The Rapid (and/or unexplainable)Rise of Equity Bank
I was having a short, but interesting conversation with someone late last night and the topic of Equity Banks’ rapid rise to the top came up (apparently, it now holds 41% of all bank accounts in the country).
Anyway, during this short conversation, this guy told me that he attended a speech given by Equity’s MD at the Harvard Business School and during that speech, people in the audience could not figure out how this bank was doing it. I suppose they were stunned by it’s rapid ascent and now, it’s going to become a business school case study because people want to figure this thing out. Perhaps they are lessons here for other third world countries?
I’ve often said that one of the many frustrations about trying to decipher Kenyan business is it general secrecy. I’m sure some of this secrecy is because a few players are nervous about political destruction, but many others are hiding simply because a lot of their wealth is stolen. So, you never really get an idea of how people are doing it. They don’t talk, they don’t give interviews, they don’t give speeches….all you get is an announcement in the paper of a company reporting these astronomical profits. The questions however, usually remain unaswered as is the case with Equity Bank’s rising share price.
It’s like black magic…..
Vodooo….
Should I bring out the bongo drums?
Discuss….
my only worry about Equity Bank is that it might become a victim of its own success i.e. speculation is driving the share price to become white hot but what happens when it cannot meet super heated expectations?
I am not surprised that Kenyans are astounded by Equity’s success, its halmarks are typically UNKENYAN in that they are innovation, a huge appetite for risk and service/customer growth…….this in a business and corporate landscape defined by imitation, fear of the unknown and untested, and a dogma of servicing a small but safe predictable customer pool with product development focused on ‘prestige’ and ‘convenience’ appeal.
I’m glad it is now a mandatory case study because an Equity culture has taken root in Kenya……all of a sudden people are bold, audacious and ambitious……..SMEs are the new darlings on the block…….people are mouthing off ‘private equity’ and ‘venture capitalists’ like it is now passe……it is cool to be a microentrepreneur……or the new buzzword for the 20somethings ‘techpreneur’
KE
Perhaps the strategy is good marketing. The CEO and MD also appear to be very humble characters.
I had the privilege of attending a meeting organised by the govt and the business community from Kenya to persuade Kenyans in the diaspora to invest in Kenya. The CEO and the MD of Equity were speakers in the meeting. I distinctly remember the CEO (Mr Munga?) convincing the gathered crowd to chant that “we shall end poverty in our lifetime”.
It sounded abit corny I must admit. But then, after the meeting, Equity’s table had the longest queue of people seeking to open accounts with them. There was a scramble to open accounts. And remember these are people based in the UK and EU. Their accounts will therefore be generally heavy duty because of the currency conversions.
On a general point though, I believe that there is money in Kenya and Africa in general, it is just that we have not had brilliant business people to tap into this potential. Just look at the oversubscribed IPOs in Kenya.
If we could just for a moment, drop our obsession with politics and concentrate on the economy, the sky is the limit. There are limitless opportunities in an emerging market such as Kenya in particular and Africa in general.
compare this with any other kenyan banks who have been thinking that kenyans are rich and tell me if it is a suprise that customers from barclays and standard as well as the other banks would not be tempted. hell even the millions who had post bank have to flee.
* No minimum operating balance
* No ledger fees, maintenance fees and no monthly charges
* Affordable minimum account opening balance
* ATM card on application
* Account accessible at any branch
* Cheque book facility available
* Free monthly account statement
* No cash deposit or cheque handling charges
* Free internal standing orders
* Free photos captured on account opening
trust me if you have ever had some charges to your account other than what you spent or withdrew, you are already tempted to jump to equity.
@sijui
i have been a long investor of equity bank and it has never let me down.. u sound like u dont no shiet bout investing… ma philosophy is always to invest when nobody wants to…i bought equity shares back in dec, jan and feb when all ODMER’S were attacking gema companies…u just need to look at future earnings potential and way u risks… good luck anywaz..
Equity banks’ market happens to be in a niche market!!! Its targeting small savers
Its actualy a microfinance instutution and its growing becuse thats where KENYAS Level is . With 70% below a dollar a day ,Cheap educated labour that can do for a pittance what #VOH listed above
So EQUITY is not doing any magic…its just being appropraite
You said Proudkaleo, I like you have always bought Equity when others have been holding their noses starting in Dec 2006 when I only bought 1,000 shares.
Equity will be understood by those who have never known poverty. Name a financing need and Equity will be first to come up with a product to cover it. From farming even home-internet, it has a product for all.
Voh, you got it…..Its not a mystery—A bank that serves people without deep pockets, but who need to be served anyway.
My mother got her first loan from the Ngumba bank (Not sure what it’s actual name was) in the late 70′s —early 80′s to buy her first house in Dandora (98,000 KSh) . At the time no bank would loan a poor woman money to do such a thing. Then came Moi and his Indians and his jungu banks and local banks were crushed, money taken out of the country etc—–voila! a vacuum was created.
Equity is filling that vacuum. See this clip about them…
http://www.youtube.com/watch?v=FCtOGzudDws
Their primary challenge is managing growth. They may also face competition from established snobby banks who realize what they have missed all this time….
So, how is Equity making money if it isn’t charging for anything?
http://www.bdafrica.com/index......temid=5812
brilliant…just brilliant…….am also glad that AGRA is turning out to be more than just a bureacratic talk shop!!!!!!
Sijui:
Bdafrica.com is really doing a fantastic job with it’s business reporting. I don’t know who’s running that paper, but they are far ahead of their counterparts at both the Standard and the Nation.
I was reading the article to the link you posted above, which said the following about this new loan scheme:
“The money will be distributed immediately and will be guaranteed with Sh325 million from the Alliance for the Green Revolution in Africa (Agra) and the International Fund for Agriculture (Ifad). The security is meant to cushion Equity Bank against defaults or natural calamities”.
So, basically, this foundation is giving Equity money (by guaranteeing it’s loans) and Equity is incurring no risk whatsoever (great for Equity of course) but is it that good for the poor farmers? Why give this “free” money to a bunch of rich bankers? give it directly to the farmers in the form of grants, not loans.
It doesn’t make sense to me.
Annon@1:48:
I am sure like most banks, Equity earns its money from interest on loans. I understand the interest from loans given to folks to buy the SFCM shares alone will net equity over 15 billion shillings.
They also have non-interest, fee-based income I am sure. The diaspora banking if and when it picks up will generate some of this.
Proudkaleo, maiinat,
Hongera kwenu for hanging tough. I thought about getting equity in Equity in Dec, but then hesitated because I was unsure about the politics. I’m kicking myself now.
KE, I’m not sure of the specifics but my understanding is different from your’s……guaranteeing the loans does not necessarily mean disbursing the cash………I take it to mean a legal obligation that if Equity disburses its own cash for these loans and the farmers default, Agra will reimburse Equity.
And frankly it should not be a grant, that is why the Cooperative Movement failed until state subsidies……there is no accountability and consequences. When people know it is ‘free’ money, there is little incentive to be responsible and disciplined.
To me this is the best situation, farmers understand they hold real financial liability and obligation if they do not repay yet they are not penalized for not having collateral upfront. Furthermore it rewards entrepreneurship…..I bet you these farmers will pay back every dime because they want to develop a sound credit history with Equity and have access to even larger pots of cash like preferential lines of credit, bigger loans, mortgage, investment options etc……
http://www.bdafrica.com/index......temid=5848
this guy gets it and is a student of the bottom of they pyramid that is why he is now filthy rich!
…………
they have poor customer service and there is no order at all in their ATMs…