The impact of Digital financial systems on Revenue Collection Efficiency in County Governments in Kenya

Author: Monayo Obed Tanda

Date: 2025

Abstract: This study examined the impact of digital financial systems on revenue collection efficiency in county governments in Kenya with the ongoing push for public sector reforms and digitization, county governments have adopted various digital platforms such as mobile money, electronic banking, e-citizen services, and integrated financial management information systems (IFMIS) to streamline revenue collection processes. The objective was to assess how the adoption of these systems has influenced revenue performance in terms of timeliness, accuracy, accountability, and cost-effectiveness. The research adopted a descriptive survey design targeting revenue officers, finance directors, and ICT staff across selected counties. Primary data was collected using structured questionnaires while secondary data was sourced from county financial reports. The study employed both qualitative and quantitative techniques, with data analyzed using statistical tools such as descriptive statistics and regression analysis. Findings revealed a significant positive relationship between the use of digital financial systems and revenue collection efficiency. Counties that had fully integrated digital systems reported increased revenue volumes, reduced leakages, enhanced transparency, and improved taxpayer compliance. However, challenges such as inadequate ICT infrastructure, limited technical capacity, and resistance to change were noted as impediments to full-scale implementation. The study concluded that digital financial systems are a critical enabler of revenue mobilization and fiscal accountability in devolved governments. It recommends that county governments invest in ICT infrastructure, build technical capacity, and strengthen legal frameworks to enhance the sustainability and scalability of digital financial initiatives. The study concluded that digital financial systems had significantly improved revenue collection efficiency in county governments in Kenya. Respondents consistently indicated that the adoption of digital tools such as mobile money, e-payment platforms, and integrated financial management systems had led to notable gains in transparency, accuracy, speed, and accountability in revenue processes. The use of these technologies reduced manual handling of cash, minimized revenue leakages, and promoted timely compliance among taxpayers. The results further showed that counties which embraced digital financial systems experienced improved financial reporting and easier monitoring of collections. Moreover, digitization reduced bureaucratic bottlenecks and enhanced the overall taxpayer experience. Although some challenges such as technical capacity gaps and infrastructure limitations were implied, the overall perception from the respondents confirmed that digitization was a critical enabler of effective and efficient public revenue management. Based on the findings of the study, several recommendations were made to enhance the effectiveness of digital financial systems in county revenue collection. Firstly, county governments were advised to invest in modern ICT infrastructure to support the seamless operation of digital financial platforms. It was observed that some counties still faced connectivity issues and system downtime, which hindered efficient service delivery.

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