World Bank approves $750 Million for Kenya to support reforms enhancing inclusive growth

The World Bank Board of Directors recently approved a $750 million International Development Association (IDA) credit to support the Government of Kenya’s reforms to enhance inclusive growth, accelerate poverty reduction and achieve its Vision 2030 objective of becoming a middle-income industrialized country.

The operation lends support to the government’s “Big Four” agenda which prioritizes agriculture, affordable housing, universal health coverage, and manufacturing.

“Measures supported by this operation are expected to benefit ordinary Kenyans through better targeting of agricultural subsidies to reach low income farmers, prosecuting those who engage in fraudulent procurement practices, increasing availability of affordable housing, and improving revenue mobilization. This operation creates a foundation for essential reforms for fighting corruption, liberalizing markets, and enhancing inclusive growth.” said Felipe Jaramillo, World Bank Country Director for Kenya.

In agriculture, the Kenya Inclusive Growth and Fiscal Management Development Policy Financing facility will support critical reforms that  will enhance competition and market transparency, reduce corruption opportunities, and help Kenyan farmers to achieve higher productivity and to increase their incomes.

Reforms supported by the facility include better targeting of subsidies for agricultural inputs to reach the intended beneficiaries (using e-vouchers and biometric digital identification); reducing inefficiencies and leakages in the procurement and marketing of fertilizer; and establishing a warehouse receipt system and a commodities exchange to help farmers get easier access to credit and to reduce post-harvest losses.

By supporting the advancement of digitization through the creation of the national digital ID and pushing for access of internet services to all Kenyans, the facility will enhance service delivery by the government to its citizens and reduce the need for face-to-face interactions and corruption opportunities.

In housing, the operation will remove major regulatory constraints that developers face, help them lower construction costs, and thereby increase the supply of less-expensive housing units. The reforms supported by the operation will unlock the availability of longer term home loans and catalyze the development of the housing finance market in Kenya, which is expected to triple the proportion of households in Kenya who have access to a mortgage.

The operation will also provide support to the government’s medium-term fiscal consolidation plan by supporting measures to improve revenue mobilization, public expenditure and the prudent management of Kenya’s debt. It also supports reforms to enhance private sector’s participation in the inclusive growth process.

Kenya has been one of the fastest growing economies in sub Saharan Africa over the past decade. For this growth to be sustained into the future and help reduce poverty, critical reforms are required.

“The policy and institutional reforms supported by this operation will help improve the standard of living of ordinary Kenyans. Additionally, the policy reforms will contribute to improving good governance by the reinforcement of accountability and enforcement mechanisms through the use of digital technologies.” says Allen Dennis, World Bank Task Team Leader.

The operation is aligned with the World Bank Group’s twin goals of ending extreme poverty and promoting shared prosperity. This operation also complements other interventions supported by the World Bank and other development partners in support of the government’s inclusive growth agenda.