Kenya is moving toward the creation of a dedicated legal and regulatory framework for development finance institutions (DFIs), in a reform aimed at strengthening oversight and expanding long-term financing for key sectors of the economy.
The proposal emerged during a Chief Executive Officers’ Breakfast Meeting convened by the Kenya Development Corporation in Nairobi, which brought together regulators, policymakers, DFIs and development partners.
Stakeholders at the meeting said DFIs play a critical role in financing sectors that often struggle to attract commercial lending, including manufacturing, agro-processing, industrialisation and enterprise development, but currently operate without a unified regulatory structure.
They argued that the absence of a dedicated legal framework has resulted in fragmented supervision, limiting transparency, coordination and the ability of DFIs to attract institutional investors and long-term capital.
Senior officials said a more predictable regulatory environment would strengthen the credibility and sustainability of the sector as Kenya seeks to accelerate industrial transformation and economic growth.
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Director General for Public Investments and Portfolio Management Lawrence Kibet said DFIs require a coherent oversight system to support the country’s broader development agenda.
“As Kenya pursues ambitious goals in industrialisation, export growth, climate resilience and regional competitiveness, a stronger development finance ecosystem will be essential,” he said.
Discussions at the forum focused on four key pillars for the proposed framework: improved governance and accountability, stronger financial and prudential standards, better access to domestic and international institutional capital, and enhanced coordination among DFIs.
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Kenya Development Corporation Board Chairman Sakwa Bunyasi said the proposal draws on international best practices for development finance regulation and supervision.
Stakeholders also examined how a new framework could align with Kenya’s existing financial regulatory system while avoiding duplication and ensuring effective oversight of public and quasi-public financial institutions.
There was broad agreement among participants that a dedicated regulatory regime would improve institutional resilience, strengthen transparency and accountability, and enable DFIs to mobilise greater volumes of development finance for priority sectors.
Kenya Development Corporation Director General Norah Ratemo said the reform effort goes beyond regulation, focusing on building stronger institutions capable of delivering long-term economic and social impact.
“The objective is to build a credible, coordinated and globally competitive development finance system capable of delivering sustained economic and social impact,” she said.
The proposal comes as Kenya intensifies efforts to expand access to affordable long-term financing, particularly for industrial growth, climate-related investments and inclusive economic development.
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Policy analysts say DFIs are expected to play a central role in bridging financing gaps that private commercial banks often avoid due to risk considerations and long investment horizons.
If implemented, the new framework would mark a significant shift in Kenya’s financial governance architecture, potentially reshaping how development finance is supervised, coordinated and deployed across the economy.
The meeting concluded with agreement to continue consultations aimed at refining the proposal and advancing it toward formal policy and legislative consideration.
