D S M 6 0 1 – S T RAT E G I C M A N A G E M E N TG R O U P A S S I G N M E N T : E Q U I T Y B A N K C O M PA N Y PROFILE A U G U S T- D E C E M B E R 2 0 1 5 , T U E S D A Y E V E N I N G C L A S S GROUP MEMBERS: GRACE THUN GU – D61/73476/2015 MAUREEN KENDI – D61/77909/2015 S A M U E L A N U N D U A N YO N A – D 6 1 / 7 7 4 4 0 / 2 0 1 5 TA R S I L A W A N J A – D 6 1 / 7 4 3 4 1 / 2 0 1 4 Z A C H A RY M O K U A – D 6 1 / 6 0 2 7 0 / 2 0 1 3 TABLE OF CONTENTS 1. Preamble......................................................................................................................3 2. History..........................................................................................................................3 1.1 Equity Building Society...........................................................................................3 1.2 Equity Bank Kenya Limited......................................................................................4 1.3 Equity group holdings limited.................................................................................4 1.3.1 Equity Group Foundation...................................................................................5 2 Ownership....................................................................................................................5 3 Vision, Mission and Core Values...................................................................................6 4 Governance..................................................................................................................7 5 Scope of Operations.....................................................................................................8 6 5.1 Branch Banking.......................................................................................................8 5.2 Branchless Banking.................................................................................................9 5.3 Diaspora Banking....................................................................................................9 Environmental Factors, Challenges & Opportunities..................................................10 6.1 External Environment Factors...............................................................................10 6.1.1 Political Factors................................................................................................10 6.1.2 Economic & Social Factors...............................................................................12 6.1.3 Legal and Regulatory Environment.................................................................15 6.1.4 Technical Factors.............................................................................................16 6.2 Internal Environment Factors................................................................................16 6.2.1 Leadership and Management..........................................................................16 6.2.2 Human Resources............................................................................................16 6.2.3 Technology......................................................................................................17 6.3 7 Challenges............................................................................................................17 Performance...............................................................................................................19 7.1 Equity bank numbers............................................................................................19 7.2 Agency banking.....................................................................................................19 7.3 Regional markets..................................................................................................21 7.4 Merchants & payment...........................................................................................21 8 Accolades, Awards and Recognition...........................................................................21 9 Conclusion..................................................................................................................23 Page | 2 10 Works Cited..............................................................................................................24 1. PREAMBLE This paper attempts to look at the context within which Equity operates to make sense of its strategic decisions over time and their effect on the company’s performance. We aim to establish a nexus between the environmental conditions of the firm, its strategic decisions and subsequent performance. In doing this, we explore the origins and evolution of the Equity Bank, its ownership, guiding philosophies, governance, environmental conditions, performance and future outlook. 2. HISTORY 1.1 EQUITY BUILDING SOCIETY Equity Bank was founded as Equity Building Society (commonly known as ‘Muiganania’ in Kikuyu language, which literally translates to ‘equalizer’) in October 1984 by Dr. Peter Kahara Munga and was originally a provider of mortgage financing for the majority of customers who fell into the low income population. Dr. Peter Kahara Munga had established Equity Building Society in Kangema in the present day Murang’a County, with the aim of helping peasant farmers from the area. He noted one Dr. James Mwangi’s financial administrative skills and employed him as the Finance and Strategy Director at Equity Building Society. Dr. Mwangi was later promoted and became the Bank’s Managing Director (MD) and Chief Executive Officer (CEO) a rank he still holds to date. Dr. James Mwangi recruited millions of peasants into Equity Bank and made the ‘unbankable’ to be bankable. The move resulted in massive accounts opening in Equity Bank. The society’s logo, a modest house with a brown roof, resonated with what was its target market and determination to make small but steady gains toward a better life, seeking security and advancement of its dreams. The vast majority of Kenyans had historically Page | 3 2014) The rationale for the reorganization was that. This was the beginning of the current Equity Bank’s inspirational success story. Equity Group Holdings limited operated both as a licensed bank and a holding company for its subsidiaries. Prior to November 2014. 