Moody’s sees Co-op Bank deepening SME loans after Jamii Bora buyout

A Co-op Bank branch in Nairobi. FILE PHOTO | NMG Global rating agency Moody’s expects Co-operative Bank of Kenya to deepen lending to small and medium-sized enterprises (SMEs) on completing the acquisition of the troubled Jamii Bora Bank (JBB).

The agency says the deal will serve as a springboard for the tier-I lender to raise the share of loan book to SMEs given the repeal of interest rate cap law late last year.

Moody’s comment comes on the back of the bank’s announcement on March 11 that it had commenced talks to acquire the cash-strapped lower-tier bank.

"Co-op Bank will absorb JBB, Kenya’s second-smallest bank without affecting its credit quality and will gain JBB’s small and midsize enterprises focused business," said Moody’s.

"The acquisition would be credit positive for both banks and the country’s banking system. JBB’s SME-focus and expertise will help Co-op Bank expand its SME footprint in Kenya."

Co-op Bank recently launched a new import financing product and joined three other banks — KCB, NCBA and DTB — in offering a pilot mobile loan product, Stawi. Both products target SMEs.

Financial inclusion of SMEs is a key strategy for many Kenyan banks since the removal of a cap on commercial lending rates in November 2019.


Co-op’s SME lending exposure was at six per cent in contrast to KCB’s four percent and Equity Bank’s 59 percent at the end of December last year, Moody’s had said in a separate comment on Kenya’s top three banks.

The bank, with a subsidiary in South Sudan, has focused more on the Kenyan market as opposed to launching outside like its peers given that returns in the region have been unstable.

The rating agency says JBB will ride on Co-op’s strength to gain greater access to capital and funding, generating economies of scale and stabilising its financial position.Co-op bank is yet to announce whether it will absorb the JBB brand after acquisition or will leave it as a stand-alone subsidiary as KCB has done with National Bank of Kenya.

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