State and public officers are set to benefit from favourable terms under the proposed amendments to the Motor Car Loan Scheme Fund Regulations, which are currently under consideration by Parliament.
In the new proposals, the Officers will now be allowed to use the state backed loan to buy commercial vehicles, buy motorcycles with it and have a longer repayment period of the loan.
The proposed changes to the regulations were presented before the National Assembly Delegated Legislation Committee by National Treasury Cabinet Secretary John Mbadi on Thursday.
Through the amendments, the government is seeking Parliament’s nod to delete provision 15 of the current rules that restrict the use of the vehicle.
Currently, the regulation provides that during the loan repayment period, the beneficiary shall ensure that the motor car is not used for commercial purposes.
“It is proposed that the restriction use of the motor vehicle be expunged from the regulations by deleting the definition of ‘commercial use’,” reads the regulation.
Mr Mbadi while justifying the need for the amendment, told the committee that non-restriction of the use of the vehicle will attract potential beneficiaries to the loan facility and thereby enhance uptake.
Cabinet Secretary for the National Treasury and Economic Planning John Mbadi before a parliamentary committee on August 11, 2025.
Photo credit: Dennis Onsongo | Nation Media Group
“This also aligns the scheme to the other public sector schemes including the Parliamentary Service Commission Scheme,” Mr Mbadi told the committee.
In the new proposals, the officers will also be allowed to purchase vehicles that are ten years old from the date of manufacture. Currently, they are restricted to only buy cars that are eight years old from the manufacture date.
Mr Mbadi said the amendment will provide the officers with a wider range of vehicles to select from hence affordability.
“Ten-year-old vehicles are generally and mechanically sound and insurance companies provide comprehensive insurance cover to such vehicles,” Mr Mbadi told the committee.
Mr Mbadi however clarified that this provision if adopted will only apply to vehicles that will be bought locally and not imported ones, this after the committee warned that if the window is opened to civil servants, then other Kenyans should also be allowed to bring in cars that are more than eight-year-old.
“If you are to expand it, then you will also have to expand the requirement to other Kenyans so that the law does not become discriminatory,” said the committee chairman Samuel Chepkonga.
However, Mr Mbadi answered “this will only apply to cars already in Kenya,”
Through the new regulations, the government is also seeking MPs' nod to expand the categories of vehicles that the officers can acquire to include motorcycles.
Through this amendment, the government seeks to expand the meaning of motor car to include a motor vehicle with less than four wheels that will see the inclusion of motor cycle.
“The proposed amendment will facilitate access to the car loan facility to a wider range of potential beneficiaries. This is in view of the relatively low cost of motor vehicles,” Mr Mbadi told the committee.
Mr Mbadi said the amendment takes into cognizance in some jurisdictions such as Lamu where the need for different types of motorised transport was identified during the awareness creation forums.
If approved, the beneficiaries of the loan will also have a longer repayment period as the government is seeking to extend the period from the current five years to six.
Cars on sale at Jamhuri grounds in Nairobi.
Photo credit: File
Currently, the regulation provides that “a loan advanced under these regulations shall be paid in full within 60 months- which is five years.
Mr Mbadi told the committee that the proposal will enhance loan uptake in the view of the lower monthly deductions.
It is also good news to beneficiaries who leave public service on disciplinary grounds as the government is seeking to expunge a requirement that converts the loan to commercial terms for such an officer.
The current regulations provide that “Where a beneficiary leaves the public service on disciplinary grounds, the terms of the loan shall convert to commercial terms after 90 days from the effective date of leaving the service,”
Mr Mbadi told the committee that the amendment is aimed at making the loan facility attractive and it was informed by an advisory from the Public Service Commission regarding double punishment.
If approved by the House, public officers will also be eligible for more than one loan within a period of three years.
Currently, the regulations provide that no borrower shall be eligible for more than one loan at a time from the fund within five years.
“It is proposed that regulation 13 be amended to read “no borrower shall be eligible for more than one loan at a time from the fund within three years,” reads the proposed amendment.
Mr Mbadi while justifying the amendment told the committee that if adopted, it will enable officers who may wish to benefit from the scheme upon early completion of loan repayments without having to wait for five years.
“This also takes care of cases of reappointment of State Officers and promotion of public officers to higher grades that may arise within the period of servicing the loan,” Mr Mbadi told the committee.
The Salaries and Remuneration Commission (SRC) through a circular dated December 17, 2014 conferred mortgage and car loan benefits to state and public officers.
The goal was to motivate the officers towards enhanced productivity as well as attract and retain requisite skills in the public service.
However, the low uptake of the fund has been a subject of audit queries by the Auditor General which Mr Mbadi noted threatens the very existence of the fund.
“It is a pointer to an issue concerning the sustainability of the fund. In this regard, a need emerged to re-examine the existing structures and legal framework of the fund to ensure that the scheme operates efficiently and effectively including providing timely services to the beneficiaries,” Mr Mbadi told MPs.
Mr Mbadi while urging the committee to approve the regulations said they are geared towards ensuring fund sustainability and enabling the fund to discharge its mandate.
State and public officers are set to benefit from favourable terms under the proposed amendments to the Motor Car Loan Scheme Fund Regulations.
“The proposed amendments are beneficiary focused, aimed at making the motor car loan facility attractive to the potential beneficiaries. The intended effect is to grow the beneficiary uptake of the State Officers and Public Officers motor car loan scheme,” Mr Mbadi told the committee.
Mr Chepkonga said during the meeting that the amendments are long overdue, pointing out that the hard economic times necessitate the changes in order to help public officers survive.
“The amendment on the scheme fund is very important as it affects many Kenyans. If accessing the fund is left to be restrictive as it is now, then it will defeat the purpose of having it in the first place,” Mr Chepkonga said.
The amendments according to the government will see a rise in the number of those taking the loan from 106 in the 2023/24 to 1,125 by 2027/28.
Through the amendments, the disbursed amount will also increase from Sh324 million to Sh2.2 billion.
According to the latest report of the Auditor General for the Financial Year ended June 30, 2025 tabled in the National Assembly, the low uptake of the loans by State and Public officers has forced the National Treasury to invest the idle funds in Treasury bills.
“The fund has experienced low response from State and Public officers which compelled management to invest in treasury bills so that the funds do not lie idle,” Ms Nancy Gathungu says in her report.
The report states that as at June 30, 2025, the fund had a balance of Sh4, 355, 166,574 with Ms Gathungu warning that with the low uptake of the loan, the main purpose why the fund was created risk being missed.
“The objective and purpose for which the fund was established may not be achieved,” Ms Gathungu says.
Since inception, the fund has processed motor car loans amounting to Sh824, 260,060 for 389 number applicants.