2014 Equity Bank announced its intention to incorporate a new wholly owned subsidiary. It is licensed as a commercial bank. The bank maintains a network of 161 branches across Kenya. brand. to which it would transfer its Kenyan banking business. Kenya. On October 31. which includes over 40 branches in Nairobi (Kenya Bankers Association.The Free Encyclopedia. During an extraordinary shareholders general meeting held on November 24. In 1993.B. by the Central Bank of Kenya. Equity bank Kenya limited was incorporated in 2014 as a result of the corporate restructure of Equity Group Holding Limited. 2014. Equity Building society was declared technically insolvent but this was a transformation into a rapidly growing microfinance and which was converted to Equity Bank then a commercial bank.).G. 2015). Equity Bank Kenya Limited. 2015). assets and liabilities (Equity Bank Group (E.2 EQUITY BANK KENYA LIMITED Equity bank Kenya limited is a financial service provider with its headquarters in Nairobi. by converting Equity Group Holdings limited into a nontrading holding company (as defined under the banking Act cap 486 Laws of Kenya) that owns both banking and non-banking subsidiary companies and provides strategic.3 EQUITY GROUP HOLDINGS LIMITED Page | 4 . 2014) 1.been excluded from access to financial resources. it was resolved to adopt the proposed reconstruction thus leading to the formation of Equity Bank Kenya limited (Equity Bank Group. the group would be better placed to invest and to develop the existing and new businesses as part of its third phase of growth and transformation (Wikipedia . risk and talent management to its subsidiaries. 1. 2015). and National Banking Regulator (Central Bank of Kenya. The companies that comprise the Equity Group Holdings limited include the following. Equity Bank Rwanda limited.6 million (KES 57. Equity Bank Kenya limited. Equity Bank Uganda limited-Kampala-Uganda 6. This innovation and creative vehicle transformed the concept of philanthropy and corporate social Page | 5 . Kenya 2. Additionally. Equity Group Foundation-Nairobi-Kenya 1. 2004 as a holding company. Equity Insurance Agency limited-Nairobi-Kenya 9. Equity Investment Services limited-Nairobi-Kenya 11.Juba. Equity Bank south Sudan limited.Kigali.Equity Group Holdings Limited was incorporated on 21st December. FinServe Africa limited-Nairobi-Kenya 12. Equity Consulting Group limited-Nairobi-Kenya 8. 2014): 1.3. Equity Nominees limited-Nairobi-Kenya 10. Procredit Bank Congo SARL-Kinshasa-DRC 7. Rwanda 4. South Sudan 3.1 billion) as at 30th September 2014.Nairobi. as at 31st December 2014 (Equity Group Holdings Limited.2 million in the six East African countries that it serves making it the largest commercial bank on the African continent by customer numbers.84 billion (KES 339. It has a customer base in excess of 9.1 EQUITY GROUP FOUNDATION Equity Bank in 2010 established the Equity Group Foundation.44 billion) and shareholders’ equity in excess of US$644. Equity Bank Tanzania limited-dares salaam-Tanzania 5. it has an asset base estimated at over US$3. 2015): Rank Name of Owner Percentage Ownership 1 Norfininvest AS of Norway 12.44 9 Andrew Mwangi 2. Financial Literacy and Access.76 11 Others 50. the parent company of Equity bank are listed on the Nairobi stock exchange (NSE) under the symbol EQTY.58 4 Genesis Investment Management LLP of the UK 4. Agriculture.44 10 Nelson Muguku 1.07 6 James Njuguna Mwangi 3.63 3 National Social Security Fund of Kenya 5.46 Total 100. Entrepreneurship. 2 OWNERSHIP Shares of the stock of Equity Group Holding limited.73 8 National Social Security Fund of Uganda 2.00 Page | 6 . shareholding in the group's stock was as depicted in the table below (Wikipedia.23 2 British-American Investments Company 10.45 7 Fortress Highlands Limited 2. As of January 2015. Equity Bank provides the infrastructure of delivery hence reducing the operational costs for the Foundation and increasing the rate of return on any social investment.21 5 Equity Bank Employees’ Share Ownership Plan 4. Innovations and the Environment. The foundation has six social thematic areas of focus: Education and Leadership Development. The groups stock is also cross-listed on the Uganda securities exchange (USE) under the symbol EBL and the Rwanda Stock Exchange as EQTY. Health. While Equity Group Foundation champions the socio-economic transformation of the people of Kenya and seeks partnerships along six cluster thematic areas.responsibility. loan portfolio and profitability 2001–2005: To be the dominant microfinance provider in Kenya by the year 2005 2005 . Equity’s vision has changed considerably since 1995. inclusive financial services that maximize their opportunities Our Vision: To be the champion of the socio-economic prosperity of the people of Africa Mission Statement: We offer inclusive. These have changed over the years as the company has grown and evolved. Tagline: Your Listening. positioning. Caring Partner Our Motto: Growing Together in Trust The bank takes pride in having an organization culture that values people. vision. tagline and motto. MISSION AND CORE VALUES Equity Group Holdings Limited’s is guided by corporate philosophies that outline its purpose. from thinking like a building society to an emphasis the provision of microfinance services to the current expanded vision of Page | 7 . This culture is grounded on seven core values identified by the bank as: Professionalism. give dignity and expand opportunities. Teamwork. enhances performance and supports the business. they are are as follows. Unity of Purpose. Respect and Dignity for Customers and Effective Corporate Governance.To become the microfinance provider of choice in Kenya and the region These changes reflect its change in focus. customer focused financial services that socially and economically empower our clients and other stakeholders Positioning Statement: Equity provides Inclusive Financial Services that transform livelihoods. mission.3 VISION. verbatim from their website (Equity Group Holdings Limited. Currently. Integrity. when it was first formalized: 1995–2000: To become the biggest microfinance provider in Kenya in terms of funding. Creativity. 