A stark and unsettling admission from the Kenyan Treasury has sent ripples of concern through households across the nation: the government can no longer fully afford free education in public primary and secondary schools. Treasury Cabinet Secretary John Mbadi, appearing before the National Assembly Committee on Education on Thursday, laid bare the grim financial reality, stating that the burden has become too heavy for the State to sustain. This revelation signals a significant cut in capitation funding, pushing parents to brace for increased financial contributions to their children’s schooling at a time when the education sector is already reeling from a series of controversies, including “ghost school” scandals and mounting unpaid debts.

CS Mbadi’s candid disclosure highlighted a substantial shortfall in the government’s commitment. “If you look at the total budget for the year and divide it by the number of total students, you will see that instead of Ksh.22,000, we are funding about Ksh.16,000. And so we release 50%, 30%, then 20%. As to whether it is enough, it is not,” he admitted, confirming that secondary school students, who are supposed to receive Ksh.22,244 per year in capitation, are only receiving approximately Ksh.16,600. This means a direct deficit of around Ksh.5,600 per student, a burden now poised to fall squarely on the shoulders of already struggling families.

The Erosion of a Promise: Capitation Cuts and the Dream of Free Education

The concept of “capitation” in Kenya’s education system refers to the per-student grant that the government provides to public schools to cover tuition and operational costs. It is the cornerstone of the Free Primary Education (FPE) and Free Day Secondary Education (FDSE) policies, which have been pivotal in shaping Kenya’s educational landscape for over two decades.

The journey towards universal basic education in Kenya began in earnest with the reintroduction of Free Primary Education (FPE) in 2003 by the NARC government. This policy was a landmark initiative, aimed at improving participation, progression, and completion rates in primary schools, particularly for children from disadvantaged backgrounds who were previously excluded due to fees. FPE significantly boosted enrollment, with public primary school enrollment increasing by 17.6% from 5,874,776 in 2002 to 6,906,355 in 2003 alone, as noted in a study on FPE’s impact. While celebrated for widening access, FPE also brought challenges such as overcrowded classrooms and strains on resources, as the government was initially unprepared for the sheer influx of students.

Building on this success, the government officially launched the Free Day Secondary Education (FDSE) program in 2008. The primary objective was to make secondary education more affordable and accessible, especially for children from poor households who, despite completing primary school, could not transition to secondary due to school fees. Under the FDSE policy, the government committed to subsidizing a significant portion of the fees, initially Ksh. 10,625 per child per year, which was later increased to Ksh. 22,244 in 2018. This capitation was designed to cover tuition, textbooks, and other learning materials, prohibiting public day secondary schools from charging parents tuition fees. Parents were only expected to cover caution money, development fees (capped at Ksh. 2,500), and lunch fees.

The current capitation model dictates that funds are disbursed to schools in three installments throughout the year, typically in a 50:30:20 ratio corresponding to the three school terms. However, as CS Mbadi’s statement confirms, the actual funds disbursed have consistently fallen short of the official capitation rate. This underfunding is not a new phenomenon; former Kenya School Heads Association Chairperson Indimuli Kahi revealed in November 2023 that underfunding of secondary schools began as early as 2019, accumulating a total capitation deficit of Ksh. 54 billion between 2019 and 2023. This persistent shortfall, now exacerbated by the Treasury’s explicit admission, highlights a systemic issue where the government’s financial commitments have not kept pace with the growing student population and rising operational costs.

Kenya’s Economic Headwinds: The Broader Fiscal Squeeze

The Treasury’s admission of inability to fully fund free education is a direct consequence of Kenya’s challenging macroeconomic environment. The nation has been grappling with significant fiscal pressures, primarily driven by a burgeoning public debt and weak revenue growth.

Kenya’s public debt has been on an increasing trend for years, reaching a point where it poses a significant risk of distress. According to the World Bank’s latest Kenya Economic Update (May 2025), interest payments on this debt are now absorbing approximately one-third of the country’s tax revenue. This massive allocation to debt servicing severely constrains the government’s ability to fund essential social services like education, healthcare, and infrastructure development. When a significant portion of national income is diverted to debt repayment, less is available for crucial public investments.

