Impact Investing | May 9, 2024

Kenya’s Co-op Bank gets $25 million EU-guaranteed loan to support female entrepreneurs

Lucy Ngige
Guest Author

Lucy Ngige

Co-operative Bank of Kenya was founded nearly six decades ago to cater to Kenya’s cooperative movement. It has serviced a broader range of customers and businesses since it became a commercial bank in 1994.

The $25 million loan from DEG, a subsidiary of German development bank KfW, is earmarked for micro- to mid-sized businesses owned and led by women. 

“There is a great need for stronger backing of businesses that are owned or managed by women,” said Co-op Bank’s Gideon Muriuki. Female entrepreneurs in Sub-Saharan Africa face a $42 billion financing gap.

EU backing

The European Fund for Sustainable Development Plus provided a guarantee to secure part of the loan. EFSD+, as it is known, was set up in 2021 to mobilize up to €300 billion in private sector investments for digital access, climate and energy, health and education and other development sectors. 

“The EU guarantee is helping to realize this investment, which is particularly relevant in view of its development impact,” which includes creating jobs and raising household income locally, said DEG’s Monika Beck

It is the first loan by DEG to be guaranteed by the EU facility. 

DEG has long partnered with Co-op Bank, including, with Africa Agriculture & Trade Investment Fund (AATIF), Symbiotics and other European development organizations, making a 7-year loan of $100 million last year to Co-op Bank.

Bank lending for SMEs

Kenyan banks in recent years have become more engaged in lending to small and mid-sized enterprises, which contribute over 40% to Kenya’s GDP and account for 98% of businesses. The rise of fintech players such as  Pezesha and Zanifu, which offer small business loans and stock financing options, has helped awaken banks to SME opportunities. But limited knowledge about SMEs, spotty credit data, high overhead costs and an inefficient collateral registry hamper access to credit for SMEs, according to the Central Bank of Kenya. The IFC last year launched a technical assistance program for Kenyan banks to improve credit scoring for SMEs.