Description
In 1993, Equity Building Society in Kenya was failing but, by 2004, had turned itself around with remarkable results.
Summary
In 1993, Equity Building Society in Kenya was failing but, by 2004,
had turned itself around—with remarkable results. Transformed
into Equity Bank Limited (EBL), a commercial bank traded since
2006 on the Nairobi Securities Exchange, it had amassed 7.4
million accounts (57 percent of all bank accounts in Kenya) by
the end of 2013, with a continuing focus on and commitment to
small-balance depositors. The successful turnaround enabled EBL
to embark on a regional expansion plan in 2007, which led to the
acquisition of an existing microfnance institution in Uganda in
2008, and the establishment of greenfeld subsidiaries in South
Sudan in 2009, in Rwanda in 2011, and in the United Republic of
Tanzania in 2012.
The EBL greenfeld subsidiaries have expanded quickly and, in
keeping with the mission, are successfully
reaching the ‘bottom of the pyramid’ with
zero-opening-balance, no-minimum
accounts held by a signifcant number of
clients in each country. As of December
2013, Equity Bank Limited ? South Sudan (EBL South Sudan),
Equity Bank Limited – Rwanda (EBL Rwanda), and Equity Bank
Limited – Tanzania (EBL Tanzania) were serving more than
330,000 active depositors, of which 251,000 (76 percent) held
balances with less than US$100. Although EBL has been less
successful in providing loans to this segment of the market, it has
clearly contributed to increased fnancial inclusion in East Africa.
By capitalizing on the technological investments and shared
services provided by EBL headquarters in Kenya, the greenfelds’
fnancial performance has also been impressive; by the end of
2013, EBL South Sudan and EBL Tanzania were proftable and EBL
Rwanda was close to breaking even.
A key to EBL’s success in reaching the mass market for deposits
in Kenya has been its pioneering of and expertise in agency
banking. Although EBL was poised to capitalize on this
experience in its greenfield subsidiaries, challenges both
external and internal have limited its outreach via agents in
these countries as compared to its goals. EBL is working to address
these challenges and is now focused on riding the technological
wave into a ‘cash-lite,’ fnancially inclusive future.
Overview of Equity Bank Limited
EBL was founded as Equity Building Society (EBS) in 1984,
originally providing mortgage fnancing for mainly low-income
customers. In 1993, the Central Bank of Kenya declared EBS
technically insolvent. In a turnaround strategy presented to and
approved by the Central Bank, EBS shifted its focus from mainly
credit-oriented mortgage lending to deposit mobilization for the
masses.
The new model was based on ofering the low-income and
marginalized population convenient and afordable access to a
safe and secure place for their savings. The strategy also involved
capital injection by shareholders, signifcant support by donors
1
and the strengthening of management to help revive the
institution. At the same time, Kenya liberalized the fnancial
sector and, as a result, several major banks shifted focus from the
retail to the corporate sector and a number of banks closed their
rural branches, creating a gap in the retail sector and a steady
fow of new deposits to EBS. Poised to capture a new market,
EBS rose to the occasion, registering a 600-percent increase in
gross loans between 2000 and 2004. In 2004, EBS raised K Sh720
million ($9 million) via a private placement to support transition
to EBL, a commercial bank subsequently listed in August 2006 on
the Nairobi Securities Exchange.
Because of its growing success in Kenya, by 2007 EBL was
in a position to begin to realize its long-term dream of
expanding its reach first to neighbouring countries in East
Africa and then across the African continent. As one manager said,
“There were two driving forces to our expansion. First, by
2007, it looked like our model was working very well—in 20
years in Kenya, we had gone from insolvent to successful.
We saw the opportunity to replicate our success in
neighbouring countries where there was a huge bankable
but unbanked population, with high levels of poverty.
At the same time, we were experiencing the benefits of
regional integration with the revival of the East African
Community.”
Equity Bank:
South Sudan
Rwanda
Tanzania
INCREASING FINANCIAL INCLUSION IN EAST AFRICA:
Equity Bank’s Agent-Driven Model
By Ann Duval
MICROLEAD
1. United Nations Capital Development Fund (UNCDF) provided key strategic support for EBL’s transformation via MicroStart, which helped early on to establish EBL’s MIS, and via MicroSave, which
assisted EBL to develop as a market-led institution with a focus on customer service.
