<p>Governance of County Education Aid and Its Effect on Student Retention in Lamu County, Kenya </p>

Despite substantial annual investments in county education bursary programmes, student retention in many marginalized regions of Kenya remains a persistent challenge. This study examined the governance of county education aid and its effect on student retention in public secondary schools in Lamu County, Kenya. The study was motivated by continued student dropout despite sustained bursary funding, suggesting that governance factors rather than financial resources alone may influence programme effectiveness. The research adopted a mixed-methods approach using an explanatory sequential design. Quantitative data were collected from 350 bursary beneficiaries through structured questionnaires, while qualitative data were obtained through interviews and focus group discussions. Quantitative data were analysed using descriptive and inferential statistical techniques, whereas qualitative data were analysed thematically. The study was anchored on Fiscal Decentralisation, Administrative Capacity, and Principal-Agent theories. Findings revealed that fiscal adequacy and predictability, administrative capacity, and accountability and targeting integrity significantly influenced governance effectiveness. The study further established a significant positive relationship between governance effectiveness and student retention outcomes. Mediation analysis demonstrated that governance effectiveness significantly mediated the relationship between governance inputs and student retention outcomes, indicating that governance processes serve as the mechanism through which financial and institutional resources influence educational outcomes. Qualitative findings reinforced these results, highlighting challenges related to delayed disbursement, administrative inefficiencies, targeting errors, and limited transparency in bursary allocation. The study concludes that improving governance systems is essential for enhancing the effectiveness of county education aid and strengthening student retention in marginalized counties.