Kenya and the World Bank: Fact Sheet

As of November 2006, the World Bank’s portfolio in Kenya consisted of 13 active operations (excluding a US$4.3 million grant from the Global Environment Facility), with a total commitment of US$675 million. No Bank operations were submitted to the Executive Board of Directors for approval between October 2004 and January 2006. So far in 2006, the Board has approved four projects.

Project Approved in November 2006

On November 7, 2006, the World Bank approved a credit of US$80 million for the Kenya Education Sector Support Program (KESSP). This project builds on the Bank’s grant financing for the Free Primary Education Support Project, which helped deliver instructional materials to all 18,000 primary schools throughout Kenya. About 1.5 million children who had previously dropped out or never attended school have benefited since the project was implemented in January 2003.

The KESSP was approved only after an extensive review by the Bank’s independent Department of Institutional Integrity of the Free Education project which concluded that the mechanisms for community involvement, consultations, accountability, procurement and financial management were satisfactory. The review also requested additional safeguards for the KESSP including public disclosure of performance indicators, independent monitoring of performance and an annual independent audit of procurement. These safeguards should provide a satisfactory level of accountability and assure the project will secure results in improving enrollment and quality of education.

This loan is a good illustration of the Bank’s governance strategy. In difficult environments, the Bank seeks to engage selectively with Ministries, agencies and institutions that champion good governance and make clear that the funds go for their intended purpose.

Project Approved in August 2006

On August 3, 2006, the World Bank approved a credit of US$60 million additional financing for emergency drought interventions in Kenya’s arid and semi-arid lands. The credit will be implemented under the  Arid Lands Resource Management Project (ALRMP) II, which has helped improve the lives of over one million people in 22 districts. With this supplemental funding, the project will target an additional one million people and its coverage will be increased to 28 districts in the North Eastern, Eastern, Coast and Rift Valley provinces, in the communities most severely affected by the drought and famine that began toward the end of 2005.

The credit will build on the achievements of the Arid Lands project, which include drought preparedness, recovery efforts and mitigation strategies through more than a decade of partnership in arid lands intervention involving the Kenyan Government, the Bank and other stakeholders. It will also scale up the good track record of governance rooted in community accountability mechanisms that the Arid Lands project has established, as well as the strong array of safeguards against fraud and corruption that are built into project design and monitoring to ensure that funds are properly utilized.

Projects Approved in January 2006

On January 24, 2006, the World Bank approved two credits for Kenya. They were the Institutional Reform and Capacity Building Project which is part of the country’s active portfolio and the East African Trade and Transport Facilitation Project which is managed separately under a regional arrangement.

The Institutional Reform and Capacity Building Project (US$25 million) is supporting the Government of Kenya's fight against corruption by:

• Strengthening government budgeting functions through increased stakeholder consultation and independent review processes, as well as the establishment of a Parliamentary Budget Committee;
• Modernizing public financial accounting system, including the rollout of an integrated financial management system and adoption of current international standards;
• Enabling an effective institutional risk management function through the establishment of Ministerial Audit Committees and a risk based internal audit approach adopting professional best practice;
• Supporting timely financial audit reporting , and clearing backlogs in public auditing;
• Supporting implementation of the recently enacted Public Procurement and Disposal Act, 2005 that supports openness (via web posting of transactions) of public procurement, establishes an effective independent oversight function and seals existing loopholes in public procurement;
• Supporting implementation of the ethics provisions of the Code of Conduct that all government ministers are required to sign and follow; and
• Supporting the effectiveness of Parliamentary watchdog institutions including the Investment, Accounts and Budget Committees.

The East African Trade and Transport Facilitation Project (US$120 million) aims to improve the efficiency of trade supply chains and main trade routes, reducing the room for corruption in the trading system of four East African countries, including Kenya. In addition, this project ― along with all others in the World Bank’s portfolio ― contains safeguards against corruption that embody the practical lessons we have learned from the detailed audits and reviews we have carried out, and continue to carry out. Our tightened audit and supervision standards and legal provisions, as well as improved oversight on the part of parliament and citizen watchdogs, are among the toughest anti-corruption measures of any development organization.

Operations Currently Pending

The proposed operations in the lending pipeline include a sector wide approach program in health, Community Driven Development and Natural Resources Management for Western Kenya; a second-generation HIV/AIDS project; and development policy loans in support of ongoing structural reform in public finances, parastatal restructuring, and the financial sector. All these projects will strongly focus on governance, both in terms of fiduciary management within the project and in making a major contribution to the broader agenda for governance. The Bank’s lending in Kenya has been combined with a very full program of economic and sector work, which is focused on ways to regenerate growth with a heavy emphasis on poverty-reduction.

Board presentation of five operations had been delayed pending completion of Detailed Implementation Reviews by the Bank’s Department of Institutional Integrity. The Education project approved in November 2006 was one of them. The four operations still pending, which total US$210.5 million, are:

• The National Statistical System Project (US$20.5 million ) includes a component for generating systematic and verifiable data on governance and corruption.
• Total War on HIV/AIDS Project (US$50 million) would provide continued funding for the government's multi-sectoral HIV/AIDS strategy, including financing for civil society organizations with innovative proposals. The project is designed to strengthen institutional risk management and oversight in implementation in order to address governance issues which have emerged in audits of the predecessor project.
• Financial Sector Reform Credit (FINSRC) (US$65 million) would address the availability of credit resources for investment and growth by supporting further modernization of Kenya's banking system (including privatization of state-owned banks), improved regulation, and the adoption of several anti-corruption measures such as anti-money laundering provisions.
• Kenya Economic Recovery Strategy Support Credit (ERSSC) (US$75 million) would help to fulfill the government’s pledge to Kenyans to strengthen public financial management institutions, create more favorable conditions for private investment and job creation in all areas of the economy (especially agriculture, telecommunications and manufacturing), and rationalize the government's involvement in direct commercial activities.

