EFFECT OF PROJECT FINANCING ON THE PERFORMANCE OF ROAD INFRASTRUCTURE DEVELOPMENT PROJECTS IN KENYA
Keywords:
Financing, Road Construction, Infrastructure Development
Abstract
Road construction is an important aspect that drives the economy of the country and increases the productivity of the people since it acts as a linkage to various factors of production. However, successful implementation and ultimately performance of these projects requires immense resources that may not be readily available. To overcome the financial and expertise challenges, Governments across the world enter into strategic partnerships with the private sector to help put up such infrastructure. Unlike governments, private sector is out to maximize profits hence the need to charge some fees to enable them recoup their investment. This study therefore set to determine the impact of project financing on the performance of road infrastructure development projects in Kenya. The study was anchored on resource based view theory. The study applied a mixed method approach to collect data from the target population of 199 spread out among 15 road infrastructure development projects in the country. The study utilized both primary and secondary data sources and adopted a combination of descriptive survey research design and explanatory design. For primary data collection, both closed and open-ended questionnaire were used. The questionnaire’s reliability was tested through the use of the Cronbach’s alpha reliability coefficient. The study also made use of a structured interview process to get more insights on the research questions. The study mainly made use of descriptive statistics to summarize data and inferential statistics and specifically the Multi linear regression were used to test hypothesis. The analysis made use of statistical packages to analyse data and these were presented in the form of tables and figures. The study found that project financing had a positive and significant influence on the performance of road projects in Kenya. The study concluded that project financing increases the amount of financing available and lower the overall risk to acceptable levels for major project stakeholders. The study recommended that it is important to identify the problem to be dealt with concerning the project, the stakeholder to be involved, outline the project goals that are to be achieved and all the relevant project tasks crucial in achieving the results of the project. The study recommended that the organization should identify the right sources of project finance.
References
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Ullah, M. I., Aslam, M., Altaf, S., & Ahmed, M. (2019). Some new diagnostics of multicollinearity in linear regression model. Sains Malaysiana, 48(9), 2051-2060.
Aduma, L. K., & Kimutai, G. (2018). Project risk management strategies and project performance at the National Hospital Insurance Fund in Kenya. International Academic Journal of Information Sciences and Project Management, 3(2), 80-110.
Mambwe, M., Mwanaumo, E. M., Nsefu, M. K., & Sakala, N. (2020). Impact of stakeholder engagement on performance of construction projects in Lusaka District. In Proceedings of the 2nd African International Conference on Industrial Engineering and Operations Management, Harare, Zimbabwe (pp. 7-10)
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Akhanolu, I. A., Ikpetan, O. A., & Chibuzor, O. T. (2016). Project Financing: Causes and Effects of Financing Abandoned Building projects in Nigeria. The Social Sciences, 11(24), 5818-5823
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Antônio, C. P. J, Geciane S. P., Ornella, P., & Alexandre P. S. J. (2015). Project Stakeholder Management: A Case Study of a Brazilian Science Park. Journal of Technology Management & Innovation 10(2)
Arezki, R., & Sy, A. (2016). Financing Africa's Infrastructure Deficit: From Development Banking to Long-term Investing. Journal of African Economies, 25(2), 59-73.
Berssaneti, F. T., & Carvalho, M. M. (2015). Identification of variables that impact project success in Brazilian companies. International journal of project management, 33(3), 638-649.
Buso, M., Marty, F., & Tran, P. T. (2017). Public-private partnerships from budget constraints: Looking for debt hiding? International Journal of Industrial Organization, 51, 56-84.
Conti, S., & Peruginelli, G. (2021). Communication policy in European projects: to what extent non-expert users can better and easier perceive and understand the European legal framework. Journal of Open Access to Law, 9(1), 11-11.
Creswell, J. W., & Creswell, J. D. (2017). Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications
Dabirian, S., Ahmadi, M., & Abbaspour, S. (2023). Analyzing the impact of financial policies on Japan construction projects performance in using system dynamics. Engineering, Construction and Architectural Management, 30(3), 1201-1221.
