The Co-operative Bank signed a Sh12.6 billion deal with German fund DEG-led global institutional investors in a subordinated loan to enable it increase its capital base and support lending to MSMEs.
The money was wired through the European Financing partners involving a joint venture between the European Investment Bank (EIB) and various European funds. The deal will improve Co-op Bank from its current position as Kenya’s third largest bank to become the top lender.
Norfund, Norway globally recognized fund which is among the institutions funding Co-op bank’s deal with a direct credit line of $16million (Sh2 billion) and another $3.4 million (Sh430 million) through the European Financing Partners, said it will strengthen Co-op Bank’s capital base, support lending to MSMEs and position the bank for future growth.
“Co-operative Bank is the third largest bank in Kenya, 65% owned by co-operatives and the largest co-operative bank in Africa,” Norfund said.
The deal comes after a section of local banks also increased their uptake of substantial credit facilities from global funds, including EIB, IFC – the World Bank’s private investment arm – and AFD. Appealing terms of loans, lower interest rates and longer maturity periods attract the banks.
Co-op-bank used most of its global funds, which stood at Sh19.6 billion by December 31, 2021 to provide credit in thematic spheres of agribusiness, renewable energy and mortgages.
IFC is the principal long-term partner for Kenyan banks, committing up to Sh112 billion to 31 local banks by April 2021. Equity Bank is the biggest beneficiary, with a Sh42 billion boost to its kitty.
Together with KCB, Equity is among local financial institutions that have borrowed from international financiers to fund their long-term lending business.
Donor financing to Kenya has been a mix of both grants and loans, but data from recent analysis on the Kenyan aid landscape before and during Covid-19 shows that grants are declining, and loans are steadily increasing.
Loans advanced to Kenya between 2018 and 2021 were by the three major international finance institutions (IFIs) − the World Bank (WB), African Development Bank (AfDB), and International Monetary Fund (IMF).
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