The Co-operative Bank of Kenya has received a long-term seven-year funding facility amounting to $100 million (Sh14.2 billion), for on-lending mainly to Micro, Small and Medium-sized Enterprises in Kenya.

This is from a consortium of financial institutions led by DEG - Deutsche Investitions- und Entwicklungsgesellschaft, boosting the bank’s ability to support MSMEs growth in the country.

This comes amid growth in overall private sector credit in the market which stood at 13.2 percent in April, compared to 11.7 per cent in February.

According to the Central Bank of Kenya, strong credit growth was observed in manufacturing (21.7 percent), transport and communication (18.0 percent), trade (13.7 percent), and consumer durables (13.3 percent).

"The number of loan applications and approvals remained strong, reflecting increased demand," CBK notes.

The loan to Co-op Bank is a tier II facility that has already been fully disbursed, where DEG acted as lender, mandated lead arranger and facility agent.

The Consortium included the Africa Agriculture and Trade Investment Fund (AATIF), Micro Small Medium Enterprises Bonds (MSMEB) and European Development Finance Institutions namely Finnfund, Norfund and the co-financing facility European Financing Partners (EFP).

DEG - Deutsche Investitions- und Entwicklungsgesellschaft is part of KfW Group and headquartered in Cologne, Germany.

With a strong focus on climate and impact, it offers financing, advice, and support to private-sector enterprises operating in developing and emerging-market countries.

Commenting upon the disbursement of the facility, Co-operative Bank Group managing director and CEO Gideon Muriuki said: “The funding by DEG and the Consortium is most timely in view of the great need to better support our business customers.”

In addition, the long-term tenure of the facility has significantly boosted the bank’s ability to offer solutions that are better structured to fulfil the long-term financing needs of MSMEs, Muriuki added.

Monika Beck, member of DEG’s management board said: “By acting as lead arranger and providing the subordinated loan to Co-op Bank, DEG contributes to the further development of Kenya’s financial sector and the wider economy through the creation of jobs and local income, all geared towards the attainment of Sustainability Development Goals.”

Co-op Bank continues to leverage its strong balance sheet to access funding and allied partnerships with global development partners, to enhance the bank’s opportunities for growth and overall performance, management said.

These include enhancing the bank’s assets and liability match where long-term loans can be financed using the long-term debt.

It is also keen on diversifying its asset and funding portfolio, expand client base, especially among MSMEs and boost the bank’s competitive position, on account of affordable lending.

The DEG-led facility is a significant support to the bank especially at this point in time when the bank’s digitisation journey is moving full steam ahead with the recent transition to a new, robust core banking system.

The Co-operative Bank Group has five subsidiaries namely, Kingdom Securities Ltd, Co-optrust Investment Services Limited, Co-op Consultancy and Bancassurance Intermediary Ltd, Kingdom Bank Limited and Co-operative Bank of South Sudan.

The bank holds a 24.8 per cent stake in CIC Insurance Group and a 25 per cent equity stake in Co-op Bank Fleet Africa Leasing Limited.

A sustained push by the Cooperative Bank for greater efficiency in its operations enabled tier one bank to attain a historic cost-to-income ratio of 43.6 per , to register solid profitability in the first quarter of this year.

This is a remarkable improvement from 59 per cent in the financial year 2014 when the bank’s growth and efficiency journey began.

The bank also continued to build a sound capital war chest by plowing back part of its earrings, which further boosted the shareholders' funds to another historic high of Sh112.6 billion, a 9.7 per cent rise from Sh102.7 billion as at the close of last year. 

The high liquidity saw the lender record a net profit of Sh6.1 billion in the first three months of the year as both interest and non-interest incomes rose.  

This is an increase of 5.2 per cent compared to Sh5.8 in profit after tax, that the lender which supports over 15 million Sacco members, made in the first quarter of last year.

“The strong performance by the bank is in line with the Group’s strategic focus on sustainable growth, resilience, and agility,” CEO Muriuki said.

The lender’s total operating income grew by 6.5 per cent from Sh16.8 billion to Sh17.9 billion.

At the height of the Covid-19 pandemic, in 2021, Coop Bank secured a Sh6.3 billion credit facility which went into supporting SMEs.

The European Investment Bank (EIB) extended the money to Co-operative Bank to provide working capital and long-term local currency loans to businesses.

Its current partner-The Africa Agriculture and Trade Investment Fund is a public-private partnership dedicated to promoting the sustainable development of the food or agri-sector across Africa, by providing patient capital and technical assistance.

The fund provides debt financing to small, medium, and large-scale agribusinesses along the entire agriculture value chain, as well as financial institutions active in the sector.

Finnfund on the other hand is a Finnish development financier and impact investor.

It invests between 200–250 million euros (Sh 31.8 billion-Sh39.7 billion in 20–30 companies in developing countries each year, focusing mainly in renewable energy, sustainable forestry, sustainable agriculture, financial institutions, and digital infrastructure and solutions.

Today Finnfund’s investments, commitments and investment decisions total about 1.22 billion euros (Sh 193.9 billion), half of them in Africa.

Norfund is the Norwegian Investment Fund for developing countries.

Norfund’s committed portfolio totals $3.1 billion (Sh 438.5 billion) in Sub-Saharan Africa, South-East Asia, and Central America.