Determinants of Financial Sustainability among Water Services Providers in Kenya

Abstract

The purpose of this study was to establish the determinants of financial sustainability among water service providers (WSPs) in Kenya. It was guided by six research objectives namely to examine the influence of water pricing on financial sustainability of WSPs, in Kenya; to analyze the influence of infrastructure financing on financial sustainability among WSPs is Kenya; and to assess the influence of efficiency on financial sustainability of WSPs in Kenya. Others were to examine the influence of subsidies on financial sustainability of WSPs in Kenya; to examine the joint influence of water price, infrastructure financing, efficiency and subsidies on financial sustainability of WSPs in Kenya; and finally, to analyze the moderating effect of government regulation on financial sustainability of WSPs in Kenya. The study adopted the pragmatism research philosophy and explanatory sequential mixed design to provide empirical bred solution to the financial sustainability concerns among WSPs in Kenya. The target population constituted six hundred and sixteen senior managers (managing directors, heads of finance and account, commercial, procurement audit, human resource and technical departments) from all the eighty-eight registered small to very large WSPs in Kenya as custodians of information relating to the financial sustainability for their respective entities. From the target population, a sample of three hundred and fifty-two was selected ring the multistage sampling method. A structured questionnaire was used to collect quantitative data from the respondents with additional data collected using interview schedule from a target population of eleven key informants namely the Principal Secretary (PS) and Water Secretary from Ministry of Water, Sanitation and Irrigation (MWS1), the CEO Water Services Regulatory Board (WASREB) and CEOs from eight water works development agencies (WWDAs). From the target population, a sample of three experts representing each organization category was selected using purposive sampling. Data collected, was coded cleaned and analyzed to obtain both descriptive and inferential statistics. The study established that there was a weak positive correlation (R=134, P=0.296), with regression result showing that water pricing was not statistically significant in influencing financial sustainability of WSPs (B coefficientO.122, R-square=0.018). In terms of infrastructure financing the result indicated a strong, positive and statistically significant correlation (R=0.331, P=0.01), with regression result showing that infrastructure financing significantly influenced financial sustainability of WSPs (B coefficient=0.262, R-square=0.11). Regarding utility efficiency, there was a positive and statistically significant correlation (R=0.395, P=0.002), while regression results revealed that utility efficiency had a statistically significant influence on the financial sustainability of WSPs (B coefficient=0.273, R-square=0.156). Subsides showed a weak and statistically insignificant correlation on financial sustainability of WSPs (R=0.002, P=0.977). This finding was supported by regression analysis which established that subsidies did not have a statistically significant influence on financial sustainability of WSPs (B coefficient=0.002. R-square0.000). Water pricing, infrastructure financing, utility efficiency and subsidies jointly had a statistically significant influence on financial sustainability of WSPs (R-square=0.176, P= 0.000). Finally, government regulation had a positive moderating effect on the joint influence of water pricing, infrastructure financing, utility efficiency and subsidies on financial sustainability (R-square=0.233, P=0.000) being an improvement from 0.176 before moderation). From the findings, it was inferred that infrastructure financing, utility efficiency as well as water pricing, infrastructure financing, utility efficiency and subsidies jointly, influenced financial sustainability of WSPs, while water pricing and subsidies had no significant influence on financial sustainability of WSPs. Additionally, the study concluded that government regulation positively and significantly moderated the influence of the pricing, infrastructure and efficiency jointly on financial sustainability of WSPs. In lieu of the findings, the study recommends that WASREB should establish the sufficiency of the current pricing methodology, while the MWSI should pursue enhanced and sustained collaboration with local communities. NGOs and other key stakeholders to tap into local resources and development grants. National government through National Treasury and WWDAs should ensure that all finding proposals capture end-to-end financing of asset development to enhance sustainability. Finally. the MWSI should spearhead the development and implementation of an integrated water management policy that ensure that pricing, infrastructure financing, utility efficiency and subsidy are addressed and coordinated appropriately. This study is of great contribution to the sector because it will inform policy and practice on matters related to infrastructure financing, water pricing, efficiency, subsidies and financial sustainability.