Co-operative societies in Laikipia will get cheap loans following a credit guarantee scheme inked between their regional government and Co-operative Bank of Kenya.
The two unveiled a Sh300 million kitty, Laikipia Enterprise Fund, that will see Saccos access low-interest loans to finance their members, some of whom have been hit by the Covid-19 pandemic.
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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.
Prevailing interest rate by commercial bank averaged 11.92 per cent in April, according to data from the Central Bank of Kenya.
Low interest rates are the result of Co-op bank and the county government entering into an interest-sharing and guarantee arrangement.
With the interest sharing and guarantee arrangement, the cooperative societies in the county will be empowered through affordable financing and consultancy services.
In addition, borrowers will enjoy a reduced appraisal fee at 1.5 per cent of the approved loan amount.
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.