Co-op Bank obtains a loan of 550 million shillings to finance mortgages

Companies

Co-op Bank obtains a loan of 550 million shillings to finance mortgages


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

charlesmwaniki_img

Summary

  • Last year, the Co-operative Bank took out a loan of 549.8 million shillings from the Kenya Mortgage Refinance Company (KMRC) to lend to home buyers.
  • KMRC lends the money to the bank at an interest rate of five percent per annum, which will enable the institution to lend the same at single digit rates to mortgage customers earning less than 150,000 shillings per year. month.
  • Co-op Holdings, which is owned by co-operative societies and labor unions, has a 64.5% stake in Co-operative Bank.

The Co-operative Bank #ticker:COOP took out a loan of 549.8 million shillings from the Kenya Mortgage Refinance Company (KMRC) last year to lend to home buyers, according to revelations from the majority shareholder of the lender.

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

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

“At the end of 2021, the amount disbursed to the bank was 549.79 million shillings.”

KMRC lends the money to the bank at an interest rate of five percent per annum, which will enable the institution to lend the same at single digit rates to mortgage customers earning less than 150,000 shillings per year. month.

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

The lender accounted for 5% of Kenya’s total outstanding mortgage loans at the end of 2020, according to the latest data from the Central Bank of Kenya (CBK). This represented 1,285 mortgage accounts, with loans worth 11.9 billion shillings.

Co-op Bank subsidiary Kingdom Bank had also issued mortgages worth 1.19 billion shillings by the end of the period, from 203 accounts.

There were a total of 26,971 outstanding mortgages in Kenya in 2020, worth 232.7 billion shillings.

The average size of home loans was 8.6 million shillings, with an average loan rate of 10.9% and a term to maturity of 11 years.

This relatively high interest rate and the mismatch between banks’ short-term deposits and the long-term commitment of mortgage finance have been blamed on the low underwriting and disbursement rate of housing loans.

KMRC was therefore formed to supply banks with long-term financing at 5% interest, which in turn allows them to commit to finance home buyers at cheaper rates and over longer terms. long.

The mortgage refinancer had at the end of last year accessed 6.5 billion shillings in capital for further loans via an 18 billion shillings line of credit from the World Bank and the African Development Bank through the intermediary of the Treasury.

[email protected]

Comments are closed.