2015): Purpose: We exist to transform the lives and livelihoods of our people socially and economically by availing them modern. Corporate & iii. will mobilise savings and term deposits for the timely provision of loan facilities to generate sufficient and sustainable profits. Marketing. 2015) is chaired by Peter Kahara Munga. Equity recognises the importance of staff members and their contribution to the institution and will avail them of opportunities for growth and job security” 4 GOVERNANCE The group has an eleven-member board of directors (Equity Group Holdings Ltd. Rwanda. Tanzania and Uganda) 5 SCOPE OF OPERATIONS Equity Bank Kenya Limited is a financial services provider headquartered in Nairobi. ii. Branchless banking. This will enable us to contribute to the members’ (clients’) welfare and to the national economy. A Managing director and CEO A Chief Operating Officer with nine departmental directors handling Corporate Strategy. Strategic Partnerships & Programmes. founder and one of the seven non-executive directors. it uses Branch banking. iv. The leadership team of the bank currently consists of: i. Kenya. To offer financial services. James Mwangi serves as the managing director and chief executive officer of the bank. These changes were necessary for expansion of the scope and ambition of the firm. It also has Page | 8 . Technology & Information. Equity Building Society.championing socio-economic prosperity in Africa. was wordy. but provided a goal that could be pursued: “We. Internal Audit and Equity Foundation An Executive Chairman and a Director of FinServe Africa Limited An Executive Director of Regional Services with Managing Directors of the bank’s regional subsidiaries reporting to him (currently South Sudan. SME Banking. Human Capital and Administration. Dr. Finance Innovation and Payments. took nearly two years to complete. The firm’s first mission statement (which has also changed and been refined over the years). which includes over 40 branches in Nairobi. The bank is Present in five countries in East Africa: Kenya.products such as Diaspora banking as well as Mobile banking through its group subsidiary. 11 in Rwanda and 9 in Tanzania (Equity Group Holdings Limited. South Sudan and Tanzania.Equitel. 2015) lists Equity Bank Kenya Ltd as having 161 branches across Kenya.1 BRANCH BANKING Branch banking refers to engaging in banking activities such as accepting deposits or making loans at facilities away from a bank's home office. Burundi and the Democratic Republic of Congo in the next two years before expanding southwards to Mozambique. The latest listing of bank branches in Kenya (Kenya Bankers Association. Rwanda. 11 in South Sudan. Equity bank limited plans to expand its operations to 10 countries (Ethiopia. 5. Figure1. & 2 below give depictions of the branch distributions in Kenya and the East African Region respectively. FinServe Africa Ltd and the MVNO . Uganda. 38 in Uganda. Malawi. Equity Bank had 161 branches in Kenya (as at November 2015). 2014). 2015) Page | 9 . Zambia and Zimbabwe) within the next 5years at a cost of Sh200 billion (Business Daily Africa. Fig. 1 Equity Bank Branch Distribution in Kenya Western Central 4% Rift Valley 18% 16% Coast 11% Nyanza 8% North eastern 6% Eastern 9% Central Coast Eastern Nairobi North Eastern Nyanza Rift Valley Western Nairobi 28% Fig.2 BRANCHLESS BANKING Branchless banking refers to a distribution channel strategy used for delivering financial services without relying on bank branches. While the strategy may complement an Page | 10 . 2 Equity Bank Branches by Country Rwanda 5% Tanzania 4% Southern Sudan 5% Uganda 16% Kenya Uganda Southern Sudan Rwanda Tanzania Kenya 70% 5. Its initial scope and therefore external environment were quite different from its focus later on as Page | 11 . Germany. Equity Bank started out as a Building Society with the goal of providing mortgage financing to low-income Kenyans. Some of these challenges almost led to the firm’s collapse. Internet Banking. There are Equity agents in the USA. branchless banking can also be used as a separate channel strategy that entirely forgoes bank branches. EFTPOS devices and mobile phone banking. 6. Each of these technologies serve to deliver a set of banking services and are part of distribution channels that may be used either separately or in conjunction to form the overall distribution channel strategy. Canada. case in point being the Building Society’s near insolvency in 1994 (The Economist. 