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‘Disruptive’ Equity changes banking in Kenya

Interview - March 22, 2016

Banking the ‘unbankable’ has led Equity Bank to become home to more than 50% of all bank accounts in Kenya, and have a $5 billion balance sheet piquing the attentions of investors worldwide. As well as making banking accessible and affordable, Equity is a major part of establishing Nairobi as a regional financial hub. Dr James Mwangi, CEO and Managing Director of Equity Group Holding Limited and Chairman of Kenya’s Vision 2030 Delivery Board, discusses the institution’s huge impact on the sector, and also the nation’s development through its Vision 2030.


What do the UN’s Sustainable Development Goals (SDGs) and Millennium Development Goals (MDGs) pose for Kenya’s private sector and its Vision 2030?

The new Sustainable Development Goals really change the ownership of future aspirations. The last 15 years of implementation of the Millennium Development Goals have primarily been based on government-led initiatives, with business involvement limited to an ad-hoc basis. For a number of reasons, a structured framework for engagement of the private sector with the MDGs had never been on offer. Now that we have chosen to pursue the UN’s new Sustainable Development Goals, times have changed and awareness regarding the potential role and contribution of the private sector in addressing some of global challenges we face and the achievement of development objectives has significantly evolved.

The goals have become a shared aspiration, and I see a possibility of greater achievement through this shared sense of ownership and responsibilities between communities, government and the private sector. For instance, an organization like Equity embeds all the applicable SDGs in its business model.

I would like to emphasize that the Kenyan government’s and the private sector’s overriding objective is create a conducive environment for our citizens, by providing them with an opportunity to live a quality life within a clean and secure environment, as envisaged in the country’s primary development blueprint, the Kenya Vision 2030. In pursuit of this objective, the government in alignment with the private sector had placed great emphasis on achieving the SDGs as a panacea for attaining balanced socio-economic development.


In line with the SDGs, how can the Vision 2030 plan bring the country out of a cycle of corruption and economic stagnation?

Vision 2030 is an ultimate set of guidelines that aims to eradicate poverty, create a thriving economy, build infrastructure, provide a better quality education to our citizens, and make Kenya a hub for the rest of sub-Saharan Africa.

We realized that the Vision cannot be just another political wish, but it has to be realistic and achievable within its time framework, in order to move into higher growth and a long-term development path. In other words, the Vision is a mandate between the people and their leaders of what is required to have a thriving country.

It is anchored on three key pillars: economic, social, and political governance. The objective is to achieve an economic growth rate of 10% per annum and sustaining the same till 2030. The social pillar seeks to create a just, cohesive and equitable social development in a clean and secure environment. It therefore presents comprehensive social interventions aimed at improving the quality of life. Finally, the political pillar’s objective is to have “an issue-based, people-centered, result-oriented, and accountable democratic system”.

As they say Rome wasn’t built in a day. It has only been three years since the introduction of Vision 2030 and of course we are facing certain challenges and bottlenecks, but in another 15 years I believe most of the initiatives will take roots and mature. A good example is the County Devolution program, where we are already seeing good progress. Another example is the evolution of the education system. We now have about 27% of Kenyans accessing high quality higher education, and in 15 years the country will have a better and bigger pool of highly educated people, eradicating the limitations some institutions are currently facing when it comes to human recourses. 

In regard to corruption, it’s a vice just like in any other society. However it is not the challenge that is important, but what the government aligned with the private sector is doing to eradicate this menace. We can already see real signs of change. Corruption is being exposed on a daily basis in our local newspapers. The big and mighty are dotting the front page of our newspapers in what one would call a name-and-shame perspective, things that you could never see before. Remember corruption is a sickness that cannot be cured overnight. We are making milestones every year. In the next 15 years we will be able to comfortably reflect back and see how different our country is from the country that we inherited before Vision 2030.


How is Equity Bank being proactive to promote Nairobi as the financial heart of Africa?

One of the deliverables of Vision 2030 is to make Nairobi a financial hub for Africa. Recent financial challenges that South Africa has been facing seem to have accelerated this transformation. There are several other aspects, such as strong financial inclusion, a well-educated human resource within the financial sector, a well-reformed and evolving regulatory framework, and a political will necessary for transformation.

