The Effect of Implementation Capacity to the relationship between different modes of Infrastructure Financing and Success of Public Capital Projects in Kenya

Authors

  • John W. Nguri PhD candidate in Business Administration, Faculty of Business and Management Science, University of Nairobi
  • Dr. Duncan Elly Ochieng (PhD, FFA, CPA) Senior Lecturer, Department of Finance and Accounting Faculty of Business and Management Sciences - University of Nairobi
  • Prof. Gituro Wainaina Department of Management Science and Project Management, Faculty of Business and Management Sciences - University of Nairobi

DOI:

https://doi.org/10.47672/ajf.2726

Keywords:

Internal Infrastructure financing; External Infrastructure Financing; PPP Infrastructure Financing; Implementation capacity; public capital projects; cost and time overrun

Abstract

Purpose: The study investigates the effect of implementation capacity on the relationship between the internal, external and PPP infrastructure financing methods and the success of public capital projects in Kenya.

Materials and Methods: Using positivistic approach, the study adopted descriptive cross-sectional design to analyze data from high-impact infrastructure projects in the roads, energy, and water & sanitation sectors under Kenya’s Medium-Term Plans (MTP I and MTP II). A sample of 313 projects were purposively and randomly selected covering the three types of infrastructure projects and ensuring representation across all regions of the country from projects developed in the three sectors over the 10 year period. A response rate of 260 high-impact infrastructure projects (representing 83%) was achieved with secondary data on cost and time overruns, for each of the three identified infrastructure financing methods analyzed using ratio scale, and primary data collected from the project managers' perceptions of implementation capacity using Likert Scale of 1 to 5 where 1 was the lowest and 5 was the highest.

Findings: The study findings show that the effect of implementation capacity on the relationship between internal financing and success of public capital project in terms of costs overrun was negative; for external infrastructure financing positive; and for PPP financing negative. In the case of time overruns the effect on internal infrastructure financing was positive; for external financing the effect was negative; and on PPP infrastructure financing the effect was negative. The study also notes that out of the four factors explaining the implementation capacity, payment to the contractors exhibits the highest risk.

Unique Contribution to Theory Practice and Policy: The study recommended that the government prioritize external financing over internal financing; strengthen implementation capacity by improving the payment to contractors; and further study be made on PPP financing once more capital projects are developed using this mode of financing.

Downloads

Download data is not yet available.

References

Cirolia, L.R., Pollio, A., and Pieterse, E. (2021). Infrastructure financing in Africa: Overview, research gaps and research agenda. Cape Town: African Centre for Cities

Ahmadabadi, A. A. and Heravi, G. (2019). The effect of critical success factors on project success in Public-Private Partnership projects: A case study of highway projects in Iran. Journal on Transport Policy, Volume 73, Pages 152-161.

Akinyemi, F. & Adewale, T. (2023). Governance and Infrastructure Development: Lessons from Nigeria. Journal of African Economies, 32(1), 65-87.

Amadi, E., & Nwachukwu, U. (2022). Infrastructure Financing and Development in Africa: A Comparative Study of China and Nigeria. African Review of Economics and Finance, 14(2), 34-59.

Gbahabo, P. T., and Ajuwon, O. S., (2017). Effects of Project Cost Overruns and Schedule Delays in Sub-Saharan Africa. Development Finance, University of Stellenbosch Business School, Western Cape, South Africa. European Journal of Interdisciplinary Studies, Volume 3, Issue 2.

Healy, P. N., & Palepu, K. G. (2001). Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature. Journal of Accounting & Economic, 31, 405-440. http://dx.doi.org/10.1016/S0165-4101 (01)00018-0

Jensen, M.C., & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

Kenya National Bureau of Statistics. (2023). Economic Survey 2023. Nairobi: Government Printer.

Lakmeeharan, K., Manji, Q., Nyairo, R., and Poeltner, H., (2020). Solving Africa’s infrastructure paradox. McKinsey & Company Publication. Found at http//solving-africas-infrastructure-paradox.pdf

Leshore, L. & Minja, D. (2019). Factors affecting implementation of Vision 2030 flagship projects in Kenya: A case of the Galana-Kulalu irrigation scheme. International Academic Journal of Law and Society, 1(2), 395-410

Meng, J., Ye, Z., and Wang, Y. (2024) Financing and investing in sustainable infrastructure: A review and research agenda. Sustainable Futures Journal. Journal homepage: www.sciencedirect.com/journal/sustainable-futures

Meyer, S.C., (2023). Handbook of the Economics of Finance. Chapter 4 - Financing of Corporations. Volume 1, Part A, 2003, Pages 215-253. Found at https://doi.org/10.1016/S1574-0102(03)01008-2

Mwangi, D. (2021). Corruption and Its Impact on Infrastructure Development in Kenya. East African Business Journal, 15(2), 45-60.

Myers, S.C., & Majluf, N.S. (1984). Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have. Journal of Financial Economics, 13(2), 187-221.

Nabil, Ahmed, (2024). Impact of Cost Overruns on Infrastructure Projects Failures and Effective Cost Management to Reduce Overruns. Available at SSRN: https://ssrn.com/abstract=5020982 or http://dx.doi.org/10.2139/ssrn.5020982

Odhiambo, J., & Wamuyu, M. (2021). Project Management Practices and Infrastructure Development in Kenya. Journal of Construction and Project Management, 12(1), 54-73.

Panda, B., and Leepsa, N. M., 2017). Agency theory: Review of Theory and Evidence on Problems and Perspectives. Indian Journal of Corporate Governance 10(1) 74–95 © 2017 Institute of Public Enterprise SAGE Publications sagepub.in/home.navDOI: 10.1177/0974686217701467http://ijc.sagepub.com

Steinebach, Y. (2022). Instrument choice, implementation structures, and the effectiveness of environmental policies: A cross-national analysis. Regulation & Governance, 16(1), 225–242. Found at https://doi.org/10.1111/rego.12297

UNCTAD. (2023). World Investment Report: Investing in Sustainable Development. Geneva: United Nations Conference on Trade and Development.

World Bank. (2023). Kenya Economic Update: Infrastructure for Growth. Washington D.C.: World Bank.

Xu, L., Zhao, Q., & Feng, Y. (2021). Implementation Capacity and Infrastructure Project Success: Evidence from China. International Journal of Infrastructure, 29(3), 453-471.

Zhao, Q., & Feng, Y. (2020). The Role of Governance in Infrastructure Development in China. Journal of Asian Economics, 23(4), 67-82

Downloads

Published

2025-06-28

How to Cite

Nguri, J., Ochieng, D., & Wainaina, G. (2025). The Effect of Implementation Capacity to the relationship between different modes of Infrastructure Financing and Success of Public Capital Projects in Kenya. American Journal of Finance, 11(2), 19–35. https://doi.org/10.47672/ajf.2726

Issue

Section

Articles