2012). South Africa.017 indicating 39% growth. Equity bank has appointed agents in various countries. the number of agents stood at 22.1 EXTERNAL ENVIRONMENT FACTORS From the history section outlined in section one. It has numerous ATMs 5.existing bank branch network for giving customers a broader range of channels through which they can access financial services. To facilitate this. As at 30th September 2015 investor briefing report. Automated Teller Machines (ATMs).3 DIASPORA BANKING Equity Bank also has an arrangement that allows people working and living out of Kenya or the East African region where it has branches to enjoy banking services as if they were in the region. UAE and Botswana 6 ENVIRONMENTAL FACTORS. Examples of branchless banking technologies used by Equity Bank include Agency Banking. Point of Sale devices (POS). Equity Bank has experienced both great successes and challenges. Australia. UK. CHALLENGES & OPPORTUNITIES Over its 31 years of existence. The environmental conditions that have shaped Equity Bank over the years may be analyzed broadly under internal and external environmental challenges. While continuing to raise concern about areas of operation in which Equity is seen to contravene the law. was a senior government employee exposing him to the government’s rural development policy and the socio-political circumstances in the country. Kabbucho. rules were relaxed and resulting in the arising of opportunities for Kenyans to start formal. 2009). the Central Bank of Kenya declared it insolvent. Kabbucho and Mnjama. The firm’s management however contends that part of their success lies in the fact that they remained true to their core value of empowerment of Kenya’s poor (BBC News. 2002). Around the year 1982. the CBK has opted to apply Page | 12 . The first decade or so of operations of the Society were difficult as there still was a repressive climate characterized by political uncertainties and pressures resulting in poor growth rates that were not good for businesses. found partly to be based on the close working relationship Equity had with the CBK and the recognition of the positive value Equity was playing in changing lives of Kenyans: “…We put these questions to both Equity and the CBK. These uncertainties contributed to high interest rates further exacerbating defaults (Waweru & Kalani. licensed financial institutions that could bring financial services to the ‘common mwananchi’ who hitherto had had no access to the formal banking sector. It had to move from a focus on mortgages to members to savings and loans and from private ownership to public listing as a commercial bank on the Nairobi Stock Exchange in 2006. both in terms of license fees and capitalization (Coetzee. 2002. and what emerged is a picture of Equity management greatly valuing CBK supervision and of the CBK having developed a rational respect for Equity as a “financial institution that has touched many Kenyans in a special way”.1 POLITICAL FACTORS Equity Building Society was formed in the single party era in Kenya when the government enforced tight controls over the finance sector. In the early 1980s. 6. This reflected badly in the performance of EBS such that by 1994.1. The CBK however spared Equity from liquidation. 2011). Peter Munga and John Mwangi seized upon this opportunity to set up Equity Building Society. Peter Munga. This strategy of choice of the legal format was a function of what was available at the time and what could be afforded. the present Chairman of the Board.a bank. a move which Coetzee. & Mnjama. Equity gained a massive market share in this period due to its focus on individual clients as many foreign banks converted from retail to corporate banks. From 2003 to 2013. “middle-income country providing a high quality life to all its citizens by the year 2030” (Government of the Republic of Kenya. The implementation of these national strategies spurred fairly high growth from the year 2003 to 2013 with expansion of the capital and financial markets.6 percent in 2002). The economy however kept dwindling with growth rates approaching zero by the turn of the century (a growth of 0. Kenya experienced a new era of political freedom. which was a wild success.rational judgement. Growth was steady at about 5% a year. leaving a vacuum in the Page | 13 . & Mnjama. 2002) The early 1990s witnessed the height of the clamor for a multiparty democracy which the ruling party conceded to in 1992.8 billion in 2013-2014 (National Treasury of Kenya. under which flagship projects and other priority programmes will be implemented during the next 23 years to transform Kenya into a newly industrializing. 2007). recognizing that the Building Societies Act does have limitations…” (Coetzee. social and political. roping in numerous amounts of money from the local population as the NSE experienced a boom (The Guardian. Interest rates dropped and inflation stabilized while tax collection increased almost five-fold. democracy and progressive development strategies brought about by the National Rainbow Coalition (NARC) and personified in the Economic Recovery Strategy for Wealth and Employment Creation (ERSWEC) of 2003-2007 – an Action Plan that harmonized strategies for accelerated economic growth with the country's poverty reduction strategies and the ideals outlined in the NARC Manifesto (Government of Kenya. Equity did its listing during this period. 2003) . This coincided with the liberalization of the economy and the financial markets. 2007). Equity benefited immensely from the latter. from 202billion in 2002-2003 to KSh963. as did the microfinance sector in general.and later the Kenya Vision 2030– a long-term (2008-2030) national planning strategy anchored on three main pillars namely. 2015). Loans to individuals and small businesses skyrocketed due to reduced interest rates and expanding opportunities for business that were further bolstered by increased government spending on development projects. Kabbucho. economic. 2015) 6. Between 1991 and 1993. In 2008. which led to suspension of balance of payments support.1. There was a renewed effort at integration of the East African countries with renewal of the East African Community (EAC) in the year 2000. Equity bank limited plans to expand its operations to 10 countries (Ethiopia. 