Co-operative Bank of Kenya (Co-op Bank) says it has set aside a Sh12.6 billion war chest for affordable loans to small businesses as it posted a 5.17 per cent jump in net earnings to Sh6.1 billion for the first three months of the year.
The jump in earnings was driven by growth in both interest and non-interest income, with total operating income rising 6.5 per cent to Sh17.9 billion.
Non-interest-funded income grew at the fastest pace, increasing by 10.8 per cent to Sh7.1 billion from Sh6.4 billion in a similar period last year.
The lender's net interest income grew by 3.9 per cent to Sh10.8 billion from Sh10.4 billion in 2022.
This came as total costs jumped by 8.8 per cent to Sh9.8 billion, eating into the lender's bottom line.
"The strong performance by the bank is in line with the group's strategic focus on sustainable growth, resilience and agility," said Co-op Bank Group Chief Executive Gideon Muriuki in a statement.
He said the bank has signed a Sh12.6 billion long-term credit agreement with global institutional investors led by the German fund, Deutsche Investitions-und Entwicklungsgesellschaft (DEG) to strengthen the bank's capital base and support lending to small enterprises.
The facility was drawn in April 2023, the bank said.
As inflation spikes and economic slowdown looms, many Kenyan businesses are struggling to secure affordable finance, piling pressure on the embattled government as it unveiled budget measures aimed at reviving the economy.
Co-op Bank, which has a network of 187 branches including four in neighbouring South Sudan, has bucked the trend of branch closures by opening three new branches at Kenol in Murang'a County, Hindi in Lamu and Bamburi, Mombasa.
It had earlier opened five new branches in Kabarnet, Iten, Kasarani and Kamakis on the Eastern Bypass, Nairobi, last year.
Co-op Consultancy and Bancassurance Intermediary posted a profit before tax of Sh336.4 billion in the period, riding on strong penetration of the bancassurance business, Mr Muriuki said.
Co-operative Bank of South Sudan which is a joint venture partnership with the Government of South Sudan made a profit before tax of Sh110 million in the period.
This performance, however, translated to a monetary loss of Sh71.3 million attributed by the bank to hyperinflation occasioned by the currency devaluation of the South Sudanese pound.
Co-op Trust Investment Services contributed Sh51.2 million in profit before tax with funds under management of Sh194 billion compared to Sh190.2 billion in the previous period.
Kingdom Bank, the SME-focused subsidiary lender, contributed a profit before tax of Sh256.3 million.
Many banks are increasingly nervous about extending credit to small companies, according to a recent Central Bank of Kenya (CBK) survey of interviews with lenders and business heads, as rising costs of debt, labour and raw materials put the business case of lending to such companies under unprecedented strain.
Co-op Bank said it had established a dedicated capacity-building fund with an initial injection of Sh100 million aimed at offering technical support and digitisation to farmers' co-operatives throughout the country.
The lender said it has carried out capacity-building for 30 co-operatives in six agriculture sectors - coffee, dairy, potatoes, poultry, cotton and cereals. The initiative will impact over 50,000 individual farmers.
In collaboration with other partners, the bank recently launched a potato value chain programme in Nyandarua County intended to assist farmers to produce and deliver potatoes with standards consistent with the requirements of key food retailers and restaurants such as KFC.
"The Co-operative Bank Group continues to pursue strategic initiatives that focus on resilience and growth in the various economic sectors," said Muriuki.