Kahiga on the spot over Sh16m loans issued without land valuation

Nyeri Governor Mutahi Kahiga has been put on the spot by the Senate after his administration was found culpable for issuing loans amounting to Sh16.3million without land valuation reports to confirm their worth.

The Auditor General in her latest report on Nyeri County Enterprise Development Fund for the year ended June 30, 2024 raised the alarm that without valuation of the land, recovery of the outstanding loans may not be possible.

The Senate County Public Investment and Special Funds Committee grilled Kahiga on why Sh16.3 million was disbursed to 41 beneficiaries out of which 34 loans amounting to Sh13.4million were secured with land title deeds with no valuation report provided.

“I would like to inform the Senate that my administration has noted the issue of unvalued loan securities and has adopted the pre-qualified property valuers from the County Government who will value land before disbursement of loans,” said Kahiga.

According to the Auditor General report it was not possible to confirm whether the management would be able to recover the outstanding loan amounts in case of default and in the circumstances, recoverability of outstanding loans may not be possible in case of default as the value of the land may not be commensurate to the amount of the loan advanced.

The Senate Committee chaired by Vihiga Senator Godfrey Osotsi hard-pressed the Governor to explain why his administration failed to conduct proper valuation of the property of those seeking loans before accepting the land title deeds as collateral.

“I would like Governor Kahiga to tell us what happens if he knows the value of the land is much far less than the amount of money issues to various individuals who have failed to pay it back, how does his administration expect to recover the money,” said Osotsi.

Kahiga responded saying that the Enterprise Development Fund which started with a seed capital of Sh10milllion has since grown to Sh90million where they are only issuing out loans of between Sh50,000 and Sh500,000 so as not to encounter loan defaulters.

It also emerged that since the inception of the fund, 182 beneficiaries have received loans and out of which 12 loans carrying a total amount of Sh4.6million were found to be non-performing since the beneficiaries have never made any repayment to the fund.

“I would like to tell the Senate that this loan was started with only Sh10million, we only issue between Sh50,000-Sh500,000, no one gets more than that, with this amount we have little chance of having defaulters” stated Kahiga.

In addition, as per the loan agreements, the beneficiaries were supposed to repay the loans over a period of 24 months, however, review of the outstanding loans showed that a total of 83 beneficiaries had an outstanding loan of Sh11.7million as at June 30, 2024.

Kahiga said that his administration has escalated the loan recovery by issuing demand letters to the beneficiaries who did not respond to the previous communication with the management having also engaged the County Attorney’s Office to take legal action on the loan default cases.

Governor Kahiga was at pains to explain why his administration issued loans without mandatory documentation on the Car Loan and Mortgage Staff Scheme Fund with Senators raising concerns as to why the county failed to observe due diligence in the matter.

According to the Auditor General, during the year under review, the Fund disbursed 16 loan applications amounting to Sh70.6million but loans amounting to Sh21.2million were advanced without the required mandatory documents such as approvals, approved drawings, mortgage insurance protection policy and valuation reports.

Kahiga told Senators that as a means of ensuring that the County Government does not suffer any financial loss due to non-repayment of loans, the properties used as security for the loans must be valued and the amounts disbursed must be of same value or lower.

“I would like to assure the Senate that should there be any default in payment of loan, the regulations provide that the properties used to secure the loans may be used to recover the funds through institution of legal proceedings,” said Kahiga.