Compounding the debt burden is the cost of living crisis that has gripped Kenyan households. While the official overall inflation rate stood at 3.8% in June 2025, within the Central Bank of Kenya’s target range, the lived experience for many Kenyans is one of persistently high prices. The Consumer Price Index (CPI) shows that prices for essential items under Food and Non-Alcoholic Beverages (up 6.6%), Transport (up 3.2%), and Housing, Water, Electricity, Gas, and Other Fuels (up 0.2%) continue to rise, putting immense pressure on household budgets. Stagnant income growth, particularly for those in informal employment, means that even modest price increases erode real purchasing power, forcing families to make difficult trade-offs, often at the expense of education or healthcare.

The government’s revenue collection has also been underperforming, further tightening the fiscal space. Despite ambitious targets, the Kenya Revenue Authority (KRA) has faced challenges in meeting collection goals, partly due to a slowing economy, high interest rates, and subdued business sentiment. This revenue shortfall directly impacts the national budget, which for the 2025/2026 financial year stands at Ksh. 4.239 trillion. While education has been allocated the largest share of this budget at Ksh 702.7 billion, representing approximately 16.6% of the total expenditure, this “lion’s share” is still proving insufficient to meet the full capitation requirements given the escalating costs and growing student numbers. The allocation includes specific amounts for Free Primary Education (Ksh 7 billion), Free Day Secondary Education (Ksh 51.9 billion), and Junior Secondary Capitation (Ksh 28.9 billion), but these figures are evidently not translating to full per-student funding.

The Shadow of Mismanagement: “Ghost Schools” and Accountability Lapses

Adding fuel to the fire of the education funding crisis is the recent revelation by the Auditor General that public funds were paid to non-existent, or “ghost,” schools last year. This scandal has ignited outrage among Members of Parliament and the public, highlighting deep-seated issues of mismanagement and potential corruption within the Ministry of Education.

The Auditor General’s report for the financial year ending June 2023 exposed “massive irregularities” in the Ministry of Education’s expenditure, including “overfunding and payments to non-existent schools.” A special audit of 400 schools uncovered widespread misuse of funds, alongside a staggering funding shortfall of Ksh. 117 billion for public schools. This means that while legitimate schools are struggling with inadequate funds, money is being siphoned off to fictitious entities.

MPs, including Luanda MP Dick Maungu and Teso South MP Mary Emasse, expressed “serious concerns” and demanded answers from Education Cabinet Secretary Migos Ogamba. Igembe North MP Julius Taitumu questioned how such an anomaly could occur with directors in the ministry. CS Ogamba, in his response, acknowledged the gravity of the situation, stating, “If money went to schools that do not exist, that is a criminal offence. Nobody can defend that. If it happened, the matter will be handed over to the DCI [Directorate of Criminal Investigations].”

This “ghost schools” scandal is not merely a financial irregularity; it represents a profound breach of public trust and a direct undermining of the government’s commitment to providing quality education. The Auditor General’s office plays a crucial role as an independent watchdog, scrutinizing public expenditure to ensure accountability and proper use of taxpayer money. The involvement of the DCI signals a potential criminal investigation, which could lead to prosecutions and a much-needed cleanup of the system. This scandal underscores the urgent need for robust financial controls, transparent reporting, and severe penalties for those found culpable of defrauding the public education system.

Digital Dreams, Analog Realities: Challenges with KEMIS

Further complicating the capitation issue is the effectiveness of the new Kenya Education Management Information System (KEMIS). Intended to replace the older National Education Management Information System (NEMIS), KEMIS was designed as a transformative digital platform to streamline student data management, enhance resource allocation, improve capitation tracking, and enable real-time decision-making across the education sector. It aims to provide a unique personal identification number (UPI) for every learner, linking data from early childhood development to higher education, and integrating with other government systems like the births and deaths register.

However, the implementation of KEMIS has been plagued with challenges, leading to significant discrepancies in capitation disbursement. Baringo North MP, Joseph Makilap, highlighted that “many students are not receiving capitation according to actual enrollment because of KEMIS.” This issue stems from several problems identified with the system:

• Inaccurate and Outdated Data: Many schools, particularly in marginalized areas, lack the technical capacity or internet access to regularly update learner records, leading to distorted statistics where transferred or dropped-out students still appear as active.
• System Downtimes and Poor User Experience: Users have reported that the system is slow, prone to crashing, or inaccessible during peak periods, frustrating school administrators and undermining its reliability.
• Limited Access in Rural Areas: The digital divide, characterized by unreliable electricity and internet connectivity in remote regions, means many schools struggle to fully participate, leaving learners unregistered or underrepresented in national data.
• Poor Integration: The system’s isolation from other government platforms like e-Citizen and the National Registration Bureau makes cross-referencing data cumbersome, affecting services like birth certificate verification for learner registration.