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Doyle, L., McCabe, C., Keogh, B., Brady, A., & McCann, M. (2020). An overview of the qualitative descriptive design within nursing research. Journal of Research in Nursing, 25(5), 443-455.
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Gain, H., Mishra, K., & Aithal, P. S. (2022). Risk Management Practice Adopted in Road Construction Project in Nepal. International Journal of Management, Technology, and Social Sciences (IJMTS), 7(1), 21-36.
Ganbat, K., Popova, I., & Potravnyy, I. (2016). Impact investment of project financing: opportunity for banks to participate in supporting green economy. Baltic Journal of Real Estate Economics and Construction Management, 4(1), 69-83.
Garrido, L., Gomez, J., de los Ángeles Baeza, M., & Vassallo, J. M. (2017). Is EU financial support enhancing the economic performance of PPP projects? An empirical analysis on the case of Spanish road infrastructure. Transport policy, 56, 19-28.
Gichuru, B. M. (2016). Influence of bank loan financing on project performance: a case of Kenya commercial bank financed youth groups’ projects in Imenti south District-Kenya (Doctoral dissertation, University of Nairobi).
Gorshkov, R., & Epifanov, V. (2016). The mechanism of the project financing in the construction of underground structures. Procedia Engineering, 165, 1211-1215.
Ismail, S. (2019). Critical success factors of public private partnership (PPP) implementation in Malaysia. Asia-Pacific Journal of Business Administration, 4(1), 56 – 69
Khmel, V., & Zhao, S. (2016). Arrangement of financing for highway infrastructure projects under the conditions of Public–Private Partnership. IATSS research, 39(2), 138-145.
Liang, Y., & Jia, H. (2018). Key success indicators for PPP projects: evidence from Hong Kong. Advances in Civil Engineering, 2018.
Lohawiboonkij, S. (2019). The Best Project Financing Option for Infrastructure Projects in Developing Nations. PM World Journal, 3(1), 1-28.
Lomoro, A., Mossa, G., Pellegrino, R., & Ranieri, L. (2020). Optimizing Risk Allocation in Public-Private Partnership Projects by Project Finance Contracts. The Case of Put-or-Pay Contract for Stranded Posidonia Disposal in the Municipality of Bari. Sustainability, 12(3), 806.
Maina, M. S. (2018). Stakeholder management and project performance of open air market projects in Nyeri county, Kenya. (Doctoral dissertation, University of Nairobi).
Majanja, T. (2012). Sources of Funding Infrastructural Projects.
Mambwe, M., Mwanaumo, E. M., Nsefu, M. K., & Sakala, N. (2020). Impact of stakeholder engagement on performance of construction projects in Lusaka District. In Proceedings of the 2nd African International Conference on Industrial Engineering and Operations Management, Harare, Zimbabwe (pp. 7-10).
Morgan, D. L. (2014). Pragmatism as a paradigm for social research. Qualitative inquiry, 20(8), 1045-1053.
Mukami, M. T. (2021). Influence of Funding Activities on Completion of Selected County Funded Construction Projects in Kitale Town. Trans Nzoia County, Kenya. Saudi J Eng Technol, 6(3), 45-52.
Muturi, W., & Oguya, S. A. (2016). Factors affecting performance of road construction projects in arid and semi-arid areas in Kenya. International journal of social science and information technology, 3(8), 908-929.
Mutwiri, F. R., Were, S., & Odhiambo, R. (2018). Project Identification and Initiation Practices on the Success of CDF Construction Projects in Kenya. Journal of Entrepreneurship & Project Management, 2(2), 47-56.
Mwangi, P. K. (2018). Influence of participatory monitoring and evaluation on sustainability of community development projects in selected public schools in Gatundu south constituency, Kiambu County, Kenya (Doctoral dissertation, University of Nairobi).