Kenya’s business environment and sophistication have enabled us to produce very strong domestic and regional institutions that have been able to anchor or to form a hub for the whole region. With Equity Bank being in DR Congo, South Sudan, Uganda, Rwanda, Tanzania and aspiring to be in 15 countries in the next 10 years, all our operations will be centralized in Nairobi. Equity Bank has become a Kenyan icon. We are rated as number eight in return on assets and 18 on return on equity globally

Essentially Nairobi produces two banks that are ranked amongst the top 100 internationally. And Equity being one of the two, we are able to link Kenya with other global banking institutions, facilitate commerce and trade, and also be a channel for investment. Equity has managed to step over a milestone, which is going beyond a $5 billion balance sheet, which is very significant and attracts a lot of international attention.


What are the key contributions that Equity Bank has made to Kenya’s banking sector?

Equity is a creation of innovation. The first disruption was on the business model when we moved to a high-volume, low-cost business model. That really disrupted the banking industry in Kenya, which prior to the entry of Equity was high-margin, low-volume. Suddenly the unbanked became bankable. Banking the ‘unbankable’ led us to become home to more than 50% of all bank accounts in the country to this day. We made what banking is now in Kenya through democratization. We made it accessible and we made it more affordable.

The second disruption by Equity was when it focused on accessibility, where we became a world leader in agency banking, using third-party retail shops to deliver services. Essentially, the last mile was bridged; every village now has access to banking services. We demystify banking; it could be offered by a shopkeeper as opposed to a banker dressed in a tie and a black suit.

The third disruption was when Equity decided to transform the humanitarian industry in this country and move away from humanitarian support given in kind to being given in cash receipts and eventually in a bank account. Essentially the un-bankable who were on humanitarian support became bankable.


How is Equity setting a benchmark with new product offerings?

Innovation is the core of our business. For the third time, Equity is disrupting the industry by converting banking from being where you go to what you do. Essentially we said banking should be on a self-service platform, preferably on a mobile phone. We are now going beyond the last mile to ensure people are able to access of the bank from their phones. The bank is permanently in your pocket or in your hand when you are speaking.

Equity Bank’s introduction of the thin SIM under the Equitel brand is an important development for the Kenyan financial market as it gives customers more choice in terms of providers, and will push product innovation further in a market that has had trouble evolving beyond payments.  We believe that to really make digital finance relevant for the mass market, benefits like free money transfers and access to credit on the mobile phone will be key drivers, which we are offering with Equitel.

We are even going beyond banking on mobile phones.  We have now put the education curriculum of the Kenyan primary and secondary schools on the SIM card, where every child will have a free access to textbooks and the curriculum.

Equally, out of these three disruptions, with digitization and virtualization being the greatest disruptions the bank will ever go through in our lifetime, I see sustainability becoming much easier because it's now platform-driven. Equitel has become more of a technology company with a banking license.


Equitel, is targeting 100 million customers in Africa within 10 years and the first 5 million by the end of 2016, and to be present in 15 countries. With such growth how will Equity maintain to be part of local communities?

 “Giving Back to society” is embedded as a core value in our business model. Every Equity Bank product carries with it a social contribution to our society.

Equity Bank in 2008 created the Equity Group Foundation in order to have a lasting, positive impact on the lives of Africans, especially the poor and disadvantaged. One of our key pillar projects is the Wings to Fly initiative, which provides a comprehensive secondary scholarship support program for top performing yet needy students in the sub-counties across Kenya. In providing this opportunity to Kenyan children who may have otherwise gone unnoticed, the Wings to Fly program is in line with Kenya’s Vision 2030 to transform Kenya into a middle-income economy led by well-educated and trained citizens.

In line with all these activities, I have created a strong governance structure within the group, which I feel proud of and have no fear about Equity Group’s long-term sustainability. We have committed through the Foundation to donate 2% of our turnover to our communities and their development with seven key social thematic areas, identified as: education and leadership development, financial literacy, financial inclusion, innovation and entrepreneurship, agriculture, health, and environment.