Ten county governments could in September start borrowing money from the capital markets to finance infrastructure projects.
The select counties are taking part in a pilot aimed at prepping them to tap into the open markets to access funds and enable them to undertake development projects with the comfort of paying over time, just as is the case with the National Government.
It, however, exposes the taxpayer to more debt stock, with the National Government expected to guarantee the county debts and pay should they be financially stressed or default on their loans.
The Commission on Revenue Allocation (CRA), together with the World Bank, have started the process to determine the creditworthiness of the 10 county governments.
Global Credit Rating Agency, through its Kenyan partner Metropol, will next week start the three-month process to rate the counties, after which the regions that will have creditworthy scores can go to the market and borrow funds.
Other than good credit scores and demonstrating that they are undertaking viable projects, counties will also need approval by the National Treasury to borrow from the capital markets, which will guarantee such debts.
CRA Chairperson Jane Kiringai said the Capital Markets Authority is also in the process of developing products that can enable counties to borrow from the local market.
"From Monday, the rating agency will be on the ground working with the counties. By September, they will come with the first set of shadow credit rating and depending on what the rating says, your ability to go to the market will depend on what the rating says," she said yesterday during the launch of the County Creditworthiness Initiative.
The counties will get a rating of between AAA and D, with those with a rating of B- and above seen as creditworthy. These can then start borrowing through instruments such as bonds or even take on public-private partnership projects.