Revenue systems in counties need transformation to boost collections for Operational Stability Ratios (OSR)
In a bid to enhance service delivery at the grassroots, Kenyan counties have been implementing strategic measures to increase Own Source Revenue (OSR) without placing additional financial burdens on citizens. This approach, aimed at boosting compliance and economic activity, particularly among small enterprises, has proven to be a significant step towards sustainable development.
Over the last two years, 312 Early Childhood Development and Education (ECDE) centers have been constructed across various counties, a testament to the growth achieved through strategic planning and prudent financial management. Moreover, a feeding program was introduced for ECDE-going children, further emphasizing the county's commitment to improving the lives of its citizens.
One of the key strategies employed in this journey has been fiscal discipline, prioritisation, and a strong belief in the potential of OSR. This growth was achieved by improving compliance, simplifying payment processes, and in some cases, reducing financial pressure on residents. For instance, the county in question reduced land rates from 0.25% to 0.15% of the unimproved site value.
The importance of building strong local revenue systems and inter-county learning is critical in this process. In Kiambu, the adoption of an Enterprise Resource Planning system has led to a more efficient, citizen-friendly environment. As a result, OSR grew from Sh2.9 billion in 2021/2022 to Sh5.4 billion in the current financial year 2024/2025, without increasing rates.
However, challenges persist. Delays in the release of funds from the National Treasury disrupt critical projects, affect staff remuneration, and cause accumulation of pending bills. Overreliance on national disbursements, which can be subject to delays, leaves counties exposed to financial uncertainty.
To mitigate these challenges, counties have been encouraged to sealing revenue leakages, embrace digital systems, and expand the revenue base through innovation and formalisation. By identifying and addressing areas where revenue is lost due to inefficiencies or corruption, implementing robust accountability measures, transitioning to digital platforms for revenue collection and management, and formalizing informal sectors, counties can increase revenue without raising rates.
Moreover, enhancing public-private partnerships, improving revenue collection efficiency, strengthening local economic development initiatives, and revising and simplifying revenue collection processes can further boost OSR. By collaborating with private sector entities, implementing effective billing and collection systems, creating favorable business environments, and ensuring that revenue collection processes are transparent and user-friendly, counties can maximize their existing resources and opportunities.
The devolution journey in Kenya is focused on improving service delivery at the grassroots, which depends on county management and mobilization of financial resources. The equitable share from the national government is vital, but long-term sustainability and autonomy of counties depend on strengthening OSR. The bursary fund program was increased from Sh100 million to Sh500 million, reinforcing the idea that counties can achieve significant progress through strategic planning and prudent financial management.
In conclusion, the strategic move towards increasing OSR without increasing taxes or financial burdens on citizens is a commendable step towards achieving sustainable development in Kenyan counties. By focusing on efficiency, transparency, and accountability in revenue collection systems, counties can unlock their potential for growth and development.
In the pursuit of enhancing efficiency and accountability, a county-wide education initiative was launched, with 312 Early Childhood Development and Education (ECDE) centers constructed over the last two years. This venture, coupled with a feeding program for ECDE-going children, demonstrates the county's dedication towards investing in education-and-self-development.
Emboldened by the success of fiscal discipline and strategic revenue management, counties are now embracing digital systems and innovation to expand their business and finance horizons, aiming to increase Own Source Revenue (OSR) without placing additional financial burdens on citizens.
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