CHAPTER ONE: INTRODUCTION1.1 Background of the Study In Kenya, Vision 2030 aspires for the country to be firmly interconnected through a network of roads, railways, ports, airports and waterways of water and telecommunications and provide water and modern sanitation to its people (Denge, 2011). However, according to Iyabo (2010), if the government's vision of accelerating economic growth in the medium term and making Kenya a middle-income country by 2030 is to be maintained, further investment in infrastructure is needed. According to Iyabo (2010) of Kenya (CBK) (2009), the recognition that local infrastructure bond market regulation remains underdeveloped has more recently led to several efforts to promote their development, including the infrastructure bond facility with a diaspora component. The bond market in Kenya trades in both Treasury bonds and corporate bonds. While Treasury bonds were introduced as early as the mid-1980s, corporate bonds came to the market in 1996 during the reform period. Despite the early introduction of Treasury bills into the market, the market remained almost stagnant, with the government using Treasury bills to finance domestic debt. It was not until 2001, when the government made a deliberate effort to develop the market, that Treasury securities market activities increased (Mbewa, Ngugi & Kithinji, 2007). According to Kim (2000), using bond markets for financing is important for many reasons: (i) it helps diversify sources of infrastructure financing; (ii) alleviates uncertainties caused by global banking disintermediation; (iii) helps transform short-term bank deposits into long-term development resources; and (iv) contributes to strengthening... the average paper debt... in the total domestic debt stock which was then at 70:30. Numerous reforms have been introduced, including; the lowering of the liquidity ratio for commercial banks to release liquidity thereby reducing short-term interest rates, the rationalization of the national liquidity lending scheme in favor of bonds and the liberalization of the pension sector (Mbewa, Ngugi & Kithinji, 2007). Kenya issued its first infrastructure bond of Sh18.5 billion in February 2009 and it was used to build roads, develop a geothermal energy project and upgrade water and irrigation systems (Mugwe, 2011). The infrastructure bond was issued at a coupon rate of 12.5% ​​over 12 years; redeemed in three phases in 2015, 2017 and 2021. its second infrastructure bond, a 12-year bond with a 12% coupon worth Sh18.5 billion ($249.16 million), on November 12 and plans to use the proceeds in fiscal 2010 ( Ombok, 2009).