By Aby Agina
The Co-operative Bank of Kenya has secured the first $50 million tranche of a $100 million financing program with the European Bank for Reconstruction and Development, strengthening its capacity to provide longer-term foreign-currency loans to Kenyan businesses.
The first tranche was executed through a cross-currency swap, marking the first such transaction to use the Kenya Shilling Overnight Interbank Average, or KESONIA, as the benchmark reference rate, the lender said in a statement on Wednesday.
The broader program is designed to expand access to competitively priced dollar financing for exporters, manufacturers, agribusinesses and other companies with revenues, supply chains or operating requirements linked to international markets and foreign currencies.
The financing will also increase Co-op Bank’s capacity to provide trade finance and working-capital facilities to exporters, while supporting businesses seeking to acquire machinery, equipment, technology and raw materials, according to the statement.
“Our partnership with the EBRD under this $100 million currency swap program represents an important milestone in our commitment to supporting Kenyan businesses with innovative financing solutions,” Group Managing Director and Chief Executive Officer Gideon Muriuki said.
“The first $50 million tranche enhances our ability to provide long-term, competitively priced foreign currency financing to help businesses strengthen their competitiveness while contributing to Kenya’s economic development and job creation,” he said.
The transaction also represents a step in the development of Kenya’s local financial markets, according to the EBRD.
“This is an important milestone for Kenya’s financial markets,” Abdessamad Abouti, the EBRD’s regional head of local-currency portfolio management, said in the statement.
The EBRD said it had worked with local authorities and market participants to support the development of KESONIA, adding that the swap demonstrates how financial-market reforms can move from design to implementation.
The program is expected to benefit businesses in manufacturing, agriculture, agro-processing, horticulture, floriculture, logistics and tourism, sectors that routinely require foreign currency to finance international trade and investment.
Co-op Bank said the facility would provide businesses with longer repayment tenors to support expansion and capital investment, as well as greater access to funding solutions aimed at modernization and entry into regional and global value chains.
The lender said it has been using partnerships with international financial institutions to broaden funding access for Kenyan enterprises and support trade and investment.
The EBRD, a multilateral development bank owned by 77 countries as well as the European Union and European Investment Bank, operates across 40 economies in three continents.
About the Author: Aby Agina is a former CNBC journalist with extensive experience covering business, finance and economic affairs.
