[Insight]
The Municipality Is the Unit That Matters Now
[Insight]
The Municipality Is the Unit That Matters Now
Opening Perspective
Kenya’s constitutional architecture describes two levels of government. Its urban policy has been quietly building a third. Seventy-nine municipalities across 45 counties now operate inside a performance-financed system under the Second Kenya Urban Support Programme, each expected to hold a charter, an appointed board, an urban manager, and a separate vote in the county budget. Annual assessment determines their funding.
That set of requirements is more consequential than it appears. A charter creates a legal entity. A board creates a governing body. An urban manager creates an executive. A separate budget vote creates a fiscal identity distinct from the county that hosts it. Assemble those four and you have an institution rather than an administrative convenience, and the difference determines whether urban investment in Kenya is delivered by bodies accountable to the residents of the town or absorbed into county budgets that answer to a wider constituency.
What the System Actually Requires
The programme’s institutional benchmarks are specific, which is what makes them enforceable. Establishment of urban governance structures is measured by whether an urban area has an approved charter, an established board, an appointed urban manager, and a dedicated budget vote. These are threshold conditions, and municipalities that fail them do not proceed to the performance conversation at all.
Beyond establishment, performance standards cover two domains. Urban area governance is assessed on citizen participation and public disclosure of urban finances, both of which are hard to fake and easy to verify. Urban planning, infrastructure, and service delivery is assessed on plan formulation, implementation performance, and actual provision of basic urban services, which shifts the measure from documents produced to services delivered.
Funding is allocated annually on the strength of those assessments, conducted by an independent verification agency rather than self-reported. A municipality that meets the benchmarks and performs receives its grant. One that does not, does not.
The system is also still being built out. A April 2026 terms of reference for the development of model municipal by-laws indicates the next stage: giving municipalities the standardised legal instruments through which they can actually regulate the things towns need regulated, from waste and markets to building control and public space.
A municipality with a charter but no functioning board is a letterhead. The benchmarks exist because urban institutions can be created on paper faster than they can be built, and the financing follows the ones that were actually built.
ACAL Advisory Team
Public Sector Advisory
Key Insights
1. Establishment benchmarks exist because paper institutions are easy to create
A municipality with a charter but no functioning board is a letterhead. Kenya’s urban programme learned this early, which is why the establishment conditions are threshold requirements rather than scored criteria. Urban institutions can be declared far faster than they can be built, and a financing system that did not distinguish between the two would fund the declaration.
2. The separate budget vote is the most underrated requirement
Of the four establishment conditions, the dedicated vote in the county budget carries the most institutional weight. It makes municipal spending traceable, gives the urban manager something to manage, and creates a fiscal record against which performance can be assessed over time. Without it, municipal finance dissolves into county finance and the municipality’s performance becomes unmeasurable in principle, not merely in practice.
3. Repeated assessment reveals capability trajectories, not just scores
Kenya now holds several cycles of independent performance assessment across the same municipalities, which converts the exercise from a snapshot into a trajectory. That data distinguishes municipalities that are improving from those coasting on an early establishment advantage, and it identifies which specific capability, planning, participation, disclosure, or delivery, is holding a given municipality back. Few countries have this. Fewer use it.
4. Municipal capability and county capability are correlated but not identical
A strong county generally produces stronger municipalities, because county support determines whether a board is appointed promptly and a budget vote is honoured. But the relationship is not automatic. Municipalities with capable urban managers have outperformed their host counties, and municipalities in high-capacity counties have underperformed where the county treated the urban vote as a formality. The municipality is a real unit of analysis, not a proxy for its county.
5. Model by-laws will determine what municipalities can actually do
An institution without regulatory instruments can plan and spend but cannot govern. Standardised model by-laws give municipalities enforceable authority over waste management, markets, building control, and public space, which is where urban service delivery either functions or does not. This is the difference between a municipality that administers a budget and one that manages a town.
6. The model is about to be tested by a new category of municipality
The Shirika Plan converts refugee-hosting areas into municipalities as the administrative mechanism for channelling development financing. Those will be municipalities with unusual demographics, atypical service demands, and financing arriving from sources the KUSP framework was not designed around. Whether Kenya’s municipal architecture can absorb that variation is the next real test of the model.
What This Means
For municipal boards and urban managers. Establishment conditions are the floor, not the achievement. The assessment rewards citizen participation, financial disclosure, plan formulation, and service delivery, and each is a system requiring deliberate construction. Municipalities that build them will compound their grant allocations over successive cycles.
For county governments. The county controls the two things that most determine municipal performance: whether the board and urban manager are appointed and empowered, and whether the separate budget vote is honoured in practice rather than only in the budget document. Counties that resource their municipalities properly are increasing their own development receipts.
For the State Department for Housing and Urban Development. The programme has produced a genuine institutional asset in the assessment dataset. Using it diagnostically, to target support at the specific capability gaps holding particular municipalities back, would extract considerably more value than using it purely to allocate grants.
For development partners. Municipalities are becoming the delivery unit for urban investment, climate adaptation, and now refugee integration. Partners designing urban programmes should assess municipal institutional capability as counterparty risk, and the assessment record makes that possible in a way it is not in most countries.
The Implications for ACAL’s Clients
Municipal institutional performance is measured ground for ACAL. The firm has served as Independent Verification Agency conducting annual performance assessments of 45 counties and 79 municipalities under the Second Kenya Urban Support Programme, delivered the capacity needs assessment for ten municipalities under the Sustainable Urban Economic Development Programme, undertaken beneficiary and socio-economic impact assessment of KUSP-financed infrastructure across 59 municipalities, and prepared integrated strategic development plans for counties within the Nairobi metropolitan region.
That work spans the full instrument set the municipal system runs on: establishment verification, performance assessment, capacity diagnosis, planning, and impact measurement.
For municipal boards, the relevant support is assessment readiness, governance and participation system design, and urban planning capability. For counties, municipal establishment and support architecture. For national agencies, assessment design and diagnostic use of the performance dataset. For partners, municipal counterparty due diligence.
Closing Perspective
Kenya has done something unusual. It has created a new institutional tier, defined precisely what constitutes existence at that tier, and financed it on independently verified performance rather than formula. Seventy-nine municipalities now sit inside that system, with several cycles of comparable data on how each is doing. The next phase will test whether the model can extend, into regulatory authority through by-laws, and into new categories of urban area created for purposes the framework did not originally anticipate. The municipality has become the unit where urban Kenya is governed or is not. It deserves considerably more attention than it currently receives.
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
