Mobilising Infrastructure Investment in Kenya’s Intermediary Municipalities

Sustainable Urban Economic Development (SUED) Programme Mobilizing Infrastructure Investment in Kenya’s Intermediary Municipalities: Lessons from Isiolo and Malindi Kenya’s intermediary cities are increasingly recognized as engines of inclusive economic growth. However, their ability to attract infrastructure investment remains constrained by limited institutional capacity, inadequate planning frameworks, and a lack of bankable projects. The Sustainable Urban Economic Development (SUED) programme, funded by the UK Government, has been instrumental in addressing these challenges. This lessons learned document draws on the experiences of two infrastructure projects—the Sustainable Urban Drainage System (SuDS) in Isiolo and the Sanitation Value Chain Enhancement Project in Malindi—to explore how technical assistance (TA), strategic stakeholder engagement, and innovative financing approaches can mobilize infrastructure investment in Kenya’s intermediary municipalities.

Infrastructure Projects Context The SUED programme supported municipalities to develop Urban Economic Plans (UEPs) and identify priority infrastructure projects that align with local economic potential. In Isiolo, recurrent flooding had become a major impediment to economic activity, displacing communities and damaging infrastructure. The SuDS project was conceived to address this challenge through a phased approach that included drainage channel construction, river expansion, and the development of a bio-park. The project aimed to enhance climate resilience, reduce economic losses, and improve social inclusion.

In Malindi, the lack of a sewer network and poor faecal sludge management posed significant public health and environmental risks. The Sanitation Value Chain Enhancement Project, led by Malindi Water and Sanitation Company (MAWASCO), sought to establish a waste-to-value (W2V) facility integrated with a faecal sludge treatment plant (FSTP). The project aimed to improve sanitation for over 8,000 people, create 257 jobs, and reduce deforestation by producing briquettes as an alternative fuel source. While initially earmarked for SUED seed funding, the project was later excluded due to strategic considerations by the British High Commission (BHC), offering valuable insights into investment prioritization.

Investment Framework SUED’s TA was pivotal in structuring both projects to attract development finance institution (DFI) interest. In Isiolo, the TA team conducted a comprehensive prefeasibility study, developed a phased implementation plan, and aligned the project with

national policies such as the National Water Master Plan 2030. The team also supported the development of a Resettlement Action Plan (RAP) in line with World Bank standards, ensuring social safeguards were integrated from the outset.

In Malindi, the TA team facilitated market assessments, financial modeling, and stakeholder consultations to demonstrate the viability of the W2V facility. The project was structured to leverage World Bank funding for the FSTP, with additional investment from private operators. SUED’s TA also explored various ownership models, including public-private partnerships (PPPs) and full privatization, ultimately recommending a model that balanced investment attractiveness with regulatory feasibility.

A key lesson from both projects is the importance of sequencing TA to build investor confidence. Initial efforts focused on data collection and stakeholder engagement, followed by technical design and financial structuring. This approach ensured that projects were not only technically sound but also aligned with investor expectations and local development priorities.

Working with DFIs Engaging DFIs required a nuanced understanding of their investment criteria and risk appetite. In Isiolo, the TA team engaged potential funders such as the World Bank, AfDB, and JICA early in the project cycle. By presenting a phased implementation plan and demonstrating alignment with climate resilience goals, the team was able to position the SuDS project as a viable investment opportunity.

In Malindi, the TA team worked closely with MAWASCO and Kilifi County to formalize roles and responsibilities, develop sanitation tariffs, and secure land for the facility.

These efforts were critical in demonstrating local ownership and reducing perceived investment risks. The team also facilitated engagements with private operators such as Sanivation and Sanergy, highlighting the potential for revenue generation through briquette sales.

Stakeholder management was central to both projects. At the county level, SUED supported the establishment of project steering committees to coordinate activities and resolve conflicts. At the national level, the team engaged regulatory bodies such as NEMA and WASREB to ensure compliance and secure necessary approvals. Clear delineation of roles between counties and municipalities was essential in presenting a unified front to investors.

The most resource-intensive aspects of the process included securing land, conducting environmental and social impact assessments, and aligning stakeholder interests.

Future projects should anticipate these challenges and allocate sufficient time and resources to address them. Early engagement with DFIs and alignment with their strategic priorities can significantly enhance the likelihood of investment.

Conclusion The experiences from Isiolo and Malindi underscore the transformative potential of wellstructured TA in mobilizing infrastructure investment in Kenya’s intermediary municipalities. By aligning projects with local needs, national policies, and investor expectations, SUED has demonstrated a replicable model for unlocking finance for climate-resilient infrastructure. As municipalities continue to grapple with urbanisation and climate change, these lessons offer a roadmap for inclusive and sustainable development.