The National Treasury has moved Sh4.3 billion set aside for state and public officers’ car loans into Treasury Bills after a steep fall in applications left the money largely unused.
During the financial year ending June 30, 2025, many government employees avoided borrowing due to heavy deductions and rising living costs, leaving the fund dormant.
Auditor General Nancy Gathungu, in her report to the National Assembly, said high inflation and economic challenges were key factors behind the sluggish uptake of the State Officers and Public Officers Car Loan Scheme.
“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,” the report states.
By the end of June 2025, the fund held Sh4,355,166,574. Gathungu cautioned that continued low participation could undermine the scheme’s intended purpose. “The objective and purpose for which the fund was established may not be achieved,” she noted.
Since it started in September 2015, the car loan program has disbursed Sh824,260,060 to 389 applicants. In the 2024/2025 year alone, 113 applications were processed, with Sh234,560,866 lent out and Sh148,395,403 repaid.
The scheme, created under the Public Finance Management Act, provides government officers with financial support to buy vehicles, aiming to enhance workforce efficiency.
National Treasury Principal Secretary and fund chair Chris Kiptoo said awareness gaps, high salary commitments, and rising costs have limited participation.
“This is worsened by the general global economic conditions, such as inflation, which made the cost of goods and services very high, including motor vehicles. It is hoped that this situation will improve in the near future following extensive awareness creation by the fund,” Kiptoo said.
Economic strains have also reduced overall demand for goods and services in Kenya. The rising cost of living, combined with new taxes under President William Ruto’s government, has made it difficult for many workers to afford basic necessities.
Employees also face statutory deductions, including 2.75 per cent for the Social Health Insurance Fund (SHIF) and 1.5 per cent toward a housing levy, cutting deeply into take-home pay. Reports indicate some workers earn less than two-thirds of their basic salary after deductions, despite the Employment Act, 2007, limiting deductions to no more than two-thirds and requiring at least one-third of pay to remain as net income.
In her report for 2022/2023, Gathungu had flagged a government department where hundreds of employees were left with net pay below the minimum one-third of their salary.
The Treasury’s decision to place the idle car loan funds in Treasury Bills is aimed at ensuring the money continues to generate returns while efforts to increase awareness and encourage applications are rolled out.
