Co-operative Bank is among 11 firms that have received a Sh12.9 billion legacy debt write-off from the National Treasury, with some loans dating back to the 1970s.
The Treasury says the loans, wiped off its books in the year ended June 2026, had accumulated over decades.
Officials add that recovery had been undermined by a range of circumstances, including borrowers’ financial difficulties, the collapse or liquidation of entities and projects, and the lack of proper or traceable loan documentation.
Treasury’s debt schedule shows Co-op Bank, Kenya’s third largest lender by assets and deposit accounts, had Sh267 million written off during the year.
The unpaid loan has raised questions about how the lender, which posted Sh29.75 billion profit last year, was struggling to pay off a debt of Sh267 million, which initially stood at Sh339 million.
But a senior official at the bank said the exposure came from an old government kitty received by the bank for on-lending to smallholder farmers in cotton, irrigation, pyrethrum and dairy sub-sectors, making the liability a legacy government programme rather than recent commercial lending.
The government had tasked Co-op with facilitating the issue of loans to farmers under co-operative societies, collecting the repayments and remitting the money to the Treasury, but poor repayment left residual balances long after the programmes collapsed.
‘A majority of farmers didn’t pay back, and that has reflected as the outstanding amount [in Treasury books] over the years,’ the official previously said.
The write-off leaves Equity Bank as the only privately owned lender remaining on Treasury’s list of borrowers under on-lending arrangements, with the country’s largest lender by deposit accounts owing Sh279 million in arrears from Sh534 million channelled through its network.
The Treasury says the debts chalked off form part of its book clean-up exercise targeting Sh26.33 billion.
The officials add that the Treasury sought Cabinet approval to write off Sh13.29 billion in outstanding principal and waive a further Sh13.04 billion in accumulated interest arrears which had become difficult or impossible to recover.
‘The write-offs were undertaken as part of efforts to clean up the National Treasury’s loan records, address long-outstanding audit queries and facilitate implementation of Public Accounts Committee (PAC) recommendations on non-performing Government loans,’ the Treasury writes in the latest annual debt management report.
The Treasury says the loans had remained unpaid for years due to financial constraints, collapsed projects, ceased operations, missing records, disputes over loan terms and legal changes that transferred liabilities to county governments.
The defunct Local Government Loans Authority accounted for the largest balance among the 11 entities, with Sh7.594 billion outstanding at June 2025 before the debt was wiped from Treasury’s books.
The authority historically facilitated capital development borrowing by local authorities, which accumulated liabilities to the national government before the system was replaced by devolved county governments.
Treasury also wrote off Sh2.461 billion owed by the National Water Conservation and Pipeline Corporation, a body formed in 1987 to develop public water supplies and reduce reliance on the Exchequer.
The corporation has since been reconstituted as the National Water Harvesting and Storage Authority, responsible for strategic national water storage, water harvesting and conservation.