Effect Of Funding Sources On Financial Sustainability Of Water Sector Instituitions In Kenya.

Abstract

The rapid expansion of the water sector in recent years has made financing mix or capital structure an issue of growing importance. There is, however, a lack of academic study on the funding sources of Water Sector Institutions in Kenya and its effect on their financial sustainability. This paper addresses this gap. The Research Objective is to investigate the effect of funding sources on financial sustainability of Water Sector Institutions in Kenya. This study will adopt a descriptive research design. The design is chosen since it is more precise and accurate since it involves description of events in a carefully planned way. It also portrays the characteristics of a population fully (Babbie, 2002). It will be a time series correlation study with Financial Sustainability as the dependent variable while the independent variables are: Equity (Share capital, Government grants, capital reserves and revenue reserves) and Debt (Long and Short term borrowings) Regression analysis will be used to find the relationship between Financial Sustainability and independent variables since the relationship expected is linear. From the study findings and discussion, the study concludes that funding sources affects the financial sustainability of organizations. On the study objective, the ratio analysis revealed a strong positive relationship between internally generated funds as one funding source and financial sustainability of water sector institutions in Kenya. On the other hand the regression analysis revealed that when all factors are held constant a positive relationship is seen on financial sustainability with an increase in government grants, donor funding, internally generated funds and reserves.