The purpose of this study is to evaluate the relationship between Donor Output Based Aid Financing and performance of water projects in Nyeri County. Donor funds are key for the social economic development among developing nations including Kenya. Donor funds have significantly financed water and sanitation projects which are mostly public projects undertaken by the national and local governments and their agencies. These projects undertaken by the water service providers enhance access to quality, clean and safe water for all communities in their jurisdiction. Traditionally, donor funds were disbursed directly to the implementing agents at the initial stage. However, varied challenges constrained successful completion and full benefit to the communities due to corruption, embezzlement, poorly structured strategies among other factors. Output based financing has however been developed and adopted in recent past by donor communities. However, it has not been clear whether this funding structured enhanced performance of water projects. Thus this study seeks to evaluate the relationship between Donor Output Based Aid financing and water projects performance in Nyeri County. Specifically, the study evaluated the relationship between output based subsidies, commercial loans and technical support and water projects performance in Nyeri County. Literature was reviewed and the guiding theories included: the theory of change, profit theory and Resource Dependency Theory. The descriptive survey was adopted while targeting ninety nine staff of five water service provision companies including Nyeri Water and Sanitation Company, Othaya/MukurweiniWater and Sanitation, Mathira Water and Sanitation Company, Tetu and Aberdare Water and Sanitation Company and NaroMoru Water and Sanitation Company, in Nyeri County. Census sampling was applied and all (99) participated in data collection. Questionnaires was used to collect data, having been piloted to test their reliability and validity. Collected data was analysed through descriptive ( means and standard deviation) and inferential statistics applied regression method. The statistical programme for social sciences was utilized to enhance data analysis. The data was presented through tables, charts and graphs accompanied by discussions on findings. The findings indicated that majority of the respondents were satisfied with the donor OBA model of financing their water projects. The study concludes that most water companies were satisfied on the subsidies received, the commercial financing and technical support as far as donor support and financing through OBA model is concerned.

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