processes at the county levels have also been cited as barriers to green financing as they delay decision-making, slowing down project implementation.
FSD calls for a multifaceted approach that includes strengthening technical capacity, improving project bankability, diversifying financial instruments, and fostering investor confidence to unlock green finance for counties: “By addressing these critical areas, counties can enhance their ability to secure sustainable financing, drive climate-resilient development, and contribute meaningfully to Kenya’s green growth agenda.”
As an initiative to unlock green financing for the counties, FSD has established the county green investment facility to support counties in identifying and preparing investable green projects for investment. The facility is currently supporting 10 counties of Embu, Kirinyaga, Kisumu, Laikipia, Nairobi City, Makueni, Nandi, Taita Taveta, Vihiga, and Wajir to identify viable green investments.
