How public servants’ car dreams have been dashed
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Government’s car loan scheme for civil servants has encountered a significant hurdle with the Auditor General reporting low appetite among the employees.
Designed to support public employees in acquiring personal vehicles, the programme remains an essential benefit for those serving in the public sector.
However, a growing number of civil servants find themselves unable to access the loans, not because of a lack of interest, but due to the rising deductions from their payslips.As of June 2023, only 246 civil servants have accessed these loans from the State Officers and Public Officers Motor Car Loan Scheme Fund, the scheme started in 2015.
Current assets
“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,” said Auditor General Nancy Gathungu. “The Fund has however experienced low response from state officers and public officers.”
As of April 2024, Kenya’s public service employees, including civil servants, were estimated to be over 970,000, making them top customers for the motor vehicle sector. This low uptake can be attributed to increasing salary deductions and salary commitments which have eroded the purchasing power of potential beneficiaries.
The deductions, which include mandatory contributions to the National Social Security Fund (NSSF), the Social Health Insurance Fund (SHIF), the newly introduced Affordable Housing Levy, and Pay As You Earn (PAYE), have drastically reduced the disposable income of civil servants. As a result, many find themselves unable to meet the eligibility criteria for the car loan scheme, which requires a steady and reliable income to secure loan repayments.
For the average civil servant, these deductions have steadily increased in recent years. The most prominent deduction is PAYE, the personal income tax. PAYE is progressive, ranging from 10 per cent to 35 per cent, depending on the salary bracket. A government employee earning a mid-level salary will typically see around 20 per cent to 25 per cent of their gross salary deducted to pay this tax.
The significant tax burden reflects the government’s need for revenue, but it places a considerable strain on public servants whose incomes often remain relatively modest.
Another considerable deduction is the contribution to NSSF, which previously was 3 per cent now stands at 6 per cent of the employee’s gross salary, though the maximum contribution ceiling is set at Sh2,160 per month.
The Social Health Insurance Fund (SHIF) deduction for civil servants earning a salary in the middle-income bracket, equates to around 2.75 per cent of their total salary. Perhaps the most impactful of the new deductions is the Affordable Housing Levy, which mandates that both employees and employers contribute 1.5 per cent of the employee’s gross salary each month.
This means that civil servants are now contributing 3 per cent of their salaries towards the housing initiative, which aims to make affordable housing more accessible to Kenyans.
Taken together, these statutory deductions mean that civil servants are left with a fraction of their income to cover their daily expenses, let alone save for large investments like a car. The dream of car ownership, once within reach for many public servants, has now become increasingly elusive.
Financial obligations
The government car loan scheme, which was once seen as a critical benefit for civil servants, is now just one of the many financial obligations that civil servants are unable to afford due to the steep deductions from their payslips.
These rising deductions have a ripple effect on civil servants’ ability to participate in government schemes that could improve their quality of life.
As the cost of living continues to rise, many employees in the public sector are forced to cut back on spending, prioritising only the essentials and delaying or forgoing large financial commitments like purchasing a car.