The World Bank has released a Private Sector Diagnostic report highlighting the challenges faced by businesses in Kenya. The report notes that high tax burdens, widespread bribery, cumbersome regulations, and elevated operational costs are increasingly slowing down private sector investment in the country. These challenges are affecting the growth of businesses and the overall economy.
According to the World Bank, businesses in Kenya face compounding pressures from multiple national and county-level levies, shifting tax policies, and systemic market inequalities. The report states that while corporate income tax rates are broadly aligned with regional peers, investors face multiple national and county-level levies, frequent tax changes, cumbersome administration, and perceptions of unequal treatment. This has created an uncertain and challenging business environment.
The World Bank has identified institutional weaknesses and widespread corruption as major hurdles to dynamic economic growth in Kenya. The report notes that survey data revealed that one-third of evaluated businesses reported receiving requests for bribe payments. This has undermined investor confidence, with Kenya ranking in the bottom third of the Transparency International Index. The report emphasizes the need for improved governance and reduced corruption.
Navigating bureaucracy remains a primary operational obstacle for businesses in Kenya. The 2025 World Bank Enterprise Survey found that 25.3 percent of participating firms cited licensing and permit processes as major barriers to doing business in the country. This has resulted in increased costs and time for businesses, affecting their competitiveness and growth.
Despite major national investments in core logistics, including modern highway expressways, port expansions, and the development of the Lamu Port, expensive utilities and structural service failures continue to constrain enterprise productivity. The report notes that firms continue to face high utility costs and unreliable services, affecting their operations and competitiveness.
Energy costs pose a severe threat to commercial competitiveness in Kenya. Local businesses pay approximately Ksh33.74 per kilowatt-hour for electricity, while 75 percent of enterprise managers report suffering regular power outages that disrupt operational schedules. Water supply deficits further burden local commerce, with over 37 percent of businesses reporting inadequate water access.
The World Bank report also highlights the need for improved land tenure systems and property registries, as well as reduced government domestic borrowing, which continues to crowd out private enterprise from financial markets. The squeeze on capital availability has driven private-sector credit down from 36.7 percent of GDP in 2015 to 29.1 percent in 2024, leaving fewer financial resources available for local business expansion.
Key points
- High taxes, bribery, and cumbersome regulations are major challenges facing businesses in Kenya.
- Institutional weaknesses and widespread corruption are undermining investor confidence in Kenya.
- Improved governance, reduced corruption, and increased access to finance are needed to support private sector growth in Kenya.
