AN INVESTIGATION INTO THE USE OF JOINT VENTURES AS AN ALTERNATIVE MODEL OF CONSTRUCTION PROJECT FINANCING

ABSTRACT
The construction industry is a key component of the Kenyan economy as has been
evidenced by its large contributions to the country‟s Gross Domestic Product. In addition
to that it is a major employer and contributes to many other sectors of the economy. This
makes it an integral part of the economy if any development is to be realized. However
being a capital intensive kind of industry, many individuals and institutions often
encounter difficulties in obtaining finance for construction projects. Furthermore, the
traditional approaches to obtaining funding for construction projects have proved not to
be sufficient. This has led to many issues being raised such as access to finance. This
study aimed at 1) Establishing the common sources of project financing and
development. 2) Establishing major hindrances to obtaining credit in construction project
financing. 3) Establishing the use of joint ventures in construction project financing in
Kenya. 4) Determining the developers, financiers, contractors and consultant‟s
perspective on joint ventures as a model of construction financing and investment. The
respondents of the study included employees of Financial Institutions (Banks), Built
Environment Consultants, Contractors and Developers. The sample for the study was
obtained through stratified random sampling of the above and was administered
questionnaires. A structured interview guide was also used to obtain data from selected
bank managers, and selected project managers. Results indicated that joint ventures
arrangements were a widely used approach to project financing in Kenya with 69% of the
respondents having already been involved in joint venture projects. The study depicted
loans as being the main source of funds for financing construction projects.
Consequently, results indicated that high interest rates were the major hindrance in
procuring project finance. The study established that industry players were pessimistic of
the idea of joint ventures as an approach to construction project financing and a large
percentage though having expected reservations were willing to adopt the idea. The study
recommends that there should be awareness of the joint venture approach among industry
players as an option to overcome the lack of capital problem. Furthermore, banks should
take advantage of the idea as it ensures more security for their resource

 

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