Co-operative Bank has secured $10 million financing from the eco.business Fund, the impact investment sub-fund for sub-Saharan Africa, for on-lending to sustainable agribusinesses.
The fund’s first ever investment in Kenya provides the much-needed financing for businesses to enhance sustainable measures in their agricultural practices, particularly important in light of the challenging operating environment created by the Covid-19 crisis.
In a statement Thursday, Co-operative Bank CEO Gideon Muriuki said the lender’s new partnership with eco.business Fund provides financing that is structured to suit the financing cycles of agriculture, and also comes with the support mechanisms to assist farmers to make a successful pivot towards sustainable, climate-smart agriculture.
“Right from our founding as a bank for agriculture co-operatives, we have always strived to support farmers in their journey to achieve sustainable livelihoods,” said Mr Muriuki.
The eco.business Fund was initiated by Germany’s KfW Development Bank and Conservation International with financial support from the German Federal Ministry for Economic Cooperation and Development (BMZ).
The German-based impact investment fund which was formally launched last year (2020) is committed to conserving biodiversity, promoting the sustainable use of natural resources, and mitigating and adapting to climate change.
Through this new investment, the eco.business Fund and Co-op Bank will provide necessary credit to sustainably certified agribusinesses, such as those in the coffee, tea, and horticulture sectors, Kenya’s main agricultural exports.
The partnership also hopes to finance green measures such as solar and hydroelectric installations for tea factories that reduce reliance on wood as a source of fuel and cold storage solutions that reduce post-harvest losses.
This is expected to boost sustainable production practices and conserve the unique ecological landscape of the country.
“We are excited about our first investment in Kenya. A country rich in biodiversity and opportunities for sustainable development,” said Jens Mackensen, Chairperson, eco.business Fund.
“This new partnership with Co-op Bank promises to be a fruitful one as the bank is well positioned to act as an enabler of sustainable production practices. Only by providing tailored financing to the agricultural sector, a key driver of economic activity and sustainable development in Kenya, can we collectively promote green finance with the goal of generating positive environmental and social impact,” said Dr Mackensen.
Agriculture is the backbone of the Kenyan economy, employing approximately 75 percent of the rural population, and making up 34 percent of the country’s gross domestic product.
However, commercial lending to the agricultural sector remains disproportionally low.
It is argued that this funding gap limits the ability of producers and processors to invest in sustainable production practices, further compounded by the economic fallout caused by the global pandemic.
The investment aims to provide financial resources to those that need it most, while simultaneously promoting conservation finance as mainstream.