Co-op Bank taps IFC in Sh8b MSMEs loan deal
Monday, January 18th, 2021 18:43 | 2 mins read
Funds meant to cushion companies that had been hit hard by the Covid-19 pandemic disruptions since March 2020.
The Co-operative Bank of Kenya has secured $75 million (Sh8.25 billion) from the International Finance Corporation (IFC) for onward lending to micro, small and medium-sized enterprises (MSMEs).
The lender says the proceeds will be channelled towards supporting customers who were affected by the Covid-19 pandemic shocks.
Co-op Bank noted that the seven-year loan facility will particularly benefit those undertaking climate-smart projects in agriculture and energy sectors.
“This facility is aimed at to supporting customers operating in MSMEs, business undertaking, climate smart projects including agricultural inputs and sustainable agricultural practices, renewable energy, energy efficiency among other related projects,” Co-op bank managing director and CEO Dr Gideon Muriuki said in a statement to newsrooms.
He said the timing of the funds was perfect and will come in handy to boost the bank’s capacity to help MSMEs counter the business and economic disruptions brought by the 11-month pandemic which hit the banking sector hard.
During that period Co-op Bank group posted a 11 per cent drop in profit before tax on escalating loan defaults caused by the virus.
The group reported a Sh13.8 profit before tax for the third quarter of 2020 compared to Sh15.5 billion recorded in the third quarter of 2019.
This was on account of loan loss provisions which had surged by 90 per cent from Sh2.1 billion in 2019 to Sh4.0 billion.
By the end of September, a total of Sh46 billion in loans had been restructured.
However, the lender says leveraging its strong balance sheet with total assets at over Sh510 billion by 30 September 2020, the new IFC facility will substantially deepen opportunities for growth.
“The financing facility will be useful at this time because the bank is executing strategies to help clients cushion the ruins left by the pandemic,” read the statement.
Co-op Bank plans to diversify it’s asset and funding portfolio by increasing long-term funding to support deposits funding.
It will also diversify its asset and increasing long-term funding and boosting its ability of affordable funding.