Case Study
2
EBL began its regional expansion by acquiring Uganda
Microfinance Limited in June 2008. The acquisition proved
to be a difficult experience; one manager commented,
“The Equity Bank model doesn’t favour acquisition—it’s
impossible to convert staf and management of an existing
institution to our culture.” Learning from this lesson, EBL re-
focused its efforts establishing greenfield subsidiaries. After
visits by a special headquarters team to several potential
locations, EBL chose Southern Sudan
2
for expansion and
established operations there in May 2009. This greenfield
subsidiary was followed by Rwanda in October 2011 and
Tanzania in February 2012.
With impressive results and an aggressive expansion
strategy, EBL has attracted major investors and donors,
including the following: Helios Investment Partners, which
acquired a 24.99 percent interest in EBL in 2007 with a
$178.7 million investment; and the International Finance
Corporation, which extended a $100 million loan to EBL in
2012 to support lending to small and medium enterprises
(SMEs), agricultural projects and women entrepreneurs in
Kenya, Uganda, South Sudan, Rwanda and Tanzania.
2. Southern Sudan Autonomous Region at the time of greenfeld establishment, which later became South Sudan.
Table 1 illustrates the massive growth of EBL (in Kenya) since 2004, both in terms of clients served and proftability:
Table 1
Equity Bank Limited in Kenya: Growth from 2004 through 2013
31 December 2004 31 December 2013 Percent growth
Number of borrowers 59,306 704,249 1,087%
Gross loan portfolio* 40 million 1.8 billion 4,400%
Number of depositors 413,095 7.4 million 1,691%
Total deposits* 65.6 million 1.8 billion 2,644%
Net income after
taxes and donations*
1.7 million
212.4 million 12,394%
Total assets* 86.8 million 2.7 billion 3,011%
Return on assets 2.5% 8.1% 224%
Total equity* 16.4 million 586.3 million 3,475%
Return on equity 15.2% 39.3% 159%
*Figures in US dollar equivalents
Source: Reports to MIX Market
Together with other donors and investors, MicroLead
fnanced the three EBL greenfeld subsidiaries in East Africa.
Performance-based agreements were signed between
MicroLead and EBL for these greenfelds as follows:
with South Sudan in
December 2009 for $2.5 million
with Rwanda in
November 2011 for $2.0 million
and with Tanzania in
December 2012 for $2.0 million
Country background and challenges
for the greenfelds
SOUTH SUDAN
South Sudan presented a large untapped market in 2009
when EBL began operations, with an estimated population
of 8 million and extremely limited bank coverage. As one
manager said, “South Sudan was our first and easiest choice
for a subsidiary—other banks had already gone there and
we saw very high potential even though we also saw the
risks.” However, the challenges and risks only grew over
time. EBL began developing its market in the absence of a
well-functioning government and central bank. Progress
was impeded when South Sudan declared its independence
from the Sudan in 2011 and violence resurged. By early
2012, the country was in economic crisis as well. With
only nascent government structures in place to mitigate
continued ethnic confict and to ensure political and economic
Equity Bank Limited greenfields in South Sudan, Rwanda and Tanzania
3
stability, the tenuous peace disintegrated in December 2013
when the conflict between the Government and rebel forces
resumed. Despite a ceasefire negotiated in January 2014,
fighting continued as of February 2014 and left thousands
of people dead and close to 900,000 displaced. In light of this
particularly challenging environment,
EBL South Sudan has achieved impressive results, serving
close to 86,000 active depositors as of December 2013.
RWANDA
Rwanda presented an attractive though much smaller
market than that of other countries in which EBL has
established greenfield subsidiaries. The 2012 FinScope
report ‘Financial Inclusion in Rwanda 2008?2012’ indicated
that there is a relatively high level of financial inclusion
—72 percent of adults had or used financial products or
mechanisms and 42 percent were being formally served.
With a population of about 10.5 million in 2012, that
level of coverage left little room for new entrants to the
market. In this more limited market, the Government of
Rwanda is driving economic development more than the
private sector; while this situation also limits opportunities
for business financing by banks, it does permit savvy actors
to take advantage of technological and other systemic
advances pushed by the Government, and to partner with
it strategically to advance financial inclusion. In keeping
with this progressive outlook, the National Bank of Rwanda’s
attitudes towards development of the financial sector are
market driven and conducive to growth and innovation; for
example, it approved agency banking guidelines (a key to
EBL success) in September 2011, prior to EBL’s establishment in
Rwanda. EBL Rwanda has been able to take advantage of the
conducive environment, building a clientele of 215,000
active depositors in just over two years from October 2011
to December 2013.
TANZANIA
In some ways, Tanzania presents an opposite picture to
Rwanda—a vast potential market for banking services
coupled with a more cautious and restrictive government.
