Overview

The East African nation of Kenya has a population estimated at 46.1 million, which increases by an estimated one million a year. With support of the World Bank Group (WBG), the International Monetary Fund (IMF) and other development partners, Kenya has made significant structural and economic reforms that have contributed to sustained economic growth in the past decade. Development challenges include poverty, inequality, climate change, and vulnerability of the economy to internal and external shocks.

Political Context

Kenya is scheduled to hold its second election under the new constitution on August 8, 2017. Devolution remains the biggest gain from the August 2010 constitution, which ushered in a new political and economic governance system. It is transformative and has strengthened accountability and public service delivery at local levels. The government’s agenda is to deepen the implementation of devolution and strengthen governance institutions, while addressing other challenges including land reforms and security to improve economic and social outcomes, accelerate growth and equity in distribution of resources, reduce extreme poverty, and youth employment.

Economy

The World Bank’s most recent Kenya Economic Update (KEU) October 2016 projected a 5.9% growth in 2016, rising to 6% in 2017.  The key drivers for this growth include: a vibrant services sector, enhanced construction, currency stability, low inflation, low fuel prices, a growing middle-class and rising incomes, a surge in remittances, and increased public investment in energy and transportation.

According to the latest Kenya National Bureau of Statistics (KNBS) quarterly report, Kenya’s economy expanded by 5.7% in the third quarter of 2016 compared to 5.8% in the same period in 2015.  The quarterly report says that the economic growth was well spread although most of the sectors of the economy recorded slowed growth. The tourism and hotel industry, information and communications, and public administration are among the sectors that registered improved growth during the quarter. Inflation was contained within the Central Bank's target to average at 6.3% compared to an average of 6.14% during the same quarter in 2015. The slight increase in inflation was primarily due to increases in the prices of food and beverages during the period under review.

According to the Kenya National Bureau of Statistics (KNBS) report, the amendment of the Banking Act in August 2016 to cap the lending rates to a maximum of 4%above the Central Bank Rate (CBR) resulted in a substantial decline in the interest rates during the month of September to 13.84% from 16.75% in the same month of 2015.

Social Developments

Kenya has met a few of the Millennium Development Goals (MDGs)  targets, including reduced child mortality, near universal primary school enrolment, and narrower gender gaps in education. Interventions and increased spending on health and education are paying dividends. While the healthcare system has faced challenges recently, devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system.

Development Challenges

Kenya has the potential to be one of Africa’s great success stories from its growing youthful population, a dynamic private sector, a new constitution, and its pivotal role in East Africa. Addressing challenges of poverty, inequality, governance, climate change, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform lives of ordinary citizens, will be a major goal for Kenya.

Last Updated: Mar 07, 2017

The World Bank Group’s (WBG) strategy for Kenya is to support the government’s strategy of ending extreme poverty and increasing shared prosperity. The WBG’sKenya Country Partnership Strategy FY14-18 (CPS) focuses on improving the economy’s competitiveness and sustainability, protecting and helping the vulnerable to develop their potential, and building consistency and equity through devolution. During the CPS period, the WBG is planning an investment of $1 billion a year, through the International Development Association (IDA), International Finance Corporation (IFC), and Multilateral Investment Guarantee Agency (MIGA).

The current IDA portfolio amounts to approximately $6 billion in 27 national ($4.9 billion) and six regional ($1.1 billion) projects. This includes the Kenya Climate Smart Agriculture Project ($250 million) which was approved on February 9, 2017. The biggest investments are in infrastructure namely: transport, energy, water, and urban development, followed by the social sectors (health and social protection). Other sectors that stand to benefit are: education, private sector development, information and communications technologies (ICT), agriculture, justice.

IFC

The IFC supports Kenya’s private enterprises through direct investments, advisory services, and capital from global financiers.

Since it started operating in Kenya, the IFC has invested $1 billion in the country’s agribusiness, infrastructure, financial markets, health, and education sectors. The IFC has invested in Bridge International Academies, National Cement, AAR Healthcare, Goodlife pharmacies, Thika, Gulf power plants, and Vegpro among others.

