Equity’s rise from a building society to a multinational

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The Equity story has to be among the best success stories to have come out of our country. Basically, how the institution rose from a building society that almost went under, to become a bank that changed the way banking was done, and now a multinational to reckon with.

Over the holidays, I took time to do some research on the Equity story and what I found out was a story of determination, perseverance and service to the people that finally paid off. For those who might not be aware of this, Equity Bank started serving the lower end of the market at a time when banking was considered to be a preserve for the rich. Basically, banking back then was too expensive that only the rich could afford it. For example, some banks had accounts with a minimum balance of Ksh. 10,000 back then at a time when the majority of the population simply could not afford it. This affordability turned out to be the magic charm and soon the unbanked started trooping to Equity and with it came profits. It was at this time that competition noticed and predictably started to introduce products for this market segment hence making banking cheaper for the populace.

1984 – 1993

The Equity story started out in 1984, when the Equity Building Society opened its doors as a mortgage financing organization in Nairobi. The society focused on providing term loans and deposit services and opened several branches in the nearby Central Province. However, after doing business for about 10 years, things didn’t quite work out and this forced a rethink of their business strategy. It was at this time after being declared technically insolvent that the leadership led by the Founder Chairman Dr Peter Munga, who retired last year during the 2019 AGM, decided to bring in new management to turn around the building society. This is what marked the beginning of the Equity that we know today.

1994 – 2003

Dr James Mwangi, the current Group CEO and MD joined Equity in 1993. He joined the society as the Director of Strategy, Finance and Operations and one of his first tasks was to rethink the business strategy to reflect their actual clientele, who were the low and moderate income savers and borrowers. The bank also expanded its offerings beyond a single credit and single deposit product to include business, household, education, emergency, and group loans. It also introduced special savings accounts for businesses, children, groups and the elderly. Loan terms were revised to include shorter loans of up to 12 months, and average loan sizes were reduced to meet the needs and repayment capacity of small farmers and micro-entrepreneurs. According to the CEO, the bank was all about providing basic finance to ordinary people on the street to transform their lives.

At the turn of the new century, that is the year 2000, the bank had grown in terms of customers and assets. As such, there was a need to computerize their operations, systems and processes, which had largely been manual. The manual system had many downsides which included; slow customer service, extensive paperwork, tedious monitoring, and opportunities for staff error among others. At this point, the society got a grant from the United Nations Development Programme (UNDP), which enabled them to install a computerized information management system that would permit its branches to communicate via a local area network. The system named Bank 2000 was launched in June 2000. In the first year after the system went live, customer turnaround time at Equity branches improved from around 35 to about 5 minutes. At the same time, loans and customer deposits grew by 71 percent and 65 percent respectively compared to 44 percent and 51 percent the previous year.

Soon after launching the banking system and witnessing its potential, the management at Equity felt that there was a need to increase its clientele. At this point in time, being that the urban areas were well covered by the other banks. They came up with the idea of providing mobile banks (banking on wheels) to the remote areas of Kenya, which were unserved. The mobile banks consisted of four-wheel drive vehicles which served rural areas with population densities of over 400 per square kilometre. These mobile banks made weekly visits to the communities they were serving and provided all the services that one could find in an Equity branch.

2004 – 2013

The village mobile units proved to be quite popular due to the fact that it saved their clientele from transportation costs. Such that by early 2004, the units were profitably serving 12,000 clients in 29 villages.

The year 2004, also saw the conversion of the Equity Building Society into a fully-fledged commercial bank that is Equity Bank Limited. This move was necessitated by the fact that they had become too big of an entity to operate as a building society and the need to increase their product offering due to the changing needs of their clients.

