Revenue Enhancement Strategies and Growth of Own-Source Revenue in the County Government of Machakos, Kenya
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Date
2025-10
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Kenyatta University
Abstract
Growth of own source revenues (OSR) in counties plays a crucial role in enhancing fiscal autonomy and reducing dependence on national government transfers. However, in Machakos County, OSR performance remains below potential. County revenue reports show that OSR contributed less than 15% of total revenue between 2017 and 2023, despite the Commission on Revenue Allocation (CRA) estimating that counties could generate up to Kshs. 260.6 billion if fiscal instruments were fully optimized. This persistent underperformance points to structural and strategic gaps in revenue generation mechanisms. Therefore, the specific objectives of this study were to determine the effect of revenue diversification strategies, internal control strategies, revenue digitization strategies, and capacity building strategies on the growth of own source revenue in the County Government of Machakos. The study was underpinned by the Resource-Based View, Public Finance Theory, Benefit Theory of Taxation, and Human Capital Theory. A descriptive research design was employed. The study targeted 110 respondents, comprising 105 sub-county revenue staff and 5 senior officers from the finance and planning departments, using purposive sampling. Primary data on the independent variables were collected through structured questionnaires, while secondary data on OSR performance were sourced from official county documents. The data analysis utilized descriptive statistics (means and standard deviations), correlation, and multiple regression to assess the strength and direction of effects. Diagnostic tests conducted included tests for normality, multicollinearity, heteroscedasticity, and autocorrelation. Ethical safeguards such as informed consent, confidentiality, anonymity, voluntary participation, and harm avoidance were strictly upheld. The findings revealed that revenue diversification had a statistically significant positive effect on OSR growth (β = 0.385, p = 0.029), implying that expanding revenue sources enhances fiscal inflows. Internal control strategies, however, showed a statistically significant negative effect (β = –0.532, p < 0.001), suggesting inefficiencies or rigidities in control mechanisms that suppress revenue growth. Revenue digitization strategies were found to have a statistically significant positive effect (β = 0.481, p = 0.011), indicating the usefulness of technology in improving compliance and efficiency. Capacity building strategies also had a statistically significant positive effect (β = 0.674, p < 0.001), confirming that well-trained personnel are instrumental in enhancing revenue collection and management. Based on these findings, the study concludes that revenue diversification, digitization, and capacity building are effective levers for improving OSR performance, while internal controls may require reform to become enablers rather than constraints. It is recommended that the County Government of Machakos adopt a comprehensive strategy that maps untapped revenue areas and digitizes the entire revenue value chain. Moreover, internal control systems should be redesigned to support rather than stifle revenue operations through automation and accountability. Finally, sustainable capacity-building programs tailored to current fiscal demands should be institutionalized to professionalize the county’s revenue management systems. The study reaffirms the importance of evidence-based policy and capacity development in unlocking county fiscal potential.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, October 2025.
Supervisor
1. Dr. Francis, K. Gitagia