31321 - Coop Bank Kenya

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Summary of Investment Information

Project Number

31321

Company Name

THE CO-OPERATIVE BANK OF KENYA LIMITED

Date SPI Disclosed

May 22, 2012

Country

Kenya

Region

Africa

Projected Board Date

Jul 2, 2012

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Oct 5, 2012
Signed : Dec 5, 2012
Invested : Mar 15, 2013

Sector

Commercial Banking - General

Project Description

The proposed investment consists of a US$60 million 7-year senior loan to Cooperative Bank of Kenya (Coop Bank or the Bank) to support its long term lending business and in particular to enable the Bank to expand its SME and Agribusiness lending programs (the Project). In addition to the senior loan, a further US$5 million trade line will be made available by IFC to the Bank under IFC’s Global Trade Finance Program (GTFP). The primary objective of the Project is to support the Bank’s growth, address its balance sheet maturity mismatch, and help it meet its US$ funding needs.

Coop Bank is the 3rd largest bank in Kenya and accounts for 8.2% of total assets in the banking system. The Bank was publicly listed in 2008 and trades on the Nairobi Securities Exchange (NSE) under the symbol “COOP”. Coop Bank has its roots in the cooperative movement having been established in 1965 by agricultural cooperative marketing societies. Over the last 15 years, the Bank has transformed into a strong universal bank catering to all market segments including public sector, corporate, SMEs, micro-entrepreneurs and the Cooperative sector.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	60.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

By providing long term US$ financing and a trade line, IFC expects to deliver strong development impact through its partnership with Coop Bank. Long term funding to address the existing maturity mismatches will offer a lower risk funding approach to the Bank''s business and consequently allow for increased reach in terms of broader access to finance for various market segments. In summary, the provision of long term finance is expected to have strong development impact in the following areas:

i) Access to Finance - SME: IFC''s long-term funding will allow Coop Bank to grow its SME lending business and enable it offer affordable long term finance to its clients;
ii) Access to Finance - Agriculture: access to long term funding will enhance the Bank''s ability to grow its agribusiness lending portfolio and increase the tenor of its loans; and
iii) Access to Finance - Trade: the trade line under GTFP will allow the Bank to ramp up its trade activities and more importantly offer affordable trade finance to SMEs.

Through its proposed partnership with Coop Bank, IFC will play a unique role in:

i) providing long-term US$ financing, currently in limited supply in the market, to help the Bank address maturity mismatch and grow its long term lending business in a sustainable way; and
iii) providing additional institutional endorsement to support the Bank''s regional expansion and future capital-raising efforts.

E&S Category Rationale / Risks and Mitigation

This transaction involves providing a long-term credit facility for up to US$60 million for on-lending to corporate business, housing and agribusiness, as well as a US$5 million trade line. The overall portfolio risk is considered to be medium. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. Co-op Bank’s corporate lending accounts for approximately 19% of its total portfolio. Lending to the agricultural sector constitutes 10% of the Bank’s sectoral focus, while loans to finance and insurance, including to savings and credit co-operatives (SACCOs), many of which are farmer co-operatives, amounts to 17.2% of the portfolio.

The lending provided entails limited adverse E&S risk and impacts that are few in number, generally site-specific, largely reversible and readily addressed though mitigation measures. For this Project the Bank will be required to screen loans against the IFC Exclusion List, the Kenyan E&S laws and regulations and the IFC Performance Standards.

The key risk is the ability of Coop Bank to identify and manage the environmental and social risks associated with its lending activities particularly to the agribusiness sector, and farmer co-operatives. Additional E&S risks and impacts of the Project derive from the capacity and systems in place to manage these risks, and the Bank’s practices with regard to labor and working conditions. At present Coop Bank does not have an Environmental and Social Management System (ESMS) outlining the procedures, responsibilities and tools for undertaking E&S risk management of its lending activities and, apart from assessing compliance with national environmental permitting requirements, E&S related due diligence is not yet part of the Bank’s loan review process. No staff/department has been assigned responsibility for E&S due diligence and monitoring, and training needs to be provided to all staff involved in ESMS implementation.

Contacts

For Inquiries About the Project, Contact

Patrick Nyaga
Director of Finance and Administration
Haile Selassie AvenueP.O. Box 48231 - 00100Nairobi, Kenya
Telephone: 3276000Fax: 219831

For Inquiries and Comments About IFC, Contact

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2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

Local Access of Project Documentation

N/A

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Online form: available at https://www.cao-ombudsman.org/
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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

Task Title & Description	Anticipated Completion Date
Nominate officers	10/31/2012
Establish SEMS	12/17/2012
Formalize procedures	12/17/2012
Develop guidelines	12/17/2012
Staff Training	03/17/2013

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