World Bank Warns High Taxes, Bribery Are Hurting Kenya’s Businesses

High tax burdens, widespread bribery, cumbersome regulations, and elevated operational costs are increasingly slowing down private sector investment in Kenya, according to a report released by the World Bank.

In its Private Sector Diagnostic report, the global lender highlighted that businesses face compounding pressures from multiple national and county-level levies, shifting tax policies, and systemic market inequalities.

“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,” the World Bank stated.

The Bretton Woods institution highlighted institutional weaknesses and widespread corruption as major hurdles to dynamic economic growth. Survey data revealed that one-third of evaluated businesses reported receiving requests for bribe payments.

“Governance weaknesses further undermine investor confidence,” the Bretton Woods Institution revealed, noting that Kenya ranks in the bottom third of the Transparency International Index.

Navigating bureaucracy remains a primary operational obstacle. In the 2025 World Bank Enterprise Survey, 25.3 percent of participating firms cited licensing and permit processes as major barriers to doing business in Kenya.

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.

“Although Kenya has made progress in transport infrastructure through expressways, port modernization, and the development of Lamu Port, firms continue to face high utility costs and unreliable services,” the report stated.

Energy costs pose a severe threat to commercial competitiveness. 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. Over 37 percent of businesses reported inadequate water access in the 2025 Enterprise Survey – more than double the 17.2 percent benchmark observed across comparable lower-middle-income economies.

Ambiguous land tenure systems and outdated property registries further escalate baseline transaction costs, deterring capital allocation toward land-intensive commercial projects.

Simultaneously, heavy government domestic borrowing 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.

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