Co-op Bank Development Loans: Co-operative Bank was among the top financiers that saw the birth of East Africa’s largest mall, Two Rivers.
Early this month, Centum Investment Company announced that it had repaid a Sh. 8 billion loan it took from Co-operative Bank to develop the Two Rivers Mall in Nairobi.
The Nairobi Securities Exchange-listed firm used a new loan from South Africa’s Standard Bank to retire the Co-op Bank debt. “On the Two Rivers Mall, we had secured an Sh8 billion development finance facility with Co-op Bank for the then greenfield site,” Centum’s chief financial officer Samuel Kariuki said.
Initially, Co-op Bank funded Two River’s administrators, Two Rivers Lifestyle Company Sh. 1 billion to buy the 100 acres for the mall.
“Co-operative Bank had been involved throughout the life cycle of this project. The bank was involved in the acquisition of the 100-acre land parcel by way of advancing the first Sh. 1 billion to Centum,” said Gideon Muriuki, Co-op Bank chief executive officer.
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When the construction phase kicked off, Co-op Bank extended another loan of Sh. 8.24 billion to the project.
“The bank was subsequently involved in structuring the financing deal right from conceptualization and later advanced a project financing facility of Sh. 8.24 billion ($80 million) for the development,” he said.
Interestingly, the bank’s exposure in the loan disbursement remained within the Central Bank of Kenya’s statutory limit. “It stood at 18.8 per cent, going by the third quarter financial results,” says Moses Khaemba, a financial analyst. According to Co-op Bank’s September 2016 results, its core capital was at Sh. 48.8 billion from a net profit of Sh. 10.5 billion.
This loan elevated Co-op Bank’s development loans portfolio and position as a top lender for mega projects in the country. Mr. Khaemba further noted that the decision by Co-op Bank to lend to the project shows a growing faith in accessing local credit for local major projects.
“This showed that large scale developers do not have to seek funding from overseas when there are easy-to-access local options,” he says. His sentiments echo those made by President Uhuru Kenyatta during the official opening of the mall. “The bank’s ability to lend the developer a huge amount of money was a clear indicator that Kenya’s financial services sector is maturing,” said the president.
