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Co-op Bank secures Sh8.25billion facility to lend small businesses

The long-term loan has a tenure of seven years

In Summary
  • The facility is intended to support customers with small businesses to better cope with the disruptions brought about by the pandemic.
  • Through the facility the lender will support the MSME business customers to not only survive the pandemic but also to remain operational and viable.
Coop Bank Group managing director Gideon Muriuki at a past event.
Image: COURTESY

Co-operative Bank of Kenya has secured a long-term financing facility worth $75million (Sh8.25billion) from the International Finance Corporation (IFC) to lend micro, small and medium enterprises.

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 the pandemic.

The long-term loan has a tenure of seven years.

“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,” said Co-op Bank Group MD Gideon Muriuki.

The facility is good news to small businesses in Kenya which are often ignored in the credit market due to high risk. 

A report by EFG Hermes in 2019ranked 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 Sh510 billion as at 30 September 2020 therefore the facility will substantially enhance the bank’s opportunities for growth and overall performance.

Through the facility the lender will support the MSME 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 key IFC facility comes in handy especially at this time when the bank is implementing mitigating strategies to help customers ride out 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 the business the impetus for sustained growth.