The Co-operative Bank of Kenya has acquired an Sh1.6 billion loan, with an undisclosed interest rate, from Swedish State-owned investor Swedfund for onward lending to the small and medium-sized enterprises (SMEs) in the nation.
Swedfund stated that the facility would elevate Co-op Bank’s lending to the small enterprises since they have been adversely affected by the effects of the pandemic on the economy.
“In the context of the ongoing Covid-19 pandemic, it is increasingly important that banks and other financial institutions continue to support small and medium-sized enterprises, and hence the entire economies through continued lending,” noted Swedfund in a statement.
“Co-op Bank’s on-lending to SMEs is welcomed particularly in light of the pandemic and its effects on SMEs and female entrepreneurs.”
In recent years, Kenyan and regional based banks have received loans from global funds such as International Finance Corporation (IFC), European Investment Bank (EIB), Agence Française de Développement (AFD), and the African Development Bank (AfDB) which are characterized by more favorable terms of debts such as lower interest rates and longer maturity tenors.
The Equity Bank, Co-operative Bank, and KCB and Equity are among the lenders that have borrowed from international financiers to fund their long-term lending business.
Lenders have in the past expressed concerns about the incongruity between long-term loans and customer deposits that are mostly short-term, revealing a gap that they decided to fill with credit from international institutions which charge single-digit interest rates.
This incongruity has also led many lenders to steer clear of issuing long-term credit on facilities such as mortgages.
Additionally, International borrowing has also progressed after the local corporate bond market was shuddered by the collapse of former Chase Bank and Imperial Bank.