1. LENDING TO CO-OPERATIVES Presentation by:
Edward Mutuaruhiu
Head Sacco Banking Department, Co-operative Bank
Wednesday, 4th July 2018

2. Presentation Agenda Brief on Co-operative Bank of Kenya
Co-operatives sector Overview
Why Lend to Co-operatives
Lending regulations
How we lend to Co-operatives
Facilities lend to Co-operatives
Lending process flow
Credit management
Bank lending requirement
Q and A

3. Co-operative Bank Established in 1968 by farmers coops
Third largest bank in Kenya
Asset base Kes.386 Billion as at 2017
Deposits 287 Billion
Loans over 30 Billion to Co-operative sector
Business divisions – Corporate, Retail and Co-operatives
Owned 64.5% by co-operatives
South Sudan Subsidiary with GoSS ,CCIA,Co-Op Trust Invest.

4. Cooperative Sector Overview
Kenya’s Co-operative movement leads in Africa and no.7 globally
22,000 registered co-ops, 15 million members
2 categories of legislation; Sasra Act(2008) for DT-Saccos(176) and Co-operative Societies Act Cap 490
As at 2016 DT-Saccos had an asset base of over 393 Billion, Deposits 272 Billion
Contributes to over 30% of the national savings
Co-operatives model is identified as key economic driver in achieving vision 2030

5. Why Lend to Co-operatives
Main business is mobilising deposits and lending to members.
Lend a multiplier of 3 to the members deposit.
The loans demand sometimes exceeds the available deposit hence the need borrow for on lending.
Investment and Housing – lend to finance their projects
Agrico-operatives – lend to bridge the gap on timing difference e.g dairy societies pay farmers in advance awaiting processors to pay; Coffee- Farm inputs

6. Lending regulations By laws of the society- Supreme authority
AGM/ADM approval via borrowing powers – Must be further approved and registered by commissioner of Co-operatives
Board resolutions
External borrowing must be less than 25% of total asset.

7. How we lend to Co-operatives
The bank uses a hybrid of assessment tools viz CAMELS,CAMPARI and the 5Cs
Mainly based on historical and future cash flows
Analysis of the books of accounts- Grading Matrix
Relationship based
Demonstrated ability to pay
Matching the facility to client’s lending structure

8. Facilities Lend to Co-ops
Overdraft- from 1 Month to 1 Year
Working Capital- Upto 72 Months
Asset Finance- Upto 60 Months
Collateral based facilities- MJL, ESS
Mortgage- Upto 15 years
Land purchase loan- Upto 10 years
Construction/project facilities-
Farm input loan- season
Farmer Advances- season
Agri value chain
Guarantees, LC’s

9. Lending Process flow Loan origination Disbursement/Marking limit
Monitoring
Credit Appraisal
Credit analysis and Approval
Contracting

10. Credit Management It is a life time process from client on-boarding
Involves training clients on banking's
Prudent record keeping
Risk management in the co-operative operations
Facility application process from the bank
Facility management-adherence to policy
Recovery of loans from members
Servicing of bank loan
Monitoring of the loan portfolio
Managing PAR-early/late alert

11. Bank Lending Requirements
Board resolutions
3 years audited books of account
Cash flow projections
Statements of accounts
Approved borrowing powers
Security - Letter of undertaking/Irrevocable instructions/Collaterals/Tangible
Facility contract

12. Q & A