In 2006, the bank listed its shares at the Nairobi Stock Exchange. This move according to the Equity Bank C.E.O was necessitated by the fact that they wanted their 2,500 shareholders who had so far been trading their shares among themselves to trade with a wider population. The bank was listed by introduction at a share price of Ksh. 90 making it the largest bank by market capitalization. At this point, the bank’s capital stood at Ksh. 1.8 Billion with customer deposits standing at Ksh. 12 Billion and a loan portfolio of Ksh. 8.5 Billion.

By 2007, Equity Bank’s model of lending to the unbanked low income customers had started to pay off. This year saw the bank’s pre-tax profit hit Ksh. 2.4 Billion up from a profit of Ksh.  74 Million in 2002. Its assets also grew to Ksh. 53.1 Billion up from Ksh.  2.6 Billion in 2002. It was this performance, which attracted Helios Investment Partners, a London-based private equity group to invest Ksh. 11 Billion to purchase a 25% stake in the bank.

In 2008, following the investment by Helios, Equity Bank bought a 100% stake in the Uganda Microfinance Limited for Ksh. 1.66 Billion. At the point of acquisition, the microfinance operated 28 branches and had 14 contact offices. This marked the bank’s first move to expand regionally and provided room for growth in regional markets and spreading of risks.

In May 2009, the bank entered the South Sudan market where it started out with 1 branch in Juba and later expanded to 13 branches in 8 town. However, due to the crisis in the country, the bank scaled down its operations to 5 branches in Juba and Nimule.

In 2011, the bank expanded into the Rwandan market. It started out with 4 branches in the towns of Kigali, Rubavu, Musanze and Muhanga. These have grown to fourteen with the addition of branches in Nyarugenge, Remera, Nyabugogo, Huye, Rusizi, Kichukiro, Giporoso, Gisozi and Rwamagana.

In 2012, the bank expanded into the Tanzanian market. It started out with two branches, one in Dar es Salaam and one in Arusha. The bank now has 14 branches in total that is 6 in Dar es Salaam and the remaining in Arusha Mwanza, Moshi, Mbeya, Dodoma Zanzibar and Temeke. As at end September 2019, the bank had mobilized over 688,511 customer accounts.

2014 – 2019

Prior to 2014, Equity Bank was both a licensed bank and a holding company for its subsidiaries. However, this changed on 31 October 2014, Equity Bank Group decided to incorporate a new wholly owned subsidiary, Equity Bank Kenya Limited, to which it would transfer its Kenyan banking business, assets and liabilities. The reasoning behind this was that by converting Equity Bank into a non-trading holding company that owns both banking and non-banking subsidiary companies, it would be better placed to invest and to develop the existing and new businesses as part of its third phase of growth and transformation (Equity 3.0).

2015 saw the acquisition of a 79% stake in the ProCredit Bank Congo S.A an SME focused bank in the Democratic Republic of Congo. The bank at the time was the 7th largest by assets in the DRC market with total assets exceeding Ksh. 21 billion, net assets of Ksh. 2.6 billion and a customer base of over 170,000. They have gone on to increase their presence in DRC by entering into a share purchase agreement for the acquisition of a majority stake in Banque Commercial Du Congo and proposing to increase its shareholding in Equity Bank Congo in a deal with Kreditanstalt Für Wiederaufbau (KfW)

They have opened a representative office in Ethiopia and have intentions of venturing into Zambia and Mozambique with the ongoing talks with ATLAS MARA.

2019 saw Equity celebrate 35 years of existence and as part of the celebration, they unveiled a new logo and refreshed identity that is in line with their ongoing journey of transformation and regional expansion. According to the bank, the new identity is aimed at creating sustainable growth path and service delivery in today’s rapidly changing financial services environment. Moving forward, Equity will present itself as a unified brand, with one basket of products and services under one roof ranging from banking to insurance and investment.

The fact that Equity Bank is a trail blazer in the Kenyan banking sector is undisputed. This is due to the fact that it grew from humble beginning to make banking accessible to the lower income demographic and at the same become a multinational all in the span of 35 years!! I have to say I can’t wait to see what the new decade has in store for this banking giant.

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