2002).3billion by the end of 2014.2 ECONOMIC & SOCIAL FACTORS 6. the Page | 14 . Burundi and the Democratic Republic of Congo in the next two years before expanding southwards to Mozambique.6million customers and a profit before tax of KSh.1. ending up with a customer base of 9. there was a weak reform effort and growing political problems. especially. On the other hand. Equity embraced the opportunity this brought to expand its operations within the East African Region. The austerity policies resulted in a huge decrease in government spending on health. retrenchments and so on. education. the first decade of Equity’s operation coincided with a period of dwindling economic fortunes in Kenya. the programmes resulted in slow but steady progress in domestic price decontrol and trade liberalization. inflation.1 EQUITY FIRST DECADE: 1984-1993 As noted in the preceding section. and infrastructure coupled with government divesture from various sectors through privatization of state run corporations. a series of economic and political reforms initiated by the World Bank and International Monetary Fund in Kenya since 1988 and especially after 1991 that transformed many aspects of the daily life of Kenyan people.22. These policies had an effect of shrinking the economy as they have been linked to a high rate of income inequality. Zambia and Zimbabwe) within the next 5years at a cost of Sh200 billion (Business Daily Africa. This resumed in mid-1993 and between 1993 and 1995. which have lowered the living standards. Malawi. A suffocating political environment was exacerbated by crippling Structural Adjustment Programmes by the IMF and World Bank. unemployment.retail sector. after negations with the Southern Africa Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) the EAC agreed to an expanded free trade area including member states of all three organizations. those relating to the material resources in the family (Rono. This bolstered Equity’s quest for expansion.2. and only the Registrar of Building Societies had the power to close the institution. It was argued that since there were no complaints from clients. in some cases. the initial board of five members shrunk to two. Page | 15 . and especially the government. against a capital investment of KSh. Kabbucho. 2002). The supervision by the Board was poor and management was inadequate. The CBK did not request the closure of Equity as the Central Bank was merely the inspection function. ended import licenses and completed domestic price decontrol. The Kenyan society’s confidence in these small local owned financial institutions rapidly dwindled.government completely liberalized the foreign exchange market. many employers. & Mnjama. costs simply became too high. Nonperforming loans stood at 54% of the portfolio and accumulated losses totaled Ksh. way below the required 20%. The CBK rating report of December 1993 stated that Equity was technically insolvent. They had about 20 staff that worked long hours and apparently had little in the way of a pay rise in that first decade (Coetzee. deposits were being used to meet operating expenses. insisted on employees opening accounts for salary deposits in government-controlled banks only. Others succumbed as parastatals called in their deposits from institutions whose clients defaulted on loans. In these years. The liquidity ratio stood at 5. Equity adopted a direct one-on-one customer mobilization strategy. making it easier to do business (KabuboMariara & Kiriti.3million. an opportunity they did not squander. EBS was in the doldrums and needed to change strategy fast to avoid imminent closure. Many of the smaller financial institutions took institutional deposits from government departments and parastatals to boost their capital base. For the first decade of operation was a difficult one for Equity and small finance institutions in Kenya. Many were being closed.8%.33 million. with their staff often having to drive new clients to branches by car to open new accounts. The CBK offered them a helping hand by not liquidating them. Loss of confidence in the venture was also exhibited at the top level of management. combined with the loss of clients and increasing levels of non-repayment of loans. At this stage. often starting with their own family members and close friends. Equity should be given the chance to turn around. 2002). 6. In early 2001. both of whom spearheaded the training and creation in the staff and in Equity as a whole a new awareness of their ability to make a change and of the great potential in the microfinance market. At the same time. many banks closed their rural branches and ‘rationalized’ urban branches – generally meaning closure of branches that were not located in the ‘high-streets’ of cities. and leaving a vacuum in the retail sector.2 EQUITY’S SECOND DECADE: 1994-2003 This period was characterized by increased liberalization of the economy and financial sector redefinition. The survey report also outlined Small and Medium Enterprises (SMEs). Equity also engaged external consultants to advise them on a new strategic direction.2.1. with growth rates dropping to 0. the country moved into an economic decline. Equity commissioned a survey entitled “Opportunities to Increase Market Penetration through Product Refinement and Development” with the following objectives in mind: To establish Equity’s effectiveness in penetrating these markets To analyse the competition To re-examine the suitability of the existing products and services in serving the markets The survey established that Equity could deepen its market penetration by refining its products to match the needs of its clientele. A renewed focus on Savings and Credit Cooperative Societies (SACCO’s) ensued. 