The Universities Fund was established under section 53 of the Universities Act, 2012 for financing Universities in Kenya. The Fund is managed by a Board of Trustees known as the Universities Fund (UF) which has been in operation since 2016. The function of the Trustees is to generally manage the Universities Fund. The specific functions of the Trustees are to: advise the Cabinet Secretary in matters of University Education Financing; develop a fair and transparent criterion for allocation of funds to Universities; apportion funds to Universities; establish the maximum Differentiated Unit Cost for the programs offered and to mobilize and receive funds for purposes of the Fund from the Government, donors, and from any other sources.
The Board commenced the apportionment of funds to public universities and issuance of conditional grants to private universities mandate in the FY 2017-2018 in accordance to the criteria established which is the Maximum Differentiated Unit Cost(MDUC). Previously (1995-2016), university education in Kenya was uniformly funded at a unit cost of Kshs 120,000 (per student); out of which the government paid Kshs 70,000 per student. The other Kshs 50,000 per student was catered for by the households and the HELB. Apart from the fact that the above funding levels were inadequate, there was neither resource mobilization framework to address the gap nor a clear and fair criterion for allocating the available budgetary support among existing and newly established public universities. This led to the creation of a transparent, fair and equitable criterion known as the Differentiated Unit Cost. The DUC provides for the funding of programmes in the universities in line with the financial requirements of the respective programmes.