Financing Alternative Building Technology Projects in Kenya
When it comes to constructing using Alternative Building Technologies, the question facing a developer building at scale, a client looking for a mortgage, or a donor wanting to develop social and community projects is how the project can be financed with manageable risks. Such technologies including earth, bamboo and recycled materials.
Any financier is first conscious of the regulations around it for the purposes of safety. Additionally, they need to check the cost-benefit analysis compared to conventional construction and where the value is added in a way that is bankable. Is it more affordable? Does it create less risk in terms of longevity? How will it respond to the market or the end user? Can it be used as security?
What are Banks keen on?
Banks are more concerned about the ability to pay back and risk mitigation in the event the project fails to work out. However, most of the time they are in business and will be keen on getting good enough collateral. This may not necessarily include the house or property itself, but the land on which it sits or any other security provided.
This applies to a developer seeking development finance as well as a private client looking for a mortgage to construct an ABT project. Because conventional concrete and masonry construction is more familiar to lenders, valuers and insurers, ABT projects may require more explanation and supporting evidence before they are considered comparable.
What are NGO Donors keen on?
For donors, the question comes from a slightly different angle. They are further interested in whether there are economic benefits through local material sourcing, labour supply from the existing community or skills transfer that remains after the project is completed.
They can actually provide concessional capital and may even fund pilots as part of technical assistance. This can come in handy in absorbing the early-stage risk and providing market evidence that mainstream financial institutions can pick up along the way.
For other types of financing, especially from DFIs, there might be more interest in measurable outcomes such as energy efficiency, water efficiency, reduced embodied carbon and broader social impact. The financing approach therefore depends not only on what material you are using but also on what the project is trying to achieve and how that value can be demonstrated.
Since we largely deal with banks for financing, it needs to be well proven that you will end up with a commercially viable asset. Unlike concrete and masonry, where we are all familiar with the construction methods and the associated risks can be compared, there is still limited experience with some ABTs event among valuers and insurance agents. You therefore need to prove expertise and guarantee quality assurance.
The financier might be concerned that such a development will take longer to sell because buyers are not yet familiar with the technology. An affordable construction method does not automatically make a project commercially viable if the intended market does not understand or accept the final product.
On matters regulation, the Kenyan Government has a few guidelines covering some of these materials, such as rammed earth and soil blocks, through the Kenya Bureau of Standards (KEBS).
The National Building Code 2024 also gives recognition to the adoption of alternative building technologies, provided that the applicable structural safety requirements and guidelines are followed.
In conclusion, this is less about a project being a product of ABT but more about meeting the legalities, structural integrity and general market acceptance.
The financing approach therefore depends not only on what material you are using but also on what the project is trying to achieve and how that value can be demonstrated.
For more information, reach out to us via info@rickfes.co.ke
At Rickfes Construction Ltd., we work with clients interested in Alternative Building Technologies, including developers, private homeowners, investors and NGOs exploring ABT projects at scale. We help you structure the project, assess the technology and prepare the project for implementation and potential financing.
