Project Finance Structuring, Public Sector Participation, and Institutional Capacity on Sustainability of Special Economic Zone Projects in Kenya

Special Economic Zones (SEZs) have increasingly been adopted worldwide as policy instruments for industrialization, export promotion, and employment creation. However, despite their rapid expansion, the long-term sustainability of SEZ projects remains uneven, particularly in emerging economies such as Kenya, where several zones continue to operate below expected performance levels. Existing studies largely emphasize financial viability while paying limited attention to how governance and institutional factors jointly influence multidimensional sustainability outcomes. This study therefore examines the combined influence of project finance structuring, public sector participation, and institutional capacity on the sustainability of SEZ projects in Kenya. In this study, sustainability is conceptualized through the triple bottom line dimensions of economic, social, and environmental sustainability. The study adopted a cross-sectional research design and collected primary data from stakeholders across SEZ projects using structured questionnaires administered to project managers, government officials, and community representatives. Reliability and validity of measurement instruments were confirmed through Cronbach’s alpha and factor analysis, while diagnostic tests verified compliance with regression assumptions. Data were analyzed using descriptive statistics, Pearson correlation, and multiple linear regression techniques. Descriptive findings indicate moderate overall project sustainability, with economic sustainability recording relatively stronger outcomes compared to social and environmental sustainability, suggesting uneven progress across sustainability dimensions. Regression results show that public sector participation emerged as the strongest predictor of SEZ projects’ sustainability, followed by institutional capacity, while project finance structuring demonstrated only a moderate relationship and became statistically insignificant when public sector participation and institutional factors were jointly considered. Collectively, the integrated model explained approximately 76.5% of the variation in SEZ projects’ sustainability. The study concludes that sustainable SEZ projects in Kenya depends less on project finance structuring alone and more on strong institutional systems and proactive public sector participation capable of balancing economic growth with social and environmental objectives. The findings contribute to policy and practice by emphasizing a shift from finance-centric SEZ projects development toward integrated governance frameworks that promote inclusive and environmentally responsible industrialization.