University Funding Model

The university funding model in Kenya has undergone significant transformations since the country gained independence, reflecting broader shifts in educational philosophy, economic realities, and political priorities. Understanding the historical evolution of this model provides crucial context for addressing current challenges and developing sustainable solutions for the future of higher education in Kenya.

Higher education plays a pivotal role in national development, serving as an engine for economic growth, social mobility, and innovation. How universities are funded directly impacts their ability to fulfill this role effectively, influencing everything from access and equity to quality and relevance. As Kenya strives to position itself as a knowledge-based economy and regional education hub, getting the funding model right has become increasingly urgent.

This article examines the evolution of university funding in Kenya, analyzes the current landscape, and proposes a path forward that balances the competing demands of accessibility, quality, and sustainability. Drawing on international best practices and local realities, it offers insights for policymakers, university administrators, and other stakeholders involved in shaping the future of higher education in Kenya.

In the immediate post-independence era, Kenya adopted a fully state-funded university system, with the government covering tuition, accommodation, and living expenses for all students admitted to public universities. This approach was rooted in the belief that higher education was a public good essential for national development and should be accessible regardless of economic background. While this model successfully expanded access to higher education for the first generation of post-independence Kenyans, it became increasingly unsustainable as enrollment numbers grew and economic challenges mounted.

The 1990s marked a pivotal shift with the introduction of cost-sharing policies, influenced by structural adjustment programs and changing global perspectives on higher education financing. Under this model, students and their families were required to contribute to the cost of their education through tuition fees, while the government maintained subsidies for operational costs. Simultaneously, universities were encouraged to diversify their revenue streams through parallel programs, research commercialization, and partnerships with industry.

This transition was not without challenges. The sudden shift of financial burden to students and families created new barriers to access, particularly for those from disadvantaged backgrounds. In response, the Higher Education Loans Board (HELB) was established in 1995 to provide loans and bursaries to needy students, though the coverage and adequacy of these financial aid mechanisms have remained persistent challenges.

The 2000s and 2010s saw further evolution of the funding model, with increased emphasis on performance-based funding, competitive research grants, and differentiated funding based on program costs and national priority areas. The expansion of the higher education sector, including the establishment of new public universities and the growth of private institutions, has further complicated the funding landscape, creating both opportunities and challenges for sustainable financing.

Government subsidies remain the largest source of funding at 45%, though this represents a significant decrease from the near-total government funding of the early post-independence era. These subsidies are primarily allocated through a differentiated unit cost model that considers program type and level, though the actual disbursements often fall short of the calculated requirements.

Student fees now constitute approximately 30% of university funding, reflecting the shift toward cost-sharing. However, the level of fees has remained largely stagnant for regular government-sponsored students, creating a funding gap that universities have attempted to fill through parallel programs charging higher fees. This dual fee structure has created inequities within the system and raised questions about quality and standards.

Research grants (15%), endowments (5%), and other income sources (5%) make up the remainder of university funding. The relatively small contribution of research grants reflects both limited national research funding and challenges in accessing competitive international grants. Similarly, the minimal role of endowments points to underdeveloped alumni giving cultures and limited engagement with philanthropic sources.

The Higher Education Loans Board (HELB) plays a central role in this ecosystem, providing loans and bursaries to needy students. However, the system faces numerous challenges, including inadequate loan amounts that fail to cover the full cost of education, delays in disbursement, and limited recovery rates that threaten the sustainability of the revolving fund.

The data reveals a steady decline in the proportion of government funding from 90% in 1990 to 45% in 2023, with a corresponding increase in the share of student fees from 5% to 30%. This shift reflects both deliberate policy changes and fiscal constraints that have limited the government's ability to maintain historical funding levels in the face of expanding enrollments.

The most dramatic changes occurred during the 1990s and early 2000s with the introduction and expansion of cost-sharing policies. The rate of change has slowed in recent years, suggesting that the system may be approaching a new equilibrium in terms of the balance between public and private contributions.

However, this apparent stability masks significant challenges. The absolute level of funding per student has declined in real terms, as enrollment growth has outpaced funding increases. This has put pressure on educational quality, with many universities struggling to maintain adequate facilities, attract and retain qualified faculty, and provide essential learning resources.

Moreover, the increasing reliance on student fees has raised concerns about access and equity, particularly for students from disadvantaged backgrounds. While the HELB loan system has helped mitigate these concerns to some extent, gaps in coverage and adequacy remain significant barriers for many potential students.

Teaching activities consume the largest share of university budgets at 45%, reflecting the primary role of universities in providing instruction and the labor-intensive nature of this function. This category includes faculty salaries, classroom facilities, and teaching materials.

Research activities account for 20% of expenditures, a relatively modest proportion that reflects the limited research funding available and the historical emphasis on teaching in many Kenyan universities. This category includes research infrastructure, equipment, and support for faculty and graduate student research activities.

Administrative costs consume 15% of university budgets, covering central management functions, financial administration, human resources, and other operational support services. While essential for institutional functioning, there are ongoing debates about whether this proportion is appropriate or whether resources could be redirected toward core academic functions.

Infrastructure development and maintenance accounts for 12% of expenditures, a figure that many observers consider insufficient given the aging facilities at many institutions and the need for expansion to accommodate growing enrollments. Deferred maintenance has become a significant challenge, with potential long-term implications for educational quality and institutional sustainability.

Student services, including counseling, career guidance, health services, and extracurricular activities, receive 8% of university budgets. While these services play an important role in supporting student well-being and development, they are often among the first areas to face cuts during financial constraints.

This allocation pattern reflects both institutional priorities and external constraints. The high proportion of spending on teaching is appropriate given universities' core educational mission, but the relatively limited investment in research may hinder Kenya's aspirations to develop a knowledge-based economy and address pressing national challenges through innovation.

For Kenya to "get it right" with university funding, a multifaceted approach is required. First, there is a need to recalibrate the balance between public and private contributions to reflect the dual nature of higher education as both a public good and a private investment. This could involve differentiated funding models for different programs based on their social returns and market demand.

Second, the student financial aid system needs comprehensive reform to ensure timely disbursement, adequate coverage, and efficient recovery. This could include income-contingent loan repayment schemes that link repayment obligations to graduates' earning capacity, reducing the burden on those entering lower-paying professions while improving overall recovery rates.

Third, universities must be supported in developing more diverse and sustainable revenue streams. This includes strengthening research capabilities to attract grants and contracts, enhancing industry partnerships for collaborative projects and internships, and optimizing asset utilization through innovative approaches to campus facilities and resources.

Specific recommendations include:

• Implement a transparent and formula-based funding model that considers both institutional performance and national development priorities, providing predictability for universities while incentivizing alignment with policy objectives.
• Reform the HELB system to increase loan amounts, improve targeting to the most needy students, streamline disbursement processes, and introduce income-contingent repayment mechanisms.
• Establish a national research foundation with dedicated funding to support university research aligned with national priorities, fostering innovation and knowledge creation.
• Develop tax incentives for private sector contributions to university endowments, research partnerships, and scholarship programs, leveraging private resources for public educational goals.
• Invest in capacity building for university leadership in financial management, resource mobilization, and strategic planning to enhance institutional sustainability.

Colbert & Co. has been working with Kenyan educational authorities and institutions to develop funding models that balance accessibility, quality, and sustainability. Our approach emphasizes data-driven decision-making, stakeholder engagement, and international best practices adapted to the Kenyan context. By addressing the funding challenge holistically, Kenya can build a higher education system that serves as an engine for economic growth, social mobility, and national development.