2012) and Nancy Nyambici.6% by 2002. a training specialist. Similarly. who was then a banker with Trade Bank (Africa Business Magazine. Equity capitalized on the new found space by targeting the middle and low income earners and SMEs that were shunned by the mainstream banks. Of note were James Mwangi. They offered financial services to the retail sector where main stream banks were fleeing. a Bachelor of Commerce graduate from the university of Nairobi. Many foreign banks converted from retail to corporate banks. Commercial Smallholder Farmers and Salaried employees as Page | 16 . They offered very low opening charges and minimum balances in addition to making it easy and quick to open accounts with them. & Mnjama. around the year 1982. licensed financial institutions that could bring financial services to the ‘common mwananchi’ who hitherto had had no access to the formal banking sector. The bank gained a massive market share in this period due to its focus on individual clients as many foreign banks converted from retail to corporate banks.3 EQUITY’S THIRD DECADE: 2004-2014 This period witnessed rapid growth of the firm. Equity did its listing during this period.2. ending up with a customer base of 9. Non-governmental Organizations (NGOs) and ten savings and credit cooperative societies (SACCOs). which was a wild success due to the favorable macroeconomic environment explored in the previous section. Gradual legal and regulatory reforms were witnessed over the years as the government undertook liberalization policies especially from the year 1991.1. As part of the survey. 2002). Kabbucho. both in terms of license fees and capitalization (Coetzee.22. Loans to individuals and small businesses skyrocketed due to reduced interest rates and expanding opportunities for business that were further bolstered by increased government spending on development projects. Equity divided its competitors into four categories based on their legal structures: seven commercial banks.3 LEGAL AND REGULATORY ENVIRONMENT Equity was setup during a period of tight legal and regulatory control of the financial sector.3billion by the end of 2014. 6. For example. The administration of Page | 17 . leaving a vacuum in the retail sector.1. Luckily for them. 6. two non-bank financial institutions (including Postbank). Regulatory changes on issues such as minimum capitalization requirements and Microfinance Regulation were used to inform the firm’s strategy to further its objectives. Peter Munga and John Mwangi seized upon this opportunity to set up Equity Building Society.three main segments of Equity’s microfinance market that could be targeted for deeper market penetration. rules were relaxed resulting in arising of opportunities for Kenyans to start formal. at its inception. the strategy of choice of the legal format was a function of what was available at the time and what could be afforded.6million customers and a profit before tax of KSh. Equity has established merchants and payments. 2002 found that Equity maintained a healthy interaction with the CBK.1 LEADERSHIP AND MANAGEMENT Leadership is one of the most significant factors that have contributed to the success of Equity. This made it easy for Equity Building Society to transition into a bank. evidenced in Equity’s strategic decisions and their implementation. 6. It has had quite a stable and dedicated senior management team. Coetzee. they have deployed lots of ATMs. POS devices and had 17.2. Of particular note are: Page | 18 . giving examples of recommedation to srengthen internal audit systems and expand their board of governors. This brought about a dichotomy between inspections and the monitoring of the implementation of corrections suggested a vacuum which led to some unsanctioned practices by some societies.opening and closure of societies was done by the Registrar of Building Societies while the CBK’s supervisory department focused on the inspection of building societies. opening new revenue streams. gaining many more new clients and the ability to offer new products to existing clients.4 TECHNICAL FACTORS Technological advancements have been a major pillar of support to Equity’s operations and expansion of service delivery. Additionally.1. The CBK made an effort to change and adjust the Building Societies Act so that these institutions increasingly resembled banks. implementing their recommendations often. the setting up of Equity’s Mobile Virtual Network Operator (MVNO) – Equitel – has given them the opportunity to offer mobile banking services.500 Equity Group agents as at 31st December 2014. 6.2 INTERNAL ENVIRONMENT FACTORS 6. agency banking and mobile banking as key strategic initiatives. To this end. Kabbucho. There have a mutually gainful relations between the firm and its regulatory body. & Mnjama. redefining the mission and vision of Equity and then promoting it to a creed The Equity management team comprehensively implemented the management of change process according to international best practice and employs its information system to analyse trends and make strategic decisions. Page | 19 .2 HUMAN RESOURCES The quality and culture Equity’s human resources has been an important pillar in the firm’s success from early on. this process culminated in formalization of the firm’s vision and mission which was a collective effort among all staff. outstanding students for future recruitment. It additionally serves to identify talented. Founding member and Board Chairman. provides full secondary school scholarships.2. In its first decade of operation. Equity’s Wings to Fly Program. a major part of the firm’s Corporate Social Responsibility (CSR) program. the staff made a lot of sacrifices – long hours. This served to strengthen teamwork and ownership of the mission as well as identification of training needs. James Mwangi and Nancy Nyambici. mentorship and leadership training to academically gifted students from economically disadvantaged backgrounds. 2012). The firm has pursued a strategy of hiring from within for most posts and recruiting young. who has given the Board an element of continuity and presence. Additionally. This created in staff the knowledge and confidence in their capacity to change the firm’s fortunes. They made clients out of their family members. educated people with little or no experience at entry points so as to inculcate in them the firm’s desired culture. 