Means Testing: An Obscure Formula for Structural Adjustment Programmes 

In February, the High Court dismissed a petition by the Attorney General to issue a stay order on its ruling regarding the Variable Scholarships and Loans Funding, popularly known as the New Funding Model. The stay order was in March instituted by the Court of Appeal.

In a government circular titled New Funding Model, published by the State Department for Higher education and Research, one of the formulas to be used to determine the financing model is Means Testing. “The MTI (Means Testing instrument) is a critical tool used to assess each student's financial need. It considers a range of socioeconomic indicators, including household income, geographical location poverty probability index, special circumstances such as orphans and students with disability, number of dependents, program costs, expenditure on education and gender. These indicators are scientifically weighted to ensure a fair and transparent allocation of funds.”

Interestingly, the petitioners in Kenya Human Rights Commission & 3 others v Attorney General & 4 others (Constitutional Petition E412 of 2023), pointed out that this formula, which the government marketed to be the panacea to discrimination in education funding, actually was discriminatory. The court ruled in favor of the petitioners regarding discrimination. The issue on means testing was not really interrogated in-depth in the petition but its effects were dealt with in paragraphs 110-115.

IMF’s Influence in Kenya’s Economic and Financial Policies.

It is no secret that Kenya’s fiscal position has been precarious to say the least. A huge debt burden, falling disposable income and a non-expanding tax base have added to the existing economic situation. Recently the country’s credit ratings dropped and despite the government’s efforts to portray the narrative as positive, few believed the government’s position. The Central Bank of Kenya recently reduced its lending rates but banks did not adjust their rates downwards.

The IMF has been around for years, with it playing a huge part in the drafting and implementation of various economic policies including the highly impugned 2024/25 Public Finance Management Bill (Finance Bill).

The lender of last resort, also acts as the official receiver of errant economies. The IMF always tries to ensure that the internal shocks of an unstable economy affect as few economies as possible. To ensure these economies pay off their external liabilities, the Structural Adjustment Programs always come in handy. Social programs are almost the first things to be hit.

The IMF considers Means Testing/ Proxy Testing to be an important way of dealing with the freeloader problem. The formula takes into account people’s incomes before determining the amount of allocation they should enjoy from social and welfare programs. The Universal Healthcare model is another social program that uses means testing.

The Differentiated Unit Cost Funding model required the government to cater for 80% of a student’s fee while the student would cater for the remaining 20%. In the New Funding Model, the government placed students in bands with each band having a different allocation of government sponsorship.

While the government was supposed to be the main financier in the old model, it reduced its total expected allocation with 66.4% being the highest allocation in Fin Year 2017/18 with the lowest being 48% in the Fin Year 2022/23. The government escaped its responsibility and even presented its nonfeasance as the best reason for why the NFM was necessary. The High Court under the maxim He Who Seeks Equity Must come with clean hands ruled in favor of the petitioners and found GOK’s means testing to be discriminatory and actually reducing the expected enjoyment of the right to education as enshrined in Article 43 of the constitution.

Milej (2021) analyzed IMF’s position on Kenya’s university funding allocation, a key message was that the government needed to increase students’ participation in the funding. The nominal fee rate had remained unchanged since 1989 and going by the IMF’s proposal, it needed to be aligned to inflation trends. While the IMF has not explicitly stated its role in the changes in funding, Kenya’s increased reliance on its loans and policy-creation suggest that means testing in its welfare programs is part of the recent conditionalities.

The Way Forward

The funding problem is more of an economic and finance issue rather that a ministerial issue. All the possible solutions which will maximize benefit should be conducted on a multisectoral scale. It cannot be solved by the education sector but needs a total economic fix.

While Kenya’s debt distress keeps rising and a shrinking tax base  trend, the government needs a newer way to ensure stability of the economy and the state. More focus needs to be applied in internal revenue creation methods. Currently, Kenya is a net importer and a service-based economy. being a net importer means the finances earned in the country tend to be spent in other economies reducing circulation in Kenya.

The government should focus more on improving the manufacturing and processing sectors to ensure more people are put in employment and that most of the imported goods are locally available through internal production. Kenya’s susceptibility to shocks in other economies and will be better placed to thrive. The debt burden should be handled in a way that ensures disposable income does not drop drastically while at the same time prevent a default.

The Means Testing Model should also be done away with. Kenya’s economy is not yet as advanced as other countries which can be able to pull it off successfully. To paint a clearer picture, her GDP per capita is approximately $1,813.76. This is the same GDP per capita that the USA had in 1865(the final year of the American Civil War). Applying the same economic model as a country which was at our level 160 years ago is not a prudent means of economic management.