Naumenkova, S., Tishchenko, I., Mishchenko, S., Mishchenko, V., & Ivanov, V. (2020). Assessment and mitigation of credit risks in project financing. Banks and Bank Systems, 15(1), 72
Ndunda, A. N., Paul, S. N. & Mbura, L. K. (2017). Influence of stakeholder activities on implementation of rural road projects in Machakos County. International Academic Journal of Information Sciences and Project Management, 2(2), 1-20
Penrose, E. (1959). 1959 The theory of the growth of the firm Oxford: Blackwell.
Pinto, J. M. (2017). What is project finance?. Investment management and financial innovations, 14(1), 200-210.
Shan, M., Hwang, B. G., & Zhu, L. (2017). A global review of sustainable construction project financing: policies, practices, and research efforts. Sustainability, 9(12), 2347
Sheard, J. (2018). Quantitative data analysis. In Research Methods: Information, Systems, and Contexts, Second Edition (pp. 429-452). Elsevier
Sundararajan, S. K., & Tseng, C. L. (2017). Managing project performance risks under uncertainty: Using a dynamic capital structure approach in infrastructure project financing. Journal of Construction Engineering and Management, 143(8), 04017046
Ullah, F., Thaheem, M. J., & Umar, M. (2017). Public-private partnerships in Pakistan: A nascent evolution. Public-private partnerships in transitional nations: Policy, governance and praxis, 1, 127-150.
Wang, Y., & Zhao, Z. J. (2018). Performance of public–private partnerships and the influence of contractual arrangements. Public Performance & Management Review, 41(1), 177-200.
Wera, H. (2016). Influence of project identification process on project performance: a case of African inland child and community agency for development, vocational training project, Kibra constituency, Kenya (Master’s Project, University of Nairobi)
Xiong, W., Zhao, X., Yuan, J. F., & Luo, S. (2017). Ex post risk management in public-private partnership infrastructure projects. Project Management Journal, 48(3), 76-89.
Zhu, L., Zhao, X., & Chua, D. K. H. (2016). Agent-based debt terms’ bargaining model to improve negotiation inefficiency in PPP projects, Journal of Computing in Civil Engineering, 30(6).
Aduma, L. K., & Kimutai, G. (2018). Project risk management strategies and project performance at the National Hospital Insurance Fund in Kenya. International Academic Journal of Information Sciences and Project Management, 3(2), 80-110.
Paul, S. R., & Zhang, X. (2015). Testing for normality in linear regression models. Journal of Statistical Computation and Simulation, 80(10), 1101-1113.
Ullah, M. I., Aslam, M., Altaf, S., & Ahmed, M. (2019). Some new diagnostics of multicollinearity in linear regression model. Sains Malaysiana, 48(9), 2051-2060.
Aduma, L. K., & Kimutai, G. (2018). Project risk management strategies and project performance at the National Hospital Insurance Fund in Kenya. International Academic Journal of Information Sciences and Project Management, 3(2), 80-110.
Mambwe, M., Mwanaumo, E. M., Nsefu, M. K., & Sakala, N. (2020). Impact of stakeholder engagement on performance of construction projects in Lusaka District. In Proceedings of the 2nd African International Conference on Industrial Engineering and Operations Management, Harare, Zimbabwe (pp. 7-10)
Berssaneti, F. T., & Carvalho, M. M. (2022). Identification of variables that impact project success in Brazilian companies. International journal of project management, 33(3), 638-649
Akhanolu, I. A., Ikpetan, O. A., & Chibuzor, O. T. (2016). Project Financing: Causes and Effects of Financing Abandoned Building projects in Nigeria. The Social Sciences, 11(24), 5818-5823
Muturi, W., & Oguya, S. A. (2016). Factors affecting performance of road construction projects in arid and semi-arid areas in Kenya. International journal of social science and information technology, 3(8), 908-929.
Mwangi, J. K., Nyang’wara, B. M., & Ole Kulet, J. L. (2019). Factors affecting the effectiveness of monitoring and evaluation of constituency development fund projects in Kenya: A Case of Laikipia West Constituency. Journal of Economics and Finance, 6(1), 74-87.
