House orders Treasury to close KCB account holding Sh3bn for car loans


House orders Treasury to close KCB account holding Sh3bn for car loans

The National Treasury building in Nairobi. FILE PHOTO | NMG 

Parliament has directed the Treasury to close a KCB #ticker:KCB account where more than Sh3 billion for buying cars for civil servants has been lying idle.

The National Assembly’s Public Accounts Committee (PAC) ordered the Treasury to either facilitate the speedy allocation of the car loans or transfer the billions to the government’s main account for allocation to other pressing expenses.

The Treasury has since 2015 been allocating millions to shillings to the car loans fund, which had grown to Sh3.5 billion as at June last year, up from Sh2.83 billion a year earlier.

This year, the Treasury developed a web-based system to support online applications for the car loans, a move expected to speed up the disbursement of the car loans. Now, MPs have set a deadline for Treasury to start disbursing the loans.

“The Cabinet Secretary, the National Treasury should within three months of tabling and adoption of this report, roll out the fund to the State Officers and Public Officers in order to achieve the objective of providing motor car loans to the civil servants,” the PAC said in a report tabled in Parliament last week. “If this is not possible, withdraw all the money plus interest deposited at Kenya Commercial Bank (KCB) and appropriate money into the Exchequer.”


The five-year car loan scheme was one of the sweeteners that were meant add to the allure of serving in the public service, which in recent years has been competing with the private sector for top talent. Allocation was to be based on job grade and the loans were to be charged an annual interest rate of three percent.

Sources at the Treasury have said that demand for the car loans has remained low, due to the pay scales that prevent majority of civil servants from benefiting from the scheme. This is compounded by the rule which requires civil servants to retain at least one third of their pay after taxes and other deductions.

The Salaries and Remuneration Commission (SRC) approved the car loans that range from a minimum of Sh600,000 to a maximum of Sh10 million for civil servants who qualified for the loans.

“Although the amount has been confirmed to exist it could have been utilised for other more deserving cases in the government while the National Treasury continues to develop or create an enabling environment for the Fund’s operation,” PAC now says.

The push from PAC comes in a period when the Kenya Revenue Authority (KRA) has routinely missed its tax targets. As a result, the government has been struggling to balance its expenses against the backdrop of below target revenue collection.

Treasury recently informed Parliament that Kenya experienced tax shortfalls of Sh60.2 billion in the three months to September while internal revenues from fines, payments for passports and marriage fees were below target by Sh24.4 billion.

Julius Muia, the Treasury principal secretary, attributed delays in the utilisation of the car loan fund to the complex nature of the tendering process for provision of financial services. As a result, the fund took longer to operationalise than earlier anticipated.

“The scheme has since transferred funds to an interest-earning account with KCB as arrangements to start piloting of the set structures are being done with a view of improving the loan issuance guidelines,” he said.

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