The IFC’s clients and partners are tackling pressing development challenges, including access to power, healthcare, and food. Small businesses are engines for Kenya’s growth, creating jobs and providing essential goods and services, however entrepreneurs are often unable to access finance.

The IFC’s Africa Micro, Small, and Medium Enterprise Finance Program helps banks increase business with the SME sector. The IFC invests directly in banks to increase lending to entrepreneurs, and advises them on how to tailor their financial services for SMEs.

Its partners in Kenya include Equity Bank, Gulf African Bank, Bank of Africa, Diamond Trust Bank, and Kenya Commercial Bank. The IFC and the World Bank also work closely with the government to improve business regulation through reforms in registering businesses, getting credit and other areas.

Multilateral Investment Guarantee Agency (MIGA)

MIGA is providing investment guarantees of $302 million in support of projects in Kenya’s infrastructure, power, agribusiness, and service sectors. Working closely with the Bank and IFC, it helps to leverage financing for construction of privately operated power plants to diversify Kenya’s energy mix in line with the government’s least cost power development plan. MIGA is receiving increasing interest from other investors and sectors in the country.

Last Updated: Mar 07, 2017

The World Bank Group (WBG) has contributed to Kenya’s development in all major economic and social sectors including the following:

Energy

  • Through IDA, 280 MW new geothermal capacity has been commissioned, increasing Kenya’s developed geothermal capacity to 579 MW from 241 MW in 2013.
  • The current 400 MW of geothermal energy production on stream in Olkaria, and the new power is already reaching millions of homes, and the price of electricity has fallen by 30% over the past year. In addition, over half of Kenya’s energy is drawn from climate-friendly sources.
  • Over 2,146,701 new customers were connected to electricity supply by June 2015 compared to the 285,000 targeted. 150,000 households in the informal settlements were connected to legal power in just one year (2015) up from 5,000 households in 2014.

Urban Sector

  • The IDA-funded Kenya Municipal Program (KMP) and the Kenya Informal Settlements Improvement Project (KISIP) have collectively constructed 60 kilometers of drainage, protecting more than 550,000 residents in 15 urban areas in the country.
  • More than 1.7 million people countrywide have benefitted from the (KMP) infrastructure investments including 43 kilometers of access roads.
  • 68,000 urban residents can now access all-season roads within a 500-meter range of their homes.
  • Through (KISIP), more than 530,000 people have benefitted from improved infrastructure since 2011 including about 30 kilometers of rehabilitated settlement roads and 30 kilometers of footpaths.
  • Between KMP and KISIP, 714 streetlights and floodlights have been installed across the 15 urban areas. To further stimulate localized urban economic activities, three markets – a traders’ market in Eldoret and two livestock markets in Garissa and Machakos – have been completed under KMP.

Social Protection

  • Presently, over 4 million individuals are benefiting from cash transfer support through the National Safety Net Program, up from 1.7 million in 2013.
  • Over 465,000 additional households have been enrolled in the National Safety Net Program since July 2013.

Transport

The IDA-funded Northern Corridor Transport Improvement Project has produced significant results, namely:

  • Kenya’s civil aviation authority has met International Civil Aviation Organization (ICAO) standards, and the country has been granted a Category 1 rating under the International Aviation Safety Assessment (IASA) program. This rating will allow local airlines to apply for non-stop flights to the United States, which will shorten the journey between the two countries.
  • Kisumu airport was elevated to an international airport and can now handle 500,000 passengers annually.
  • The freight and passenger travel time by road from Mombasa to Malaba reduced by 25%.
  • Independent road entities have been created while aviation sub-sector institutions now have financial autonomy and strengthened oversight on aviation security and safety.
  • Construction of new terminal at Jomo Kenyatta International Airport with a capacity of 2.5 million passengers annually doubled the capacity of the existing facilities.

Last Updated: Mar 07, 2017

The World Bank  Group has established strong partnerships for knowledge and resources with other development partners, researchers, and agencies that contribute to  Kenya’s development. These include the European Union, the European Investment  Bank, the African Development Bank, France’s Agence Française de Développement,  United Kingdom’s Department for International Development, the German  Development Bank, the Japan International Cooperation Agency, and China.

Last Updated: Mar 07, 2017


LENDING

Kenya: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments