Co-op Bank secures Ksh8.25 billion IFC facility to lend to MSMEs

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By Boy Matumbai

The long-term loan has a tenure of seven years and is intended to support customers with small businesses to better cope with the disruptions brought about by the pandemic.

Co-operative Bank of Kenya has secured a long-term financing facility worth $75million (Ksh8.25billion) from the International Finance Corporation (IFC) to lend Micro, Small and Medium Enterprises (MSMEs).

“The funding has come at a most opportune time as it boosts our ability to better support our MSME customers to stabilize and turn-around their businesses to meet the challenges brought about by the Coronavirus pandemic,” Co-op Bank Group Managing Director and chief executive officer Dr. Gideon Muriuki said.

With the multi-billion capital injection from IFC, the bank will further work towards ensuring the key MSME business customers not only survive the economic effects of the Covid-19 pandemic, but also remain operational and viable for the long term. This long-term IFC loan has a tenure of seven years.

The facility is intended to support customers with small businesses and those in business areas undertaking climate-smart projects to better cope with the disruptions brought about by erratic climatic conditions and the Coronavirus pandemic.

The long-term loan has a customer-favourable tenure of seven years. In addition, the bank will now be better positioned to provide long term loans to customers due to the now enhanced balance of assets and liability.

“The funding has come at a most opportune time as it boosts our ability to support our MSME customers to stabilise and turn-around their businesses to meet the challenges brought about by the pandemic. The facility is good news to small businesses in Kenya which are often ignored in the credit market due to high risk.” said Muriuki

“We will now diversify the bank’s asset and funding portfolio by increasing long-term funding to support deposits funding and boost the bank’s competitive position on account of affordable lending,” the lender said in a statement.

Apart from MSMEs, the businesses undertaking Climate-Smart Projects, including Agricultural inputs and sustainable agricultural practices, Renewable Energy, Energy Efficiency and related areas, will also benefit from these funds.

A report by EFG Hermes in 2019 ranked Kenya behind sub-Saharan Africa peers in credit provision to small and medium-sized businesses (SMEs), highlighting the funding challenges facing local entrepreneurs.

Dubbed ‘Deeping Financial Inclusion But at a High Cost’, the report said that most of the SMEs continue to rely on the owners, family and friends for funding which is not enough for them to remain competitive in the market.

The lender said it has leveraged its strong balance sheet with total assets at over Ksh510 billion as at 30 September 2020 therefore the facility will substantially enhance the bank’s opportunities for growth and overall performance.

Courtesy of the IFC facility, the lender will support the MSMEs business customers to not only survive the pandemic but also to remain operational and viable for the long term. It will also enhance the bank’s assets and liability match, with long-term loans to customers being financed using the long-term debt while boosting the bank’s competitive position on account of affordable lending.

The new year good tidings IFC facility came in handy especially at a time when the bank is implementing mitigating strategies to help customers ride through the ravages of the pandemic.

“Co-op bank remains confident that the strategic initiatives that have been put in place focused on resilience and growth will give businesses the impetus for sustained growth’ Muriuki assured Co-op Bank family.

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