Determinants of Financial Sustainability of Water Companies in Nyeri County.

Abstract

The unique potential of water companies to reduce poverty and sustain itself can easily be lost if they are not committed to continue extending services to the low-income households on a long term basis. The objective of this study was to investigate the factors influencing financial sustainability of water companies operating in Nyeri County. Descriptive case study design was adopted to answer the research problem which is to investigate the factors that determine financial sustainability in water companies. Data on the financial and operational performance of the firms was obtained from the Kenya National Audit office, financial statements and Water Services Regulatory Board, sector evaluation report by Water services Regulatory Board. The target population of this study was the water companies in Nyeri County, Kenya. The study found that water companies in Kenya though faces challenges, have enjoyed sustainable Operationalization of business. Most water companies are cushioned against financial losses being trustees and NOO funded. To ensure financial sustainability water companies in Kenya have been providing differentiated access to finances which ensures that they are able to meet their customer expectations. The water companies' financial sustainability has been ensured by beefing up their service delivery and reducing credit risks at the same time as well as obtaining finances from both local and international donors. The study finally concludes that water companies' financial sustainability is influenced positively by total operating income, net loan portfolio and funds from government and donor agencies increases the water companies' sustainability and negatively by debt equity ratio, total operating expenses and ave!age loan size. The study recommends that water companies should solicit for more funds from donors, increase the range of services they provide and beef-up their governance structure since financial sustainability is achieved when service and infrastructure levels and standards are delivered according to a long term plan.