Kenya's KES 19.56 Billion OSR Gap: A County Revenue Analysis

Data Source: Controller of Budget, Budget Implementation Review Report FY 2022/23  |  Published: March 2026

The National Picture

Kenya's 47 county governments collectively set own-source revenue (OSR) targets of KES 57.37 billion for FY 2022/23. They collected KES 37.81 billion — achieving 65.9% of target and leaving KES 19.56 billion uncollected.

This is not an anomaly. The mid-year figures for FY 2023/24 showed counties raising KES 19.95 billion against a half-year target of KES 40.1 billion — roughly 50% achievement. The structural gap between what counties are legally entitled to collect and what they actually collect has become a persistent feature of Kenya's devolution fiscal landscape.

For context: counties receive the bulk of their revenue as equitable share transfers from the national government (KES 400.1 billion in FY 2024/25 under the Division of Revenue Act 2024). OSR supplements this, but also represents the portion of revenue that counties have the most direct control over — and the most direct accountability for, through county assembly oversight and Controller of Budget reporting.

The 10 Streams That Drive 71% of National OSR

County own-source revenue is not evenly distributed across revenue types. Ten major streams account for approximately 71% of national OSR:

• Land rates — property-linked charges that depend on accurate property valuation and billing systems
• Single business permits (SBPs) — business licensing fees, often the largest OSR category in urban counties
• Market fees — fees from public markets and trading areas, often collected by county revenue agents
• Parking charges — on-street and off-street parking in county-managed areas
• Hospital and health facility charges — patient fees from county-run health facilities
• Liquor licensing — permits for alcohol sale and entertainment premises
• Building permits and development approvals — fees tied to construction approvals and planning consents
• Slaughterhouse fees — levies on livestock and meat processing at county facilities
• Sand, quarry, and natural resource fees — levies on extraction activities in the county
• Advertisement and billboard fees — charges for commercial signage on public land

The Health Facility Improvement Fund alone contributed approximately 32% of national OSR in recent years — a concentration that signals over-dependence on health billing and underperformance in land rates and permits, which require more sophisticated billing and enforcement systems.

County-Level Performance: What the Data Shows

National averages mask significant variation at the county level. Two cases from the COB data illustrate the range:

• Kisumu County collected KES 1.44 billion against a target of KES 2.28 billion — 63% achievement. Kisumu has been a reference implementation for digital revenue collection, having used Safaricom's myCounty ICRMS-backed system, yet still records a significant gap — suggesting that technology alone is not sufficient without enforcement, billing accuracy, and revenue stream coverage.
• Kirinyaga County collected KES 651.4 million against its target — achieving 118% of target, an exceptional outlier in the national dataset. Kirinyaga's performance has been associated with implementation of the Techno Brain RevenueACA system with GIS-supported property mapping, demonstrating that accurate billing data and digital collection together can push achievement above target.

The performance gap between Kirinyaga-style outliers and the national average identifies the frontier: counties with accurate billing data, integrated collection systems, and strong enforcement capacity consistently outperform those relying on manual processes or fragmented fintech arrangements.

Root Causes of the OSR Gap

The KES 19.56 billion gap is not primarily a problem of low economic activity. Most counties are undertaxing assets and activities they already have authority to levy. The root causes fall into four categories:

1. Inaccurate Billing Data

For land rates, the billing base depends on an up-to-date property valuation roll. Many counties are billing from valuation rolls that are 10–20 years old, undervaluing properties and leaving significant chargeable value uncollected. For SBPs, businesses operating without current permits — because the renewal process is manual and time-consuming — represent a direct revenue leakage.

2. Weak Collection Infrastructure

Counties that rely on manual cash collection by revenue agents face two problems: delayed banking (revenue sitting in agents' hands overnight or longer) and revenue leakage at the agent level. Digital payment channels that connect directly to the county revenue account — M-Pesa Paybill, eCitizen, bank cards — eliminate both problems.

3. Fintech Commission Drag

A 2024 Commission on Revenue Allocation analysis found that more than 33 counties had contracted fintech intermediaries charging 4–15% commission per transaction. At the high end, a county collecting KES 1 billion annually is paying KES 150 million to a vendor — money that should remain in the county revenue account. Some counties were spending more on vendor commission than they gained from the collection arrangement.

4. Lack of Integration Between Revenue and Finance Systems

When the revenue collection system is separate from the financial management system, reconciliation requires manual intervention at month-end. This creates a lag between collection and reporting, makes it difficult to identify arrears in real time, and produces the kind of reconciliation discrepancies that the COB flags in Budget Implementation Review Reports.

Why the Gap Matters Beyond Revenue

The OSR gap is a fiscal problem, but it creates secondary consequences that affect service delivery and governance:

• Development budget under-absorption — Counties that miss OSR targets often reduce capital project allocations mid-year, leading to the "unabsorbed development budget" findings that COB documents annually
• Pending bills accumulation — Revenue shortfalls create cash flow pressure that forces counties to delay supplier payments; pending bills have grown year-on-year across many counties
• County assembly accountability pressure — CEC Members for Finance must answer for OSR underperformance in budget review sessions; poor data makes these sessions adversarial rather than analytical
• Conditional grant eligibility risk — Some national government conditional grants require counties to demonstrate improved OSR performance as a disbursement condition

What High-Performing Counties Do Differently

Analysis of county OSR performance data across multiple COB review periods identifies consistent practices among counties that achieve 90%+ of OSR targets:

• Current property valuation rolls — updated within the last 3–5 years, with GIS-supported mapping
• Integrated single business permit systems where renewal is digital and enforcement officers have access to compliance status in the field
• Direct M-Pesa integration for all major collection points — no intermediary
• Real-time revenue dashboards reviewed by the County Revenue Director and Chief Officer Finance weekly
• Automated arrears identification and follow-up workflows
• Revenue collection data that feeds directly into CFSP and CBROP preparation without manual rekeying

The Path to Closing the Gap

The ICRMS Regulations 2025 create a compliance framework that mandates exactly the integrated, digital, audit-ready collection infrastructure that high-performing counties have adopted voluntarily. Every county now has a regulatory obligation — and a financial opportunity — to close the gap.

CountyERP's County Revenue & ROI Calculator allows finance teams to model the revenue recovery potential from tighter collection controls across each major OSR stream. It uses your county's own figures to estimate additional annual revenue, operational savings, and payback period. For a detailed conversation about closing your county's specific OSR gap, book a CountyERP demonstration.