The thinning public service pay slips are increasingly making it impossible for civil servants to take cheap car loans financed by the taxpayer.
A recent analysis by the Business Daily shows that the new statutory deductions to support President William Ruto’s universal health coverage (UHC) and affordable housing plan has pushed workers’ pay slip cuts up to 45 per cent.
The government introduced a 2.75 per cent Social Health Insurance Fund (SHIF) deduction on gross salary and a 1.5 per cent housing levy on employees, eroding the disposable income of households.
Prior to SHIF, which replaced the National Health Insurance Fund (NHIF), employees were contributing between Sh150 and Sh1,700 towards public healthcare coverage.
Contributions to SHIF have seen workers whose salaries range from Sh100,000 to Sh1 million part with an additional Sh1,050 to Sh25,800 for the State-backed insurance — making it the second largest pay slip deduction after personal income tax.
This additional deduction together with the rise in National Social Security Fund (NSSF) contributions from Sh200 to up to Sh2,160 and the introduction of a 1.5 per cent housing levy deduction on gross pay from July 2023 have significantly cut workers’ take-home pay.
A report tabled in Parliament by Auditor General Nancy Gathungu has flagged the low uptake of car loans by civil servants who have taken Sh404 million out of the Sh3.8 billion fund that was established in 2015.
The report shows that 246 applicants had taken loans from the State Officers and Public Officers Motor Car Loan Scheme Fund since inception in 2015.
Ms Gathungu says State officers and Public officers took loans amounting to Sh252 million or 6.6 percent of the total fund allocation in the year to June 2023.
She said the State Officers and Public Officers Motor Car Loan Scheme Fund experienced low response from state officers and public officers which compelled the management to invest in Treasury Bills so that the allocated funds do not lie idle.
Chris Kiptoo, the chairman of the State Officers and Public Officers Motor Car Loan Scheme Fund and Principal Secretary, National Treasury, attributed the low uptake of the car loans facility to lack of awareness, salary commitment and the high cost of living which eroded the purchasing power of the beneficiaries.
“This is worsened by the Covid- l9 pandemic that made the cost of goods and service very high, including the motor vehicles. It is hoped that this situation will improve in the near future,” he said in his report accompanying the financial statements of the Car Loan Scheme Fund.
“Several activities have been undertaken to increase loan uptake, including the review of the application guidelines and process to enhance service delivery and reduce the turnaround time, awareness creation in the field stations, capacity building for both staff and the advisory board members to improve skills and knowledge.”
The State Officers and Public Officers Motor Car Loan Scheme Fund was established in 2015 through Legal Notice No.195 of September 25, 2015.
The fund was established pursuant to guidelines provided by Salaries and Remuneration Commission on Car Loan benefit for State Officers and Other Public Officers in December, 2014.
The fund is meant to provide a car loan facility of between Sh600,000 and Sh10 million to civil servants of the national government to purchase a motor car at an interest rate of three percent per annum.
“The disbursed loans balance of Sh252,172,936 remains relatively low at 6.6 per cent (2022- 5 per cent) in comparison to the total current assets balance of Sh3,839,194,738 as at 30 June, 2023,” Ms Gathungu said.
“The fund has however experienced low response from state officers and public officers which compelled management to invest in Treasury Bills so that the allocated funds do not lie idle. The objective and purpose for which the Fund was established may not be achieved.”
The fund regulations provide that Cabinet secretaries, the attorney-general, secretary to the Cabinet and Auditor-General are entitled to a maximum of Sh10 million car loan.
Principal secretaries, chair and members of independent commissions and the Controller of Budget are entitled to access loans of up to Sh8 million while the Director of Public Prosecutions get up to Sh6 million.
The Registrar of Political Parties, secretaries of independent constitutional commissions, chief executive officers of government agencies have loan limits of up to Sh5 million while civil servants in grades S, T and U are entitled to a maximum of Sh4 million.
Those in grades P, Q and R are entitled to Sh3 million while those in grades K, L, M and N have a maximum loan of Sh1.5 million.
