Co-operative Bank of Kenya and the European Bank for Reconstruction and Development have signed a Sh13 billion ($100 million) financing programme to give Kenyan businesses better access to dollar funding. The first tranche, Sh6.5 billion ($50 million), was executed on September 16 through a cross-currency swap.
That swap matters beyond its size. It’s the very first market transaction anywhere to use Kenya’s new benchmark interest rate, KESONIA, as its reference point.
For Kenyan manufacturers, agro-processors, and exporters who’ve long struggled with the cost and unpredictability of foreign currency borrowing, this deal is meant to open a steadier channel. Co-op Bank Group Managing Director Dr Gideon Muriuki called the partnership “central to the lender’s push into supporting dollar lending for Kenyan businesses,” describing it as “an important milestone in our commitment to supporting Kenyan businesses with innovative financing solutions.”
How a Cross-Currency Swap Actually Works Here
The mechanics are fairly straightforward once broken down. The EBRD provides dollars and receives shillings in return, a structure known as a cross-currency swap, according to The Standard.
Co-op Bank can then lend those dollars directly to its customers without buying foreign currency on the open spot market every time a business needs it. Repeated open-market purchases expose both the bank and, eventually, the borrower to shifting exchange rates and tighter liquidity windows.
Locking in the swap structure upfront gives Co-op Bank a steadier, more predictable supply of dollars to lend against. In theory, that should translate into more competitively priced, longer-term foreign currency loans for its business customers.
Why KESONIA Matters Beyond This One Deal
The Kenya Shilling Overnight Interbank Average, or KESONIA, is a transaction-based benchmark rate calculated from actual unsecured overnight lending between Kenyan banks. The Central Bank of Kenya has published it daily since September 2025, part of a broader shift toward transparent, market-driven interest rate benchmarks.
Until this swap, KESONIA had mostly existed on paper, a well-designed reform waiting for real-world use. Co-op Bank Treasurer Mutahe Karuoro described bringing the rate to life as “a collective journey,” saying the swap “opens the door for greater liquidity, better price discovery, and stronger participation from local and international investors.”
EBRD’s Regional Head of Local-Currency Portfolio Management, Abdessamad Abouti, echoed that framing. He called it “an important milestone for Kenya’s financial markets,” noting the EBRD had “worked closely with local authorities and market participants to support the development of KESONIA.”
Once one bank has priced a deal this way, others in the market have a real benchmark to work from. That’s exactly the kind of momentum regulators hope will pull KESONIA-linked products into wider use across Kenya’s banking sector.
Which Businesses Stand to Benefit
The financing programme is squarely targeted at Kenyan businesses whose earnings or costs are tied to foreign currencies or global supply chains. According to Newsline, the sectors expected to benefit most include manufacturing, agriculture, agro-processing, horticulture, floriculture, logistics, and tourism.
Other businesses embedded in regional and global value chains are also expected to draw on the facility. In practice, that means longer repayment periods, improved trade finance and working capital facilities, and support for companies financing machinery, equipment, technology, and raw materials needed for expansion.
Take a horticulture exporter paying for imported packaging in dollars while earning euros from European buyers, or a manufacturer importing raw materials priced in dollars. This kind of facility directly reduces the currency mismatch that’s historically made borrowing expensive and unpredictable for businesses like these.
Part of a Bigger EBRD Push Into Kenya
This deal builds on the EBRD’s relatively new but expanding presence in the country. The multilateral lender, owned by 77 countries alongside the European Union and the European Investment Bank, began investing in Kenya in 2025.
Its focus has centred on private-sector development, financial inclusion, sustainable infrastructure, and the green transition, according to the EBRD’s own announcement. It operates across 40 economies globally, and this Sh13 billion facility marks one of its more concrete financial-market interventions in Kenya to date.
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What This Means Going Forward
With the first $50 million tranche already drawn, the remaining $50 million of the facility gives Co-op Bank further room to extend dollar financing as demand builds. The bigger story, though, is what this deal signals for Kenya’s broader shift toward market-based interest rate benchmarks.
KESONIA has now moved from a regulatory design on paper to a rate that’s actually priced a real transaction. As more banks and businesses reference it, Kenya’s financial markets get a step closer to the kind of transparent, internationally aligned pricing infrastructure that attracts deeper local and foreign investor participation over time.