According to a 2009 FinScope study, only 12 percent of
the population of 45 million was considered to be ‘banked,’
although this number has certainly increased since then
and did not take into account the growing presence of
mobile network operators (MNOs) in the fnancial market and
use of their services. Tanzania boasts a vibrant and growing
economy driven by the private sector at all levels (formal and
informal) and in most sectors. The Government of Tanzania
is more cautious and restrictive than the Government of
Rwanda; for example, despite concerted lobbying efforts
by the financial community, including EBL, the Bank of
Tanzania only issued agency banking guidelines in February
2013. Although the Government tends to be risk averse, and
some banking regulations are considered onerous (including
know-your-customer [KYC] requirements associated with the
agent banking guidelines), it has recently endorsed a new National
Financial Inclusion Framework. It is hoped that this framework will
help loosen the regulatory environment. Although EBL Tanzania
was not able to begin agency banking until August 2013, it had
grown its active depositor base to 32,000 by December 2013.
CHALLENGES COMMON TO RWANDA AND TANZANIA
Despite operating environments that are quite different
at the macro level, EBL faces other, similar challenges in
Rwanda and Tanzania, and is struggling with implementing its
expansion plans and reaching its outreach targets despite
good financial performance. These challenges include the
following:
A low level of knowledge of and experience with
commercial banks by the general population, and
therefore a slow uptake of banking services. This is
especially true in Tanzania, with its very low percentage of
population that is ‘banked,’ but also in Rwanda where the
reported high level of fnancial inclusion is due in large
part to the Government-established Umurenge savings
and credit cooperatives (SACCOs).
Being a new, foreign bank in markets with many well-
established local players, not only including other
commercial banks but also specialized microfnance
banks, microfnance instutions and SACCOS.
A challenging lending environment, with a high degree of
lending fraud present in the market. Fraud is facilitated in
Tanzania by the lack of a national ID with which to identify
clients and by the lack of a credit reference bureau, the frst
only beginning operations in June 2013. In Rwanda, fraud has
been coupled with a high level of competition in the fnancial
sector and lax and/or inefective lending practices; although
non-performing loans in the sector have declined from 20
percent in 2003, they still remained at 7 percent in 2013.
4
Common market-entry strategies
for the greenfelds
Aggressively opening zero-balance accounts from the
beginning. These Equity Ordinary Accounts, which are
primarily transactional accounts, are used as a marketing
tool to demystify banking for the general population,
demonstrating that anyone can open an account with
EBL. Equally important, this element of the strategy
allows the banks to begin immediately to build the base
of low-cost deposits on which they rely for their proft-
ability.
3
Table 2 shows the breakdown of EBL interest-
bearing accounts in South Sudan, Rwanda and Tanzania
as of December 2013.
Increasing and serious competition from MNOs that
are reaching very large numbers of the same clients
that EBL targets, with very similar fnancial products
(deposits, withdrawals and payments), throughout the
countries. As of December 2013, the Rwanda Utilities
Regulatory Authority reported 6.7 million telephone
subscribers, or 63.5 percent of the population. Of these
subscribers, Tigo (a major MNO) estimates that there
are 2.5 million registered mobile money users, of whom
about 50 percent actively use their accounts. In Tanzania,
the Alliance for Financial Inclusion reported 31.8 million
registered e-money accounts held through 4 MNOs
and 14 banks as of 31 December 2013, and more than
94 percent of the adult population having an e-money
account, with over 49 percent actively using these
services.
Low local-skills levels across the board, from internal
staf to external agents. The lack of experienced staf,
particularly in lending, is exacerbated in Tanzania where
the Government has restricted EBL Tanzania to eight
Kenyan nationals on staf. Despite a largely inexperienced
staf, EBL Tanzania has expanded rapidly, with resulting
gaps most evident in management structures
(particularly in the credit and operations departments)
and in the pool of staf and managers responsible for
developing the agent network. The agents in turn tend
to be minimally literate, with semi-formal businesses
and no experience with the kinds of technology and
transactions required by agent banking.
Table 2
Equity Bank Limited interest-earning accounts
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Ordinary Accounts with more than $100 balance 40,954 6,480 7,855
Jijenge Savings Accounts 72 3,243 1,970
Super Junior Savings Accounts 222 2,433 752
Call and fxed deposits 39 142 160
Total interest-earning accounts 41,287 12,298 10,737
Interest-earning accounts as percent of total
accounts
32% 4% 16%
Interest-earning accounts as percent of funded
accounts
48% 6% 33%
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
3. In Rwanda, Equity Ordinary Accounts with more than Rf100,000 ($148 at February 2014 exