Why Civil Servants Are Avoiding Government Car Loan Schemes

Billions of shillings remain unused in the State and Public Officers Car Loan Fund, with low demand for the loans raising concerns about the scheme’s future.

An audit by the Office of the Auditor-General reveals that, as of 30 June 2025, the fund held a balance of Sh4.3 billion, largely unutilised. In her report to Parliament, Auditor-General Nancy Gathungu warned that the fund may fail to meet its objectives if uptake continues to stagnate.

The car loan scheme, established in 2015 under the Public Finance Management Act, was designed to assist government employees in purchasing vehicles through affordable loans. However, over the past decade, only Sh824 million has been disbursed to 389 applicants. 

In the 2024/25 financial year, just 113 applications were processed, amounting to Sh234 million, with repayments totalling Sh148 million. Faced with the low demand, the National Treasury has opted to invest the idle funds in treasury bills to prevent them from remaining dormant. 

Treasury Principal Secretary Chris Kiptoo, who chairs the loan scheme, has attributed the weak response to limited awareness of the programme, high salary deductions, and the broader economic climate. He also noted that inflation and the rising cost of goods, including motor vehicles, have worsened the situation.

The broader economic context has contributed to the lack of interest in the loan scheme. Rising inflation, coupled with new taxes and statutory deductions under President William Ruto’s administration, has left workers with lower disposable incomes. 

Mandatory contributions to the Social Health Insurance Fund (2.75 percent) and the housing levy (1.5 percent), along with increased pension deductions, have significantly reduced employees’ take-home pay, breaching the Employment Act’s requirement that workers retain at least one-third of their basic salary after deductions.

The car loan fund was initially intended to boost productivity by improving mobility for public servants. Meanwhile, the funds remain in treasury bills, secure but far from the scheme's intended goal of providing affordable loans to officers.