Nairobi MCAs to get car loans and mortgages

Nairobi City County will set up two separate funds ahead of the 2014/15 budget to provide its assembly members with mortgages and car loans at concessionary rates.

The two schemes — Nairobi City County Assembly Mortgage Scheme Fund and Nairobi City County Assembly Car Scheme Fund — will ensure that each member has access to a Sh3 million mortgage and a Sh2 million car loan.

The loans will attract an interest of three per cent per annum, which is lower than the prevailing commercial lending rates of about 16 per cent.
Nairobi County will need to allocate at least Sh635 million to cater for the 127 members of county assembly (MCAs).

“The initial capital of the fund(s) shall consist of monies at the start of operations but county assembly may appropriate additional monies,” Gregory Mwakanongo, executive committee member for finance, proposes in the bylaw.

The car loan and mortgage are among the terms of return-to-work formula that the ward representatives struck with the Salaries and Remuneration Commission to resume work last year after a strike.

The MCAs cited the generous MPs’ pay package that includes Sh20 million mortgage, a Sh7 million car loan and a Sh5 million car grant.

Last month, President Uhuru Kenyatta said the ward representatives push for car grant similar to the MPs’ was valid.  But the SRC maintained that the MCAs will not be offered grants but loans.

Unlike most other counties that have struck deals with financial institutions to manage car and mortgage schemes, Nairobi wants to test waters with an internal scheme.

The city projects total revenues of Sh26.3 billion, including an allocation from the central government of Sh11.1 billion for the year to June 2015.

Its Loans Management Committee, whose other members are the majority and minority whips as well as the Assembly Clerk, will process loan applications and supervise day-to-day running of the fund, the bylaw states.

The committee, however, has an option to appoint an independent financial institution to manage its schemes.

The establishment of the two special funds shifts attention to MCAs ability to service the huge loans given their salaries and allowances, which are currently estimated at Sh200,200 per month.

An MCA who takes a maximum Sh5 million for a car loan and mortgage will be required to pay back Sh124,168 per month, which is in breach of the rule that requires workers to take home at least a third of their gross salaries.

“No member shall receive a loan that will result to salary deductions exceeding 30 per cent of monthly emoluments,” state the bylaw. 

They will also find it difficult to get homes worth Sh3 million in Nairobi where three-bedroom units cost a minimum of Sh6 million.