| Summary: | In Kenya, like in many other countries around the world, private equity’s emergence as a creative method for financing companies, is attracting attention as the government seeks new ways of financing its private sector – which it now recognises as the engine for Kenya’s economic development. This policy outlook is undermined by the reality of a yet extensively undercapitalised private sector, and the lack of a coherent body of knowledge and experience on Kenyan private equity. This study, for the first time, brings together that dispersed body of knowledge to facilitate coherent analysis of the emerging legal and institutional issues that private equity introduces. Using case law and statutory analysis, documentary reviews, interviews and surveys to construct the complete picture of Kenyan private equity, this empirical legal inquiry finds that the law on private equity in Kenya is incomplete: it is patchy and dispersed, and is not uniformly applied among and across all private equity market intermediaries. Secondly, the institutions charged with supervising the implementation of the law are undercapacitated, with the result that regulatory supervision within the private equity industry remains weak and largely unfelt. Thirdly, the legal institutions supporting private equity practice in Kenya (security of property rights, security of financial contracts and integrity in financial reporting) are in a nascent state of development. Fourthly, there is no clear policy on alternative investments generally, and private equity particularly, in Kenya, undermining precision in regulatory objectives. These realities combine to blunt the impact of private equity in driving creative entrepreneurship. These realities support the need for structured national capacity enhancement across all spheres of private equity practice, such as would strengthen regulatory supervision, the emergence of a ‘home brand’ to private equity, the increased visibility of structured government engagement in channelling private equity into economically productive sectors linked to the nation’s development strategy. These findings mirror earlier research investigating the under-performance of private equity in emerging markets, with the upshot that a Law and Institutional Growth Model for Private Equity in Kenya is the necessary catalyst that will trigger the rapid expansion of the Kenyan private equity industry in aid of national development.
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