- The World Bank says the SHA model depends too much on salaried workers
- Informal sector’s low participation threatens funding goals
- Contributions fall far below targets due to limited formal employment
- Recommendations made to shift the focus to government-financed support
- Ruto’s health plan may be harming efforts to grow formal jobs
The World Bank has raised a red flag on the new Social Health Authority (SHA), saying it may not work well due to how it’s funded. In a fresh report titled Public Finance Review, released on Tuesday, May 27, the financial body pointed out that most Kenyans work in the informal sector, yet the health plan is mainly collecting money from salaried employees.
The report explains that SHA relies on a mandatory 2.75% cut from people with formal jobs. However, over 80% of the country’s workforce is in informal employment, and most of them do not contribute, despite being required to.
The World Bank also shared that the government is only managing to collect around Ksh67 billion, while the actual target is Ksh157 billion, leaving a huge financial gap in the program.
Health Plan ‘Hurts’ Formal Job Growth, Experts Warn
Apart from weak contributions, the World Bank also warned that the SHA system might make things harder for small businesses and workers in low-paying jobs. The current rules are seen as discouraging people from joining the formal sector because of higher payroll costs.
“The health scheme depends on payroll taxes from formal workers, but it ends up making formal jobs less attractive,” the report stated.
While the government plans to help poor households by paying for them, a large part of the population remains uncovered. This mismatch could make the system fail in the long run.
As a solution, the World Bank recommends that the government fully fund health coverage for poor and informal workers, instead of forcing them to contribute. It also suggested removing the contribution requirement for low-income earners in formal jobs to boost job growth and reduce economic pressure.
SHA was introduced by President William Ruto after scrapping the old NHIF. It is now facing criticism over its sustainability and fairness, especially for millions in informal settlements who are left out or unable to pay.