These inefficiencies directly impact capitation, as funds are allocated based on registered student numbers. If students are not properly registered or their data is inaccurate, schools may not receive their full capitation, leading to further financial strain. CS Ogamba acknowledged these issues, stating that “The ministry is currently developing the system to ensure efficiency.” The rollout of KEMIS, with a pilot phase launched in selected counties in July and a nationwide registration exercise beginning July 15, aims to address these critical flaws, but its success is paramount to ensuring accurate and equitable capitation.

The committee also noted a significant funding gap in Technical and Vocational Education and Training (TVET) institutions, with a deficit of “Ksh.12.5 billion.” TVETs are crucial for equipping young Kenyans with practical skills for the job market, and underfunding in this sector can severely hamper human capital development and national productivity. Challenges in TVET funding also include fragmentation of programs, weak linkages with labor markets, and inadequate monitoring, all of which impact the quality and relevance of the training offered. Addressing the KEMIS shortcomings is vital for accurate data to properly fund TVETs and other educational institutions.

The Burden on Households: Parents at a Crossroads

The Treasury’s decision to cut capitation funding directly translates into increased financial pain for parents, who are now expected to “dig deeper into their pockets” to cover the shortfall. This comes at a particularly difficult time for Kenyan families, who are already grappling with a severe cost of living crisis.

For millions of households, the official inflation figures do not fully capture the daily struggle. While the overall inflation rate might be within target, the prices of essential goods and services – rent, transport, electricity, basic food items like sugar and maize flour – continue to rise or remain stubbornly high. Many Kenyans, especially those in informal employment, have not seen their incomes increase significantly since the end of the COVID-19 pandemic in 2020. This stagnant income coupled with rising expenses means that families have less disposable income, forcing them to make difficult trade-offs.

The implications of increased school fees are dire:

• Increased Dropout Rates: For low-income families, even a few thousand shillings in additional school fees can be the difference between a child staying in school and dropping out. This risk is particularly high for girls and children from marginalized communities.
• Widening Inequality: The funding cuts will disproportionately affect children from poorer backgrounds, exacerbating existing educational inequalities. Wealthier families can absorb the additional costs, ensuring their children continue to receive quality education, while poorer families may be forced to withdraw their children, deepening the cycle of poverty.
• Pressure on Household Budgets: Families already struggling to put food on the table, pay rent, and cover healthcare costs will now face an additional, significant financial burden. This can lead to increased household debt, reduced spending on other necessities, and heightened stress.
• Compromised Quality of Life: The diversion of limited household funds towards education costs may mean less money for nutrition, healthcare, and other essential needs, impacting the overall well-being of families.

The MPs’ demand for “honesty from both the Education and Treasury ministries” reflects the public’s frustration and the severe impact these decisions have on ordinary citizens. The promise of “free education” has been a cornerstone of social mobility for many, and its erosion threatens the aspirations of an entire generation.

Teacher Employment: A Double-Edged Sword?

Even as the state of capitation remains in limbo and parents stare at more costs, the Ministry of Education has announced plans to employ up to 24,000 intern teachers in the current financial year. This move is intended to address the perennial teacher shortage in public schools, which has long affected the quality of education, particularly in overcrowded classrooms. The Teachers Service Commission (TSC) is responsible for teacher employment and welfare in Kenya, and the 2025/2026 budget has allocated Ksh 387.2 billion to the TSC, including Ksh 7.2 billion specifically for the recruitment of intern teachers.

While the employment of new teachers is a welcome step towards improving the teacher-student ratio, the reliance on “intern teachers” raises questions, especially in the context of funding cuts. Intern teachers typically receive a stipend rather than a full salary, and their terms of employment are often temporary. This approach, while providing immediate relief to teacher shortages, can lead to concerns about:

• Teacher Morale and Welfare: Intern teachers may feel undervalued and underpaid compared to their permanently employed counterparts, potentially affecting their motivation and commitment.
• Quality of Instruction: While interns are qualified, the lack of permanent terms and comprehensive benefits might impact their long-term professional development and retention.
• Sustainability: Relying heavily on an intern model without a clear pathway to permanent employment might not be a sustainable long-term solution for addressing the systemic teacher shortage.

