KCB to Lend Sh40bn for Road Projects Under Annuity Plan

The Kenya Commercial Bank (KCB) has agreed to finance contractors who will be awarded tenders by the government to build roads under the annuity concessions programme.

KCB chief executive Joshua Oigara said on Friday that his bank would commit Sh40 billion to support the government’s initiative to build 10,000 kilometres of roads across the country over the next five years.

“We as the banking sector are committed to supporting this initiative to expand the road network in our country,” Mr Oigara said.

He was speaking during a meeting held at the Kenyatta International Convention Centre (KICC) in Nairobi and chaired by Deputy President William Ruto.

The Co-operative Bank of Kenya has committed Sh8 billion to the project which requires Sh178 billion in loans.

The commitments by the two lenders came in the wake of reports that local banks were not keen on participating in the project due to the ambiguity of the financing model and repayment terms.

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The annuity concessions financing model, which is largely borrowed from India, will see contractors sourcing for loans guaranteed by the Treasury to design, build and maintain roads for up to eight years.

The Treasury, which will provide 30 per cent of the funds, will then repay the loans in equal instalments (annuity) over eight years from the time a given road is completed.

The project is expected to cost Sh300 billion, but projections show the interest payments would push up the cost to Sh351 billion by the time the last annuity payment is made in 2024.

Tenders for the first 650km were received in December last year and nine bids opened in January but the contracts are yet to be awarded despite a series of promises.

The government has promised to award the tenders on March 20.

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