Elizabeth Ndemo Head of Corporate Banking and Trade

Finance – Co-operative Bank of Kenya

Kenya

BANKS AS STRATEGIC LINK BETWEEN CO-OPERATIVES ,DFIs & SMEs

Africa Finance & Investment Forum 2012 Elizabeth Ndemo

Overview:

Origin

Current status & Complimentary business lines

Co-operative Movement-Our strategy

Key focus areas

Linkages – Donor Institutions & SMEs

Conclusion

Our Origin:

1968 • The Co-operative Bank was formed through Co-operative

societies to deliver financial services to the Co-operatives

1994 • Bank transitions into a fully fledged commercial bank offering

full suite of products

2000

• Loss of Kshs. 2.3B ($27.4m)

2007 • Bank makes a turnaround - profit of Kshs. 2B ($27.4m)

2008 • Bank’s Initial Public Offer – retained the Co-operative movement as a strategic shareholder

Current Status:

Kshs. 170.5B ($2.03B) in Total Assets

94 Bank Branches, 410 ATMs countrywide; 2,000 Bank Agents

Deposits – Kshs. 142.6B ($1.7B)

2.3m customer accounts

4th Largest Bank in Kenya

Recognized as ‘The Best Bank in Kenya’ in 2010 & 2011 by the Financial Times of London

Who we are – Complimentary Business Lines:

The Bank runs three wholly-owned subsidiary companies, namely:

Kingdom Securities Ltd, the stock brokerage subsidiary

Co-op Trust Investment Services Limited, the fund management subsidiary

Co-operative Consultancy & Insurance Agency (K) Ltd which provides business advisory & capacity-building services for co-operatives

The Bank, the Co-operative Movement:

The bank extends affordable credit facilities to Saccos & its members. The following products are unique:-

Education Savings Scheme (ESS) – most critical & largest borrowing of Sacco members-specific for school fees/disbursed at the beginning of the year.

(The society members get a loan three times their savings for a period of twelve months at 12%p.a. Savings at 1.5%)

Member Development Loans – A loan granted to meet development needs of a member.

(Term loan is for max 36months and is x3 amount of savings held)

The Bank, the Co-operative Movement-cont:

Working Capital loans: To fund cash flow gap Sacco's face between their cash flows and loan demands for their members. (Tenure is 12 - 60 months)

Sacco Revolving Advance – facility granted to Fosa to fund advances to members

(Facility is revolving but limits are reviewed every 6 months)

Dividend Reserve Account - provides an avenue for Sacco's to save & comply with new regulatory rules

Our Strategy:

Unique suite of products to the Saccos

Ring fencing Saccos against commercial banks who target them for buyout

Capacity Building through our consultancy services arm, providing financial & advisory services

-Facilitate set up of Saccos, staff recruitment, strategy formulation and implementation

-Turn around co-operatives from loss making to surplus, e.g. Masaku Co-operative Society

Our Strategy…cont:

Front Office Service Activity: The bank has been part of the development of FOSAs for the Co-operatives

- it has enabled co-operative members receive affordable banking services outside formal banking sector

- Rolled out Sacco link debit card, enabling members utilise ATMs, goods & services from visa branded outlets

Financial Support to farmers from land preparation to harvesting

Key Focus Areas:

Agriculture – facilitating financial support to farmers-Dairy, Livestock, Coffee, Tea etc.

Out growers Financing –Barley Farmers-EABL, Sugarcane-KISCOL

Value Chain Financing - Githunguri Co-operatives

Asset Finance – Processing plants, factory upgrades

Key Focus Areas… cont

Alternative Delivery Channels – innovative solutions like Sacco link ATM cards, Agency Banking, Mobile & Internet banking

Strengthening of the newer Saccos with structures so that their growth is sustainable

Linkages to Donors & SMEs:

Custodian of various donor funds key to enhancing Agri-business Co-operatives & SMEs (KfW, EADD, BMGF)

- KfW - Small Holder Irrigation Project in Mt. Kenya, enabling farmers use irrigation to produce horticultural crops

- $2.5m GoK & German Development Bank

- $1.4m disbursed to 4 irrigation schemes (75% on track)

Challenges:

Refusal to sign up with a marketing group

Political interference

Donor dependency

Linkages to Donors & SMEs…cont

Capacity Building activities financed by donors (FEMO)

Livestock development Initiatives (BMGF)

Renewable Energy/ Energy Efficiency Projects (AFD)

Credit Lines for SMEs & Agri-business in manufacturing industries (Ariz Fund)

Agricultural Productivity Programme – ‘Kilimo Biashara’ targeting specific food crops (WB)

Conclusion:

Banks are a critical link to Co-operatives, DFIs and SMEs as they are instrumental in ensuring end user is well served

It is a role that The Co-operative Bank of Kenya will continue to play as it has enabled us achieve the milestones thus far

For more information, contact:

Mrs. Elizabeth Ndemo

Tel: +254 20 327 6181

endemo@co-opbank.co.ke

THANK YOU!