6. friends and other networks and bought shares in the bank as it was being set-up on encouragement by their CEO (Africa Business Magazine. in 1993/94. former Finance Director and current CEO who is credited with spearheading the turnaround of the company from insolvency to the behemoth it is today by changing its focus from a building society to a bank. He has served as a source of inspiration to the organization and newer Board members John Mwangi. When the firm was at its lowest in 1992-93. extensive client recruitment efforts in difficult terrain and barely any salary raises. Peter Munga. management skills and training provided by two consultants. both management and staff credit the start of the turnaround to the self-awareness. a former long serving Chief Executive Officer who steered the company through its formative and undoubtedly quite challenging years James Mwangi. for example. Continuing to monitor its competition 5. 6. many of which are reflected in its 2002–2006 Strategic Plan. Maintaining the client-focused culture. Conducting continued market research to track and react to changing client needs and demands Page | 20 . It had a positive effect on their operations. completing the process of computerization in a record of four months. which included the installation of local area networks (LANs) in eight branches. reducing customer turn-around time from 30-40 minutes to less than 5 minutes. Addressing clients’ concern that it would be difficult f or Equity to maintain its culture if it converted to a bank 8. Maintaining a quality loan portfolio and a satisfied customer base 3. They include the following: 1. Continually training its staff in the management of risk 4.6. Extending its services to other parts of the country 9. Changing clients’ perceptions of the pricing of products 10. This greatly improved their efficiency in collecting and giving data and its service delivery to customers as well as capacity to analyse trends for management decision making.3 TECHNOLOGY The bank embraced modern IT information systems to streamline and ease their back office operations.2. even with growth 2. Equity launched Bank 2000 in June 2000. Introducing frictionless inter-branch banking services and automated teller machines 6.3 CHALLENGES Equity’s management and the Board identified several challenges faced by the firm as it set out as on a new trajectory to offer banking services. Addressing the need for commercial banking capacity in staff and systems 7. They are continually developing and revising their strategies to address these challenges. From a loss of Kshs5m ($58. The trends in growth and performance are outlined below: Page | 21 . & Mnjama.5bn (~$225m) in 2014. Equity has turned its challenges into opportunities to strategically position themselves as leaders in the banking sector in the region.000) in 1993. the bank registered a profit of Kshs22. headed by a senior professional 16. Maintaining the current management culture. Ensuring that staff members are clear on the functioning of the comprehensive incentive system (Coetzee. Performing a deeper and wider analysis and profiling of Equity’s clients 15.11. Addressing the fact that a greater public offering of shares could lead to mission drift 12. Further strengthening internal audit and control systems 13. 7 PERFORMANCE Equity Group Holdings has registered strong growth in market share and revenue over the last decade. a process they are generally succeeding at as evidenced by their continued growth and improved performance. Establishing the human resource function. a true testament to the soundness and correctness of its strategic direction and initiatives over the years. even though Equity is growing fast 14. 2002) In addressing all these. Kabbucho. Some of the initiatives the group has undertaken include but not limited to: Agency banking. merchants and payments.2 AGENCY BANKING The number of equity group agents stood at 17.500 as at 31st December 2014. Page | 22 . The figures clearly indicate that the strategic initiatives that the group employed for the last five years have borne fruits. total assets. They accounted for 33% of total bank cash transactions. growth into other geographical markets.Fig. This model is aimed at increasing reach of the bank services to the local communities which previously had no access to banking services or had to travel very long distances to access these services. loan portfolio and profit before tax has seen continued growth over the last five years. 7. 5 and Fig.1 EQUITY BANK NUMBERS Equity bank customer deposits. Fig. 6 below illustrate this growth.4: Equity Group Population Growth (Source: Equity Group Holdings Limited (Formerly Equity Bank Limited) and Subsidiaries Annual Report and Financial Statements for the year 7. 5: Equity Bank Financial Growth (Source: Equity Group Holdings Limited (Formerly Equity Bank Limited) and Subsidiaries Annual Report and Financial Statements for the year ended 31 December 2014) Fig.6: Equity Bank Growth Metrics (Source: Equity Group Holdings Limited (Formerly Equity Bank Limited) and Subsidiaries Annual Report and Financial Statements for the year ended 31 December 2014) Page | 23 .Fig. Visa. VFX (Equity Direct) and Diners Club. UnionPay. AWARDS AND RECOGNITION Equity Bank retains a passionate commitment to empowering its clients to transform their lives and livelihoods. As a matter of fact they contributed 30% of the revenues in the last financial results. Equity Group is actively recruiting more local merchants to facilitate the regional acceptance of the various partner cards among other payment solutions beyond the Bank’s channels. the Bank has evolved to become an all-inclusive financial services provider with a growing Pan African footprint. convenience and flexibility. MasterCard. PayPal. Some these include (Equity Group Holdings Ltd. The bank sees regional markets as the new frontier for growth targeting to extend its presence to five more countries and give it a total presence of ten countries in Africa. 