Antônio, C. P. J, Geciane S. P., Ornella, P., & Alexandre P. S. J. (2015). Project Stakeholder Management: A Case Study of a Brazilian Science Park. Journal of Technology Management & Innovation 10(2)
Arezki, R., & Sy, A. (2016). Financing Africa's Infrastructure Deficit: From Development Banking to Long-term Investing. Journal of African Economies, 25(2), 59-73.
Berssaneti, F. T., & Carvalho, M. M. (2015). Identification of variables that impact project success in Brazilian companies. International journal of project management, 33(3), 638-649.
Buso, M., Marty, F., & Tran, P. T. (2017). Public-private partnerships from budget constraints: Looking for debt hiding? International Journal of Industrial Organization, 51, 56-84.
Conti, S., & Peruginelli, G. (2021). Communication policy in European projects: to what extent non-expert users can better and easier perceive and understand the European legal framework. Journal of Open Access to Law, 9(1), 11-11.
Creswell, J. W., & Creswell, J. D. (2017). Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications
Dabirian, S., Ahmadi, M., & Abbaspour, S. (2023). Analyzing the impact of financial policies on Japan construction projects performance in using system dynamics. Engineering, Construction and Architectural Management, 30(3), 1201-1221.
De Nahlik, C., & Fabozzi, F. J. (2021). Project Financing: Analyzing and Structuring Projects. World Scientific.
Debela, G. Y. (2019). Critical success factors (CSFs) of public–private partnership (PPP) road projects in Ethiopia. International Journal of Construction Management, 1-12.
Doloi, H. (2012). Understanding impacts of time and cost related construction risks on operational performance of PPP projects. International Journal of Strategic Property Management, 16(3), 316-337.
Doyle, L., McCabe, C., Keogh, B., Brady, A., & McCann, M. (2020). An overview of the qualitative descriptive design within nursing research. Journal of Research in Nursing, 25(5), 443-455.
Fabre, A., & Straub, S. (2019). The Economic Impact of public private partnerships (PPPs) in Infrastructure, Health and Education: A Review.
Gain, H., Mishra, K., & Aithal, P. S. (2022). Risk Management Practice Adopted in Road Construction Project in Nepal. International Journal of Management, Technology, and Social Sciences (IJMTS), 7(1), 21-36.
Ganbat, K., Popova, I., & Potravnyy, I. (2016). Impact investment of project financing: opportunity for banks to participate in supporting green economy. Baltic Journal of Real Estate Economics and Construction Management, 4(1), 69-83.
Garrido, L., Gomez, J., de los Ángeles Baeza, M., & Vassallo, J. M. (2017). Is EU financial support enhancing the economic performance of PPP projects? An empirical analysis on the case of Spanish road infrastructure. Transport policy, 56, 19-28.
Gichuru, B. M. (2016). Influence of bank loan financing on project performance: a case of Kenya commercial bank financed youth groups’ projects in Imenti south District-Kenya (Doctoral dissertation, University of Nairobi).
Gorshkov, R., & Epifanov, V. (2016). The mechanism of the project financing in the construction of underground structures. Procedia Engineering, 165, 1211-1215.
Ismail, S. (2019). Critical success factors of public private partnership (PPP) implementation in Malaysia. Asia-Pacific Journal of Business Administration, 4(1), 56 – 69
Khmel, V., & Zhao, S. (2016). Arrangement of financing for highway infrastructure projects under the conditions of Public–Private Partnership. IATSS research, 39(2), 138-145.
Liang, Y., & Jia, H. (2018). Key success indicators for PPP projects: evidence from Hong Kong. Advances in Civil Engineering, 2018.
Lohawiboonkij, S. (2019). The Best Project Financing Option for Infrastructure Projects in Developing Nations. PM World Journal, 3(1), 1-28.
