BACKGROUND: Strategic purchasing can ensure that financial resources are used in a way that optimally enhances the attainment of health system goals. A number of low- and middle-income countries, including Kenya, have experimented with micro health insurance (MHIs) as a means to purchase health services for the informal sector. This study aimed to examine the purchasing practices of MHIs in Kenya. METHODS: The study was guided by an analytical framework that compared purchasing practices of MHIs with the ideal actions for strategic purchasing along three pairs of principal-agent relationships (government-purchaser, purchaser-provider and citizen-purchaser). The study adopted a qualitative descriptive case study design with 2 MHIs as cases. Data were collected through document reviews (regulation, marketing materials, websites) and semi-structured interviews with key informants (n = 27). RESULTS: The regulatory framework for MHIs did not adequately support strategic purchasing practice and was exacerbated by poor coordination between health and financial sectors. The MHIs strategically contracted health providers over whom they could exercise bargaining power, sometimes at the expense of quality. There were no clear channels for beneficiaries to provide timely feedback to the purchaser. MHIs premium payments were family-based, low-cost and offered limited benefits. Coverage was based on ability to pay, which may have excluded low-income households from membership. CONCLUSIONS: Adequate policy, legal and regulatory frameworks that integrate MHIs into the broader health financing system and support strategic purchasing practices are required. The state departments responsible for finance and health should form coordinating structures that ensure that MHI's role in universal health coverage is owned across all relevant sectors, and that actors, such as regulators, perform in a coordinated manner. The frameworks should also seek to align purchasers' relationships with providers so that clear and consistent signals are received by providers from all purchasing mechanisms present within the health system.