7. JCB. To support the strategic partnerships. Key leading establishments and brands such in the retail and hospitality sectors such are already on board and many more are in the acquisition pipeline.3 REGIONAL MARKETS Other markets have continued to play a significant role in the growth strategy of equity bank group. Through a business model that is anchored on access.4 MERCHANTS & PAYMENT The Group now has arguably sub-Saharan Africa’s widest network of best in class payment channel services and card business operators including American Express. SWIFT. Equity Bank’s business model and its visionary leadership have continued to earn local. 2015): Page | 24 . regional and global accolades and recognitions.7. 8 ACCOLADES. Mwangi won the award ahead of five finalists who included Aliko Dangote. The Pan African initiative brings together over 150 of the continent’s most influential business and government leaders. Monaco. Kenya 2014: The bank with the lowest charges award from THINK BUSINESS for “Providing banking services at affordable pricing” which was a Kenyan Award presented in Nairobi. The Banking Awards recognized and reward best practices in the banking industry based on various parameters including customer service. and embracing innovation. James Mwangi was named the 'Forbes Africa Person of the Year 2012' at the prestigious Porsche Centre in Victoria Island in Lagos. Dr. 2012: Equity Bank CEO and Managing Director Dr. Dangote Group and Joyce Banda the President of Malawi. The award is given to the business leader whose organization is well-run with financial results increasing year on year. 2014: Best Bank in East Africa award from THINK BUSINESS due to “Commitment and dedication to the course of social economic transformation of East Africans” which was a Kenyan Award presented in Nairobi. innovation and reach October 2013: Dr. Nigeria.150 billion) and Bank with Lowest Charges during the annual awards. Top Ten Category a recognition for being amongst Kenya’s Top Tax Payers 2013 by KENYA REVENUE AUTHORITY: May 2013: Equity Bank was voted Best Bank in Kenya 2013 during the 8th edition of the THINK BUSINESS BANKING AWARDS. having the most influence on the events of the year gone by June. James Mwangi was named 2012 Ernst & Young World Entrepreneur of the Year at a ceremony held in Monte Carlo. The Person of The Year award recognizes the individual that has made a significant impact in business through economic growth by creating employment and spearheading innovation in the African continent. Founder and President. Kenya 2013 Distinguished Tax Payer. and model corporate citizen November 2013: Equity Bank Group Chairman Peter Munga was named Chairman of the Year during the 4th edition of the annual CAPITAL MARKETS AWARDS for laying the vision that became Equity Bank and promoting inclusivity in the financial sector November 2012: Dr. Mwangi was picked from among the 59 country finalists Page | 25 . Dr. James Mwangi was awarded the African Business Leader of the Year by AFRICA INVESTOR. The Bank also bagged the Best Bank in Kenya Tier 1 (banks with an asset base exceeding Ksh. based on a survey of market analysts at leading banks and research institutes in Africa June 2012: Equity Bank was awarded the Most Innovative Bank in Africa Award at the AFRICAN BANKERS AWARDS held in Arusha. June 2009: Most Sustainable Bank of the Year in Africa & Middle East FINANCIAL TIMES & IFC a Global Award presented in London.Best Microfinance Institution in Africa in the MICROCAPITAL AWARDS based on the bank's return. The Bank won the award on a strong brand pull. Kenyan awards presented in Nairobi. number of borrowers & size of portfolio. for its responsibility in providing solutions to the world’s most pressing issues & meeting those objectives in a financially viable way 2007 . innovation..shortlisted for the title across 51 countries. Kenya 9 CONCLUSION From examining the context within which Equity Bank operates. becoming the first business leader from Sub Saharan Africa to win this prestigious award June 2012: Equity Bank was awarded Best Managed Company in Africa award by EUROMONEY MAGAZINE.K. Tanzania. it is clear that these conditions have had a great impact on the strategic decisions undertaken over time as evidenced by the successful continued successful performance of the firm and the Page | 26 . Kenya 2004 & 2005 Trophies of Excellence from the KENYA BANKERS ASSOCIATION for being the institution with highest number of qualified bankers. a Continental Award presented in the Americas 2006: Company of the Year Award (COYA)from the KENYA INSTITUTE OF MANAGEMENT for being the best company in Corporate Planning Management. Sept 2011: AFRICA INVESTOR named Equity Bank as the Best Initiative in Support of SMEs and the Millennium Development Goals. by U. regional footprint and corporate governance. a Kenyan award presented in Nairobi. Equity Bank Group was recognized as the only financial service provider in the Emerging markets which meets the threshold of sustainability based on a criteria covering. growth & expense ratio. growth and corporate sustainability. The annual awards reward outstanding talent and achievement in Africa's financial sector September 2011: Equity Bank Group was listed as one of the 16 global emerging Markets New Sustainability Champions by a World Economic Forum Report in 2011. centralbank. This expansion will certainly require Equity to continue fine tuning and adjusting its strategies.centralbank. Kenyan hopes to open up banking to the poor. (A. Commercial Banks & Mortgage Finance Companies. 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