Co-operative Bank of Kenya is set for a fresh $140 million (Sh18.14 billion at current exchange rates) loan from the International Finance Corporation (IFC) to support its lending to micro, small, and medium enterprises (MSMEs), a new disclosure said.
The new loan was approved by the IFC board and signed by both parties in June and is currently awaiting disbursement after which the facility will run for seven years with a two-year grace period for Co-op Bank.
The IFC, the private sector lending arm of the World Bank, has also said that it will try to mobilise an additional $40 million (Sh5.2 billion) from other lenders under the same facility to boost Co-op Bank’s loan book to small businesses in the country.
Coming at concessional terms, the debt is expected to increase access to affordable loans by MSMEs in Kenya, which have traditionally struggled to access cheap loans from lenders due to their perceived high-risk profile.
“The most significant, expected Project-level outcome is increased access to MSME finance in Kenya, particularly for WMSMEs (Women-owned MSMEs),” IFC said in a disclosure.
“Beyond this outcome, IFC anticipates that the Project has the potential to promote greater banking sector resilience in Kenya via capacity building and the demonstration and replication channel.”
The loan is coming at a time when global financial conditions are generally tight, making it hard for banks and other corporations to access funding in the form of loans and investments to facilitate their activities.
IFC said the lending is particularly critical at this time due to the “current context of tightened financial conditions, high currency volatility, and elevated geopolitical strains.”
Co-op Bank has previously tapped different loans from IFC, the last being in 2020 when it received $75 million (Sh9.7 billion), also for lending to MSMEs, with a tenure of seven years.
Last year, Co-op Bank’s outstanding loans to MSMEs stood at Sh18.6 billion as of December, accounting for about 5 percent of its total loan book of Sh374.2 billion, according to its financial records.
IFC has also extended similar loans to other Kenyan banks, including KCB, I&M Bank, Diamond Trust Bank, and Equity, over the past decade, for lending to MSMEs in efforts to expand their access to affordable loans.
