The World Bank has raised critical concerns about the financial and operational viability of Kenya’s Social Health Authority (SHA), which administers the Social Health Insurance Fund (SHIF). In its latest Public Finance Review report, released on May 27, 2025, the World Bank warns that the SHA’s funding model is not sustainable under current conditions, citing structural flaws in revenue collection, insufficient government subsidies, and operational inefficiencies.
Reliance on Informal Sector Contributions
Kenya’s economy is dominated by informal employment, with between 70% and 85% of the workforce working outside formal structures. The SHA relies on mandatory 2.75% payroll deductions from both formal and informal workers to fund SHIF. However, the World Bank highlights the difficulty in collecting from informal workers, whose earnings are inconsistent and largely undocumented. In the most recent fiscal period, the government raised Ksh67 billion, well below the Ksh157 billion target needed for full SHIF implementation.
This gap threatens the SHA’s ability to finance essential health services. According to the World Bank, the assumption that informal workers can consistently contribute is unrealistic and could lead to public debt distress if the state attempts to compensate for shortfalls through borrowing.
Insufficient Government Funding
The Kenyan government allocated just Ksh6.1 billion toward SHA operations, which is only 4% of the Ksh168 billion required. The World Bank notes that this leaves millions of Kenyans, especially those from low-income households, without subsidized contributions. As a result, the SHA cannot adequately provide services such as cancer treatment, maternity care, emergency services, and outpatient coverage.
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The World Bank recommends that the state should limit SHIF contributions to formal sector workers and take responsibility for subsidizing informal and vulnerable populations to improve financial sustainability.
Structural Issues in Tax Design
The SHIF’s universal payroll tax, which applies equally to all income earners, may deter businesses and workers from joining the formal economy. The World Bank describes this as a “structural contradiction”, warning that the policy undermines its own goal of expanding the contribution base. Formalizing the workforce is critical to the SHIF’s success, yet the cost burden could encourage businesses and workers to remain informal.
Implementation and Operational Challenges
Operational inefficiencies have further strained the SHA’s rollout. The SHA claims portal is non-functional in many hospitals, leading to delayed reimbursements. According to the Rural and Urban Private Hospitals Association of Kenya (RUPHA), 89% of hospitals reported portal issues. In February 2025, RUPHA temporarily suspended SHA services due to unpaid claims and difficulties with the outpatient reimbursement process.
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As of early 2025, only 3.33 million out of 19.3 million registered Kenyans had been means-tested, raising questions about eligibility verification. Adoption of SHA’s e-contracting system also lags behind, with 46% of health facilities yet to transition from the National Health Insurance Fund (NHIF).
Public Awareness and Compliance Gaps
A GeoPoll survey conducted in February 2025 shows limited public understanding of SHA and SHIF. While 35% of respondents viewed SHIF as a better replacement for NHIF, 10% were unsure of its objectives. Legislators have also pointed to inconsistent payment behavior, noting that many Kenyans contribute only when seeking treatment. Only 3.3 million contributors, mainly in formal employment, are making regular payments.
Governance and Corruption Risks
Governance concerns further threaten SHA’s effectiveness. The Auditor General’s 2023/24 report flagged potential irregularities in the procurement of SHA’s health IT system. Civil society groups such as KELIN Kenya have called for investigations by the Ethics and Anti-Corruption Commission and the Directorate of Criminal Investigations, citing mismanagement and lack of transparency.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.