Pay blocks most civil servants from car, home loans

Majority of civil servants are unlikely to benefit from the cheap car loans and mortgages offered to them from this month due to their low pay.

Financial experts reckon that those below job group H will find it difficult to access the loans and meet a rule that requires them 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 Sh600,000 to Sh10 million while the mortgage scheme will range from Sh4 million to Sh40 million depending on the grade of an individual.

Thousands of civil servants in job groups A, B, C and D who earn an average of between Sh11,420 and Sh15,670 per month are technically locked out of the car loan scheme that promises workers between Sh600,000 and Sh10 million in five years.

A car loan of 600,000 will require a monthly deduction of Sh10,781 over the five years that the SRC has specified. Those below job group M, which has an average consolidated monthly pay of Sh75,000, will not be able to access the 20-year mortgage scheme assuming the Central Bank of Kenya average mortgage size of Sh6.4 million that requires a monthly repayment of Sh35,000 based on the annual interest of three per cent.

Though the government scheme provides mortgages of less than Sh4 million, civil servants in job group H, whose average pay is Sh28, 000, would struggle to access a home loan of Sh3 million that will demand a monthly repayment of Sh17,000.

Job group F includes artisans and storekeepers, E include clerical officers and telephone operators, drivers and cooks fall under D while C, B and A include cleaners, sweepers, guards and other support staff. University graduates start from job group J.

“Based on the a third rule, the level of pay in the civil service and prevailing home prices, it is safe to say that the mortgage will be restricted to mid and top cadre State workers,” said an executive in a local bank that deals with home loans.

The interest on both the car and mortgage schemes is three per cent per annum on reducing balance— a favourable term given commercial bank loans currently average 18 per cent.

“The approved car loan and mortgage scheme benefits are expected to facilitate State officers and other public officers to benefit from government-funded loans to purchase cars and access mortgage facilities,” SRC chair Sarah Serem says in a circular.

“It is expected that implementation of the benefits will motivate public officers and immensely contribute towards attraction and retention of requisite skills in the public service…”

Among other beneficiaries, cabinet secretaries, the Attorney-General, Chief of Defence Forces, governors and the Auditor-General are entitled to a maximum of Sh10 million car loan and up to Sh40 million for mortgage.

Principal secretaries, chair and members of independent commissions and the Controller of Budget will get up to Sh8 million as car loan and Sh35m as mortgage. The Director-General of the National Intelligence Service, Inspector-General of Police, Vice-Chief of Defence Forces, commanders of Kenya Army, Kenya Navy and Kenya Air Force and the Director of Public Prosecutions will get up to Sh6 million as car loan and Sh30 million as mortgage.

The Registrar of Political Parties, secretaries of independent constitutional commissions, deputy governors, chief executive officers of government agencies, Deputy IG and the Director of Criminal Investigations Department will get up to Sh5 million as car loan and Sh25 million as mortgage.

Yesterday, trade unionists said they were yet to break down the figures saying the SRC has not communicated its new scheme officially.

“We have not seen the rates paper yet. We’ll advise accordingly once we get it,” said Mr Charles Mukhwaya, secretary-general of Federation of Public Servants Trade Union.