Companies

Co-op Bank gets Sh550m loan to fund mortgages

coop

Co-operative Bank branch along Haile Selassie Avenue, Nairobi. FILE PHOTO | NMG

charlesmwaniki_img

Summary

  • The Co-operative Bank took a loan of Sh549.8 million from the Kenya Mortgage Refinance Company (KMRC) last year for onward lending to home buyers.
  • The KMRC is lending the money to the bank at an interest rate of five percent per annum, which will allow the institution to on-lend the same at single-digit rates to mortgage customers earning less than Sh150,000 per month.
  • Co-op Holdings, which is owned by co-operative societies and unions, holds a 64.5 percent stake in Co-operative Bank.

The Co-operative Bank #ticker:COOP took a loan of Sh549.8 million from the Kenya Mortgage Refinance Company (KMRC) last year for onward lending to home buyers, disclosures by the lender’s majority shareholder show.

Co-op Holdings, the majority shareholder of the listed lender, said the bank inked the agreement with KMRC in June last year but did not state the maximum amount that would be available to the bank under the deal.

“In June 2021, the Co-operative Bank entered into an agreement with the KMRC for a credit facility at a fixed rate of five percent to finance affordable housing mortgage loans,” said Co-op Holdings in its 2021 financial report.

“As of the end of 2021, the amount disbursed to the bank was Sh549.79 million.”

The KMRC is lending the money to the bank at an interest rate of five percent per annum, which will allow the institution to on-lend the same at single-digit rates to mortgage customers earning less than Sh150,000 per month.

Co-op Holdings, which is owned by co-operative societies and unions, holds a 64.5 percent stake in Co-operative Bank.

The lender accounted for five percent of Kenya’s total outstanding mortgage loans as of the end of 2020, the latest Central Bank of Kenya (CBK) data shows. This amounted to 1,285 mortgage accounts, with loans worth Sh11.9 billion.

Co-op Bank’s subsidiary Kingdom Bank had also issued mortgages worth Sh1.19 billion at the end of the period, from 203 accounts.

There were a total of 26,971 mortgage loans in issue in Kenya by 2020, worth Sh232.7 billion.

The average home loan size stood at Sh8.6 million, with an average rate of 10.9 percent on the loans and a time to maturity of 11 years.

This relatively high-interest rate and the mismatch between banks’ largely short-term deposits and the long-term commitment of mortgage financing have been blamed for the low uptake and disbursal of home loans.

The KMRC was thus formed to feed the banks with long-term funding at five percent interest, which in turn allows them to commit to financing home buyers at friendlier rates and longer tenors.

The mortgage refinancer had by the end of last year accessed Sh6.5 billion in capital for onward lending through a Sh18 billion credit line from the World Bank and the African Development Bank through the Treasury.

[email protected]