East Africa's capital markets are finding new ways to finance growth beyond traditional lending

East Africa investment banking trends are no longer being defined by larger loans alone.

According to Absa’s East Africa Director of Investment Banking Daniel Odongo, the market is being reshaped by deeper corporate bond markets, pension funds with billions of dollars to deploy and financing structures built around long-term cash flows rather than conventional borrowing. His assessment arrives as banks across the region rethink where they commit capital, with Absa’s sale of its majority stake in First Assurance Kenya providing another example of how institutions are reorganising their balance sheets while protecting customer-facing businesses.

Odongo’s view stands out because it connects developments that have often been treated as separate stories. Bond issuances, pension fund activity, infrastructure financing and bank restructurings all point toward the same conclusion: the way capital moves through East Africa is becoming more specialised, with investment banks spending as much time structuring deals as they do arranging financing.

Why East Africa’s deal market looks different now

One of the clearest examples is the return of corporate bond issuance. Odongo points to successful transactions by EABL and Safaricom, arguing that investors have shown renewed appetite for established companies with strong fundamentals. Those deals have not been confined to Kenya; he says similar activity has appeared in Tanzania and Uganda as borrowers seek alternatives to traditional bank lending.

He also describes a noticeable move toward structured finance, where banks build financing around identifiable revenue streams instead of offering generic corporate loans. That can mean project finance, asset-backed transactions or receivables-backed lending, arrangements that allow businesses to unlock capital without relying on a single borrowing template.

The Kenya Roads Board transaction illustrates that approach. Rather than waiting years for Road Maintenance Levy collections to accumulate, the agency raised funding against future revenues, allowing road projects to proceed while repayments are spread over time. Odongo argues that this type of financing works because predictable income streams can support investment today instead of delaying projects until cash reserves build naturally.

Pension funds are becoming major capital players

If one theme runs through Odongo’s outlook, it is the growing influence of domestic institutional investors. He estimates that pension funds across Kenya, Tanzania, Uganda and Rwanda collectively manage about $41 billion, with Kenya accounting for the largest share. The significance is not just the size of those assets, but the pressure to find long-term investments that match retirement liabilities.

That helps explain why pension funds are taking a closer look at corporate debt, infrastructure projects and private capital opportunities alongside government securities. A power plant, toll road or long-duration infrastructure asset produces revenue over decades, making it a closer match for retirement savings than short-term investments. Banks, Odongo says, are increasingly acting as intermediaries that connect those long-term investors with projects capable of generating stable returns.

His comments also challenge another long-standing assumption about pricing. Rather than viewing every corporate borrower through the lens of sovereign risk, he says investors are paying closer attention to governance, cash flow quality and business fundamentals when deciding what a company should pay to borrow.

The exit question is changing

The conversation around exits has become just as important as the conversation around fundraising. Asked why Kenya has struggled to produce a steady pipeline of IPOs, Odongo argues that many business owners still find private transactions more predictable than public listings because they offer clearer valuations and cleaner exits. Liquidity concerns on the Nairobi Securities Exchange continue to shape those decisions.

That debate has become more prominent across Kenya’s capital markets. KCB Investment Bank has proposed organising a vehicle worth about $3 billion to bring together pension and collective investment scheme capital, reflecting a broader effort to strengthen domestic buyers for large corporate stakes and improve exit options for investors.

Odongo does not comment directly on that proposal, but the underlying challenge mirrors the one he describes: Kenya has substantial institutional capital, yet deploying it efficiently into large transactions remains a work in progress.

Banks are redesigning their own balance sheets

The same thinking is visible inside the banks themselves. Absa’s agreement to sell its 63.32% stake in First Assurance Kenya and Absa Life Kenya, while preserving bancassurance distribution through Absa Bank Kenya, fits a broader strategy that has already seen the group dispose of insurance businesses in Botswana, Zambia and Mozambique.