Examples of Bank Support for Anti-corruption in Kenya

The World Bank is actively supporting anti-corruption programs in Kenya. Some of this assistance is in the form of projects specifically dedicated to fighting corruption, while other anti-corruption measures are included as components of projects with other objectives.

In June 2004, the Bank approved the Nairobi Water and Sewage Institutional Reform Project, which includes a US$ 5.6 million component to help deal with governance and corruption by restructuring the entire institutional infrastructure around delivery of water services and improving oversight of the use of these resources. At a stakeholder conference held in Nairobi in December 2005, over 80 percent of consumers who participated rated these reforms satisfactory.

In this project — as we do in the preparatory phase of all projects we design in collaboration with Kenya — the Bank made sure that safeguards against corruption risk were carefully considered. Projects also benefit from the Bank’s global knowledge on issues of governance and corruption, and from the lessons of the many forensic audits that have now been conducted and which have identified a number of “red flags” – or warning signs of corruption – that we now control through tightened audit and supervision standards, as well as improved oversight on the part of government and, where appropriate, citizen watchdogs (for example in our Education Sector projects).

We believe that the focus on tangible development results, such as measurable improvements in service delivery, is an important antidote against corruption. We have supported a pilot exercise on rapid results which has covered several ministries and was brought into the mainstream by President Kibaki when he instructed his new Cabinet in December 2005 to deliver practical results for Kenyans over the following four to six months.

In October 2004, the Bank provided a technical assistance credit for the financial and legal sector (for a total of US$ 18 million), which includes a US$8 million component aimed at assisting the courts to function more efficiently and reducing the opportunities for corruption within the judiciary. The work of the Ethics Committee of the Judiciary which submitted its report to the Chief Justice in January 2005, was partly funded by this credit.

The recently approved Institutional Reform and Capacity Building Project is a stand-alone credit that at its core is dedicated to supporting the Government of Kenya’s fight against corruption through measures including support of openness of public procurement (via web posting of transactions), provision for improved audit functions across the government, and support for the ethics provisions of the Code of Conduct that President Kibaki has insisted all ministers sign and follow.

The Bank’s assistance to Kenya also includes advisory and technical services to the government in piloting risk-based auditing – a state-of-the-art approach to public finance management that takes the likelihood of corruption as its starting point, and which concentrates on making sure institutional checks and balances against misuse of funds are in place. This approach will now be mainstreamed with support from the recently approved stand-alone capacity building project.

We have also supported the government's efforts in preparing a new Procurement Bill. This Bill, which received Presidential assent in November 2005, for the first time subjects security contracts to transparent processes, and will further assist in setting up the new Independent Procurement Authority. Kenya also requested that the Bank second one of its own senior procurement officials to head this agency. We have agreed and the individual recently arrived in Nairobi to take up these duties.

The Bank has also piloted activities such as community and vernacular radio that help inform communities about the services they should be receiving and mobilize them to hold public service providers accountable.

We have also been active in advising the government in the establishment of the Anti-Corruption Action Plan which it submitted to the donor community in the Consultative Group meeting held in April 2005, and we have closely followed and discussed with government its implementation. This Action Plan includes measures such as the full staffing of the Kenya Anti-Corruption Commission, capacity building in the justice department, and improved audit function throughout the government. As an extension of this advisory effort, we have since June 2005 engaged in a series of stakeholder dialogues with representatives from the private sector, faith-based organizations, youth groups, parliamentarians, the media, trade unions, non-government organizations, and foundations, to promote development and anticorruption issues.

Other targeted interventions provided by the Bank and in partnership with government, have included a governance mission conducted in June/July 2006 and the launch in early 2006 of Detailed Implementation Reviews (DIRs). The objective of the governance mission was to assist Kenya to further develop its governance and anti-corruption framework, including a common understanding on the concrete actions needed in the short to medium term which can also be supported by civil society, the private sector and Kenya’s development partners. The mission met a broad cross-section of representatives from government, private sector, media, development partners, civil society, parliament, academia and faith-based organizations. The mission found preliminary evidence that corruption fell in 2003-2004 but has stagnated since then. Some areas like the judiciary and procurement have deteriorated again, although not to pre-2003 levels.

Numerous critical issues require immediate attention (including further access to information and other transparency initiatives, privatization, procurement reform, anti-money laundering, prosecutions and prosecutorial capacity, etc). Recently launched Government anti-corruption plans seem to identify these issues correctly (with implementation of some ongoing) but they need to be prioritized and rigorously implemented and their results systematically measured. The DIRs were launched by the Bank’s Department of Institutional Integrity at the request of government. They covered four projects in the Kenya Portfolio: the Free Primary Education Project, the Decentralized HIV/AIDS and Reproductive Health Project, the Kenya HIV/AIDS Disaster Response Plan and the Northern Corridor Transport Improvement Project. The review goes beyond earlier project forensic audits (conducted in mid-2005 by an international consulting firm) by looking in detail at all procurement transactions carried out under Bank financing, both above the threshold for prior Bank review and below. The Government of Kenya is now reviewing the results of the DIR which it received from the Department of Institutional Integrity in September 2006. In October it received a Governance Note prepared by a governance assessment mission from the World Bank and is doing likewise. Meanwhile, the Government has indicated that it is prepared to work closely with the Bank to implement the lessons and recommendations from these studies.

Last updated: November 8th, 2006