100 Broke MPs in race to repay luxury car loans

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Car loans advanced to MPs are recovered within the remaining period of their parliamentary term. FILE PHOTO | NMG

Nearly 100 MPs are facing possible repossession of their luxury cars to recover outstanding loans at the end of their tenure on August 7, the Parliamentary Service Commission (PSC) has warned.

The MPs, fresh from spending millions of shillings in the just-concluded party primaries and expecting to spend more in the upcoming campaigns, are under immense pressure to clear low-cost mortgage and car loans advanced during their term in office.

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The lawmakers are entitled to a Sh20 million mortgage and a Sh7 million car loan that they are, however, required to repay on or before the end of parliamentary terms.

The 418 members of the bicameral Parliament are also entitled to a Sh5 million car grant which they do not repay.

Through its Car Loan Scheme Fund, the PSC has asked MPs not to rely on their monthly payslip deductions to repay the amounts due but to instead “make additional payments from other sources.”

“This will ensure early repayment and release of original logbooks to facilitate their discharge and transfer to the owners,” the fund says in a report to the Auditor-General Edward Ouko.

The fund says it had outstanding loans amounting to Sh213.1 million for both MPs and parliamentary staff.

Repossession of property

The MPs are now staring at property seizures in the event of default on the loans borrowed at the beginning of their tenure in March 2013.

In the case of the 11th Parliament, the MPs must clear their loan balances on or before August 7, 2017. The term of the current Parliament is shorter by eight months owing to legal technicalities following the transition from the old to the new Constitution– which altered the election cycle.

The PSC says 89 MPs were advanced loans in the year to June 2016, meaning that the lawmakers are under pressure to repay in just under a year and a half.

“During the reported period (2015/16), the fund was able to fully process loans to 89 honourable members (approximately 22 per cent) for the 11th Parliament,” Justin Bundi, the former Clerk of the National Assembly, says in the report tabled in Parliament last week. The National Assembly Clerk is the officer in charge of administering the fund.

“During the remaining parliamentary term, we expect to enhance recoveries for loan amounts outstanding for members to ensure full repayment before the expiry of the 11th Parliament.Members have been encouraged to make additional payments from other sources apart from monthly payslip recovery,” Mr Bundi said.

The car loan scheme is meant to facilitate acquisition of motor vehicles for MPs, Senators and PSC staff by providing funds for purchase, insurance and overhaul by members of the scheme.

Car loans advanced to MPs are recovered within the remaining period of their parliamentary term while those of staff members are recovered within the remaining period to retirement and a maximum of 60 days, whichever is lower, at an interest rate of three per cent per annum at a reducing balance.

“Most Members, having given priority to mortgage loan had a challenge of having to service the two loans simultaneously since repayment is limited to the payroll check-off system, thus lacking ability to repay the loan on or before the end of parliamentary term,” the clerk said.

The fund has upgraded its systems to enforce timely loan recovery and ensure that both the loans and vehicles are comprehensively insured.

“The scheme is set up as a revolving fund. The Treasury provided the initial seed capital for the fund while the PSC provides governance and management capabilities to run the fund. The Salaries and Remuneration Commission (SRC) is responsible for setting the maximum loan entitlement for Member of Parliament,” said Beth Mugo, the chairperson of the Loan’s Management Committee.

The nominated Senator said the SRC retained the maximum car loan entitlement at Sh7 million. The scheme was established in 1999 with an initial capital of Sh250 million.

The scheme has since been raised to Sh1.45 billion following amendments to the enabling legislation in 2013. It has invested excess funds amounting to Sh1.2 billion in short-term deposits that are readily convertible into cash.

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