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The Kenyan government, much like its neighboring countries are on an aggressive infrastructure development campaign to spark industrial development. However, the bulk of funds for these projects are coming from foreign lenders, particularly China.

Economics experts have sounded the alarm on Kenya’s heavy borrowing that it could undermine sustainable economic growth as the bulk of the country GDP will be used to repay loans. Worst case scenario, Kenya ending up paying for more than the worth of the loans by defaulting payments and the accrued interests accumulating too much.

It now appears the government has become somewhat innovative plans to merge the top three state-owned development institutions into one big bank. The institutions:

Industrial and Commercial Development Corporation (ICDC)

IDB Capital

Tourism Finance Corporation (TFC)

Combined, the above three financial institutions have a bigger balance sheet and have been earmarked for consolidation to form the Kenya Development Bank (KDB). The proposed KDB will have a similar model as the African Development Bank (AfDB) or the East African Development Bank (EADB).

However, there is no official agreement on the structure of the proposed KDB, though discussion are already underway. Last month, Kenya’s National Treasury floated out a tender looking for a consultant who will advise on the merger process of the above three mentioned institutions. The tendering period was closed on September 18.

A task force has already been formed and is chaired by the National Treasury, to work out the legalities and financial technicalities of bringing KDB into fruition. The task force includes the managing directors of the three financial institutions to be merged, their respective ministries managing them, the Attorney General, and State Corporation Advisory Council.

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