LENDING TO CO-OPERATIVES Presentation by: Edward Mutuaruhiu

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

2. 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 Presentation Agenda

3. 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. Co-operative Bank

4. 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 Cooperative Sector Overview

5. 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 Why Lend to Co-operatives

6. 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. Lending regulations

7. 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 How we lend to Co-operatives

8. 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 Facilities Lend to Co-ops

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

10. 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 Credit Management

11. 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 Bank Lending Requirements

12. Q & A