Lomoro, A., Mossa, G., Pellegrino, R., & Ranieri, L. (2020). Optimizing Risk Allocation in Public-Private Partnership Projects by Project Finance Contracts. The Case of Put-or-Pay Contract for Stranded Posidonia Disposal in the Municipality of Bari. Sustainability, 12(3), 806.
Maina, M. S. (2018). Stakeholder management and project performance of open air market projects in Nyeri county, Kenya. (Doctoral dissertation, University of Nairobi).
Majanja, T. (2012). Sources of Funding Infrastructural Projects.
Mambwe, M., Mwanaumo, E. M., Nsefu, M. K., & Sakala, N. (2020). Impact of stakeholder engagement on performance of construction projects in Lusaka District. In Proceedings of the 2nd African International Conference on Industrial Engineering and Operations Management, Harare, Zimbabwe (pp. 7-10).
Morgan, D. L. (2014). Pragmatism as a paradigm for social research. Qualitative inquiry, 20(8), 1045-1053.
Mukami, M. T. (2021). Influence of Funding Activities on Completion of Selected County Funded Construction Projects in Kitale Town. Trans Nzoia County, Kenya. Saudi J Eng Technol, 6(3), 45-52.
Muturi, W., & Oguya, S. A. (2016). Factors affecting performance of road construction projects in arid and semi-arid areas in Kenya. International journal of social science and information technology, 3(8), 908-929.
Mutwiri, F. R., Were, S., & Odhiambo, R. (2018). Project Identification and Initiation Practices on the Success of CDF Construction Projects in Kenya. Journal of Entrepreneurship & Project Management, 2(2), 47-56.
Mwangi, P. K. (2018). Influence of participatory monitoring and evaluation on sustainability of community development projects in selected public schools in Gatundu south constituency, Kiambu County, Kenya (Doctoral dissertation, University of Nairobi).
Naumenkova, S., Tishchenko, I., Mishchenko, S., Mishchenko, V., & Ivanov, V. (2020). Assessment and mitigation of credit risks in project financing. Banks and Bank Systems, 15(1), 72
Ndunda, A. N., Paul, S. N. & Mbura, L. K. (2017). Influence of stakeholder activities on implementation of rural road projects in Machakos County. International Academic Journal of Information Sciences and Project Management, 2(2), 1-20
Penrose, E. (1959). 1959 The theory of the growth of the firm Oxford: Blackwell.
Pinto, J. M. (2017). What is project finance?. Investment management and financial innovations, 14(1), 200-210.
Shan, M., Hwang, B. G., & Zhu, L. (2017). A global review of sustainable construction project financing: policies, practices, and research efforts. Sustainability, 9(12), 2347
Sheard, J. (2018). Quantitative data analysis. In Research Methods: Information, Systems, and Contexts, Second Edition (pp. 429-452). Elsevier
Sundararajan, S. K., & Tseng, C. L. (2017). Managing project performance risks under uncertainty: Using a dynamic capital structure approach in infrastructure project financing. Journal of Construction Engineering and Management, 143(8), 04017046
Ullah, F., Thaheem, M. J., & Umar, M. (2017). Public-private partnerships in Pakistan: A nascent evolution. Public-private partnerships in transitional nations: Policy, governance and praxis, 1, 127-150.
Wang, Y., & Zhao, Z. J. (2018). Performance of public–private partnerships and the influence of contractual arrangements. Public Performance & Management Review, 41(1), 177-200.
Wera, H. (2016). Influence of project identification process on project performance: a case of African inland child and community agency for development, vocational training project, Kibra constituency, Kenya (Master’s Project, University of Nairobi)
Xiong, W., Zhao, X., Yuan, J. F., & Luo, S. (2017). Ex post risk management in public-private partnership infrastructure projects. Project Management Journal, 48(3), 76-89.
Zhu, L., Zhao, X., & Chua, D. K. H. (2016). Agent-based debt terms’ bargaining model to improve negotiation inefficiency in PPP projects, Journal of Computing in Civil Engineering, 30(6).
