Coop Bank launches US$2.81m enterprise fund for financing cooperatives and entrepreneurs

KENYA – Co-operative Bank of Kenya has launched a KSh300 million (US$2.81m) enterprise fund with Laikipia County to offer affordable financing and business support to co-operatives and entrepreneurs.

The lender said the Laikipia Enterprise Fund would be scaled up based on the need.

The two parties have agreed for an interest-sharing and guarantee arrangement, meaning that the risk and return would be on shared terms.

The fund will also seek to help over 7,000 entrepreneurs in the county recover from the challenges of the Covid-19 pandemic by way of affordable financing and training.

“Borrowers will pay single-digit interest rates, which makes this arrangement perhaps the most affordable lending programme in Kenya today,” said Moses Gitau, Head of Business Banking at Co-op Bank.

“The low interest rate has been made possible by the interest-sharing arrangement, whereby the Laikipia County Government will be offering an interest subsidy of 5 per cent, thereby reducing the bank lending rate from 12.1 per cent to 7.1 per cent per annum for all borrowers,” added Gitau.

The lender said it would also offer saccos consultancy to enable them to have sufficient liquidity and strengthen their management structures.

“In addition to financing, the bank will make available the full basket of services that include digital banking tools, workshops for business training, and capacity-building consultancy services for co-operatives,” said Co-op.

Co-op Bank will match three times the amount that the county government will place in the Enterprise Fund, to ensure as many borrowers benefit from the opportunity. In addition to financing, the bank will make available the full basket of services that include digital banking tools, workshops for business training, and consultancy services for co-operatives.

Repayment period for the loans will be up to 12 months for the small and medium enterprises (SMEs) and up to 18 months for co-operatives.

The county government will undertake initial vetting of loan applicants as provided for in the Laikipia County Enterprise Fund Regulations 2020. Co-op Bank will further appraise for qualification. The bank is exploring similar affordable financing arrangements with other counties.

This comes after the shareholders of Jamii Bora bank had approved the acquisition of the lender’s majority stake by the Co-operative Bank of Kenya.

The green-light approves Co-op’s offer to acquire 90 percent of Jamii Bora’s stake through the subscription of 224,153,154 new class of ordinary shares that would enable the injection of capital to the tune of Ksh.1 billion and the appointment of a board to run the business.

Co-op is seeking to leverage on Jamii Bora’s niche in MSME banking and trade finance solutions through Jamii Bora Leasing Limited and the Jamii Bora Insurance Agency Limited.

“This acquisition will strengthen both institutions leveraging on Co-operative’s Bank established universal banking model,” said Co-op Bank CEO Gideon Muriuki.

Co-op bank will further be seeking to tap on Jamii Bora’s network which incorporates 444,000 customers and 17 branches across the country to further solidify on its market position.

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