Effect of Government Regulations on the Relationship Between Return on Investments and Financing of Water Investments In Nairobi Peri-Urban Markets in Kenya

For any economic development it is important to finance infrastructure such as water and sanitation. Water has historically been viewed as public good not as a market commodity and thus water utilities have not been able to generate sufficient internal revenue to ensure sustainable financial investment. There is a low level of investment in the sector by both public and private players especially in peri-urban areas in Kenya. Many people in these areas still do not have access to basic water resulting to millions of illnesses and death every year from water related issues. Scarcity of water in peri-urban areas has created investment opportunity yet there is little participation of private players. The study explored effect of government regulations on the relationship between return on investments and financing of water investments in Kenya. The study adopted cross-sectional survey research design. The accessible population for this study was 1500 small scale water providers registered by Water Service Regulatory Board. A two stage sampling technique was used to obtain a sample population of 150 small scale water service providers. The study utilized self administered semi-structured questionnaire and content analysis for collecting data. Structure Equation Modelling (SEM) was used to measures the relationship between return on investments and financing of water investments. The findings of the study indicated government regulations influences financing of water investments, low return on investments, among small scale water service providers limits supply of water in peri-urban markets. It was therefore recommended that the government should enhance tariff reviews, performance monitoring and efficient metering and billing. This would lead to high return on water investments. Water utilities will thus be able to generate sufficient internal revenue to ensure sustainable financial investment. The results of the study will be of great importance to both public and private water utilities. This will contribute to greater understanding of various challenges that the utilities go through in trying to make water accessible to peri-urban population.