The plan to hire 24,000 interns while simultaneously cutting capitation funding for existing students presents a paradox. It suggests a focus on increasing teacher numbers, but potentially at the expense of adequately resourcing schools and ensuring the overall quality of the learning environment, which is directly impacted by capitation funds for operations, teaching materials, and maintenance.

Charting a Sustainable Path Forward: Policy Considerations

The current crisis in Kenya’s education funding demands urgent and comprehensive solutions that go beyond stop-gap measures. A multi-stakeholder approach involving the government, parents, educators, civil society, and development partners is crucial to charting a sustainable path forward.

Several policy considerations could help address the challenges:

1. Fiscal Discipline and Revenue Enhancement:
   • The government must intensify efforts to manage its national debt more effectively, potentially through debt restructuring or seeking more concessional financing.
   • Improving revenue collection through efficient tax administration, broadening the tax base, and combating corruption is paramount. This would provide the necessary fiscal space to fund essential services.
   • Prioritizing expenditure efficiency across all government departments to eliminate wastage and ensure that every shilling allocated delivers maximum impact.
2. Rethinking Education Funding Models:
   • While “free education” is a noble ideal, the current financial realities necessitate an honest dialogue about its sustainability.
   • Exploring alternative funding models could involve a tiered system where wealthier parents contribute more, or a targeted subsidy program that ensures the most vulnerable children are fully supported, rather than a blanket “free” policy that is inadequately funded.
   • Re-evaluating the role of community contributions (the “Harambee” spirit) in school development, but within a transparent and accountable framework to avoid burdening parents unfairly.
   • Seeking increased support from international development partners specifically for education, tied to clear performance indicators and accountability mechanisms.
3. Enhanced Transparency and Accountability:
   • The “ghost schools” scandal underscores the critical need for robust financial controls and oversight within the Ministry of Education.
   • Implementing and rigorously enforcing anti-corruption measures, with severe penalties for those involved in fraudulent activities.
   • Strengthening the Auditor General’s office and ensuring that its recommendations are acted upon promptly.
4. KEMIS Optimization and Digital Transformation:
   • Prioritizing the rapid and effective development and rollout of KEMIS is non-negotiable. This includes ensuring adequate technical support, training for school administrators, and reliable internet connectivity, especially in rural areas.
   • The system must be fully integrated with other government databases (e.g., Civil Registration Services) to ensure accurate student registration and eliminate “ghost learners.”
   • Leveraging technology for transparent tracking of capitation funds from disbursement to utilization at the school level.
5. Investing in Teacher Welfare and Development:
   • While intern teacher programs can provide short-term relief, a long-term strategy for addressing teacher shortages must include pathways to permanent employment, competitive remuneration, and continuous professional development.
   • Ensuring that teachers are adequately supported and motivated is critical for maintaining and improving the quality of education.
6. Multi-Stakeholder Dialogue:
   • The government must engage in open and honest dialogue with all stakeholders – parents, teachers, school administrators, civil society organizations, and parliamentary committees – to collectively find sustainable solutions.
   • This collaborative approach can foster trust, build consensus, and ensure that policies are responsive to the real needs on the ground.

Conclusion: Safeguarding Kenya’s Future

The admission from the Treasury regarding the unsustainability of fully funded free education is a wake-up call for Kenya. It highlights a complex interplay of fiscal constraints, governance challenges, and implementation hurdles that threaten to undermine one of the nation’s most cherished social programs. The pain for parents, already struggling with a high cost of living, is immediate and tangible, risking increased dropout rates and widening educational disparities.

Education is not merely a social service; it is a fundamental investment in human capital and the bedrock of a nation’s future prosperity. Underfunding it, or allowing funds to be siphoned off through corruption, has long-term consequences for economic growth, social cohesion, and individual opportunities. The “ghost schools” scandal and the struggles with KEMIS further erode public trust and demand swift, decisive action.

As MPs rightly demand honesty and accountability, the government faces a critical test. The path forward requires not just financial adjustments but a fundamental re-evaluation of how education is funded, managed, and safeguarded. By embracing transparency, strengthening accountability, and fostering genuine collaboration with all stakeholders, Kenya can still uphold its commitment to providing quality education for all its children, ensuring that the promise of a brighter future remains within reach for every generation.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

25th July, 2025