Co-op cuts State lending, grows SME loans
Co-operative Bank of Kenya branch along Parliament Road, Nairobi. Dennis Onsongo | Nation Media Group
What you need to know:
- Investment in government securities increased marginally in the period to Sh183.2 billion compared to Sh182 billion previously.
- Bank slashed loans to the government to 0.6 per cent in the six months to June.
- Private sector lending helped the bank’s half-year net profits jump 55.4 per cent to Sh11.5 billion on strong growth in customer lending and payment charges.
Co-op Bank slashed loans to the government to 0.6 per cent in the six months to June, signalling a shift in focus to advancing to the private sector and small businesses.
Investment in government securities rose marginally in the period to Sh183.2 billion, compared to Sh182 billion in 2021.
The slower growth in government debt came even as the bank’s overall loan portfolio grew by Sh29 billion to Sh330 billion with the private sector getting more attention.
Private sector lending helped the bank’s half-year net profits jump 55.4 per cent to Sh11.5 billion on strong growth in customer lending and payment charges.
The jump from Sh7.4 billion in a similar period last year was propped by an 11.8 per cent growth in net interest income from Sh18.8 billion to Sh21.1 billion.
Co-op Bank also saw strong growth in non-interest income which jumped 29 per cent to Sh13.3 billion.
Lenders are cutting loans to the government as the Central Bank of Kenya raises interest rates, which has an impact on reducing the value of Treasury bonds held.
The lender’s shift signals good times for small businesses seeking capital to boost their recovery post-Covid-19.
Co-op Bank group chief executive officer -Gideon Muriuki said the lender has disbursed billions of shillings in small business loans as Co-op works with SMEs to ensure the bank maintains borrowers.
“Over 162,000 customers have taken up the MSME (micro small and medium enterprises) packages that we rolled out in 2018, and 26,943 have been trained on business management skills,” he said in a statement.
“Year to date, we have disbursed Sh12.6 billion to MSMEs through our Mobile E-Credit solution. MSMEs are a critical part of economic recovery post-covid and contribute up to 16 per cent of our total loan book.”
Banks have opened up their purse strings to the private sector recording double-digit growth for the first time in the first quarter of 2022 for close to five years.
Co-op Bank Group say they have ensured that they maintain loan book quality even as the lender ups loans to the private sector.
