Saccos Harvest Ksh 3.79 Billion Dividend from Cooperative Bank

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By Kenya Confidential Business Desk, Nairobi – March 31, 2021

The shareholders of the Co-operative Bank are set to receive their year 2020 dividend of Ksh 1.00 per share, which amounts to a total cash payment of Ksh 5.9 Billion, in mid-April this year.

The Bank’s strategic and majority shareholder Co-op Holdings Co-operative Society representing Kenya’s Co-operative Movement is on line to receive a dividend of Ksh 3.79 Billion for its 64.5% stake.

With this year’s dividend payment, Kenyan co-operatives through Co-op Holdings have earned Ksh 19.4 Billion in dividend payments from Co-op Bank in the last six years, which has enabled them to recoup and exceed their entire initial investment in the bank.

In addition, the controlling 64.5 per cent equity stake is currently worth in excess of Kshs 50 Billion even at the current depressed stock market prices, which makes Co-op Holdings Kenya’s largest asset-holding Sacco.

The current Covid-19 challenges have brought about the critical need to release the much-needed funds to the grassroots in the over 15 million-member co-operative movement and in line with Capital Markets Authority guidelines, the bank is progressing to make this year’s dividend payment for ratification at the next Annual General Meeting.

The dividend payout is expected to offer a most timely relief and offer a boost toongoing efforts to mitigate the severe economic hardships caused by the Covid-19pandemic.

The Chairman of Co-opholdings Co-operative Society Mr. Macloud Malonzaapplauded the uniqueness of the Co operative financial system that touches over22,000 Societies and Saccos.

The bank has maintained a solid dividend track record on the back of sustainedprofitability over the years.

The founding philosophy and affiliation of Co-op Bank to the Co-operative Movement goes beyond shareholding, and includes deep commercial ties. The bank retains a dedicated business Division to support co-operatives on a day to day basis. 

The bank also runs a wholly-owned subsidiary, Co-op Consultancy Services that has full-time consultants dedicated to offering capacity-building and institutional development advice to co-operatives, and has executed over 900 mandates in 5 years, which has helped co-operative clients not only adopt viable operating models but also become competitive in the marketplace.

Co-op Bank branches countrywide offer cash management and related support to FOSAs operated by Saccos. 

The bank invested in the Saccolink platform that integrates Sacco systems to the bank, which has enabled Saccos to issue over 1.5 million Visa-branded debit cards to members to allow them access funds in their FOSA accounts from any Visa-branded outlet, at the same time help Saccos retain liquidity. 

The bank continues to partner with capable operators to create structured agricultural value chains notably in dairy, coffee and cotton to enable farmers secure reliable markets for their production, just to highlight a few.

Most lately, the bank has secured a US$ 10 Million (Sh 1.1 Billion) from eco.Business Fund for on-lending to agribusinesses that observe Sustainable Agricultural practices. This new facility will provide necessary credit to sustainably certified agribusinesses, such as those in the coffee, tea, and horticulture sectors, Kenya’s main agricultural exports.

By financing green measures such as solar and hydroelectric installations for tea factories that reduce reliance on fuelwood, and cold storage solutions that reduce post-harvest losses, the partners hope to boost sustainable production practices and conserve the unique ecological landscape of the country.

Co-op Bank established the Co-operative Bank Foundation in 2007, to serve as corporate social investment vehicle for the bank. The Foundation has provided full secondary and university education scholarships to gifted but needy students from all regions of Kenya. The program is fully funded by the bank and has benefitted 7,685 students since its inception.

The one key unique feature of this scholarship scheme is that it is anchored in the co-operative movement. To qualify for the scholarship, a student has to have at least one parent as a member of a co-operative. In addition, the actual selection is done by delegates who represent shareholder co-operatives of the bank. This is intended to promote the co-operative spirit of self-help, and co-operation amongst members.

The historic turnaround of Co-op Bank has earned wide recognition around the world, with the bank regularly hosting study tours of co-operators and non-co-operators alike keen to study the bank’s successful co-operative banking model.

Indeed, the bank’s partnership with the movement has delivered great benefits all round, as recognised by the bank’s Group Managing Director & CEO Dr. Gideon Muriuki; “Saccos are prolific mobilisers of savings and reliable providers of affordable credit to the majority. We shall continue to nurture our bonds
of partnership with the co-operative movement, and even as we go digital we shall walk that journey together.”

From humble beginnings in 1968, Co-op Bank has in the last 50 years grown to be one of the most successful financial institutions in the region, and looks forward to charter even wider horizons in the next fifty.
On why Co-op Bank still has to pay a dividend;

  • Co-op Bank is an outlier with a modest covid-related provisions of 17 per cent of total loanbook, low relative to peers. The low damage to performance may be explained by the bank’s outsized customer focus on consumer lending, especially public sector payrolls that continue to enjoy full incomes despite the pandemic, a situation that may continue in the days ahead. 
  • In addition, the bank’s significant lending exposure to its strategic market segment – the Savings and Credit Co-operatives (Saccos) such as Harambee, Stima, Kenya Police, Sheria (Judiciary staff), Ushuru (KRA), Ukulima and Afya and others, majority of whom draw theirmembership from ‘permanent-and-pensionable’ civil servants and related public sector payrolls, has ensured that loan repayments are honoured with minimal defaults.
  • The bank has more than sufficient capital buffers, on account of
    substantial retained earnings over the years from its frugal dividend
    policy, with shareholders’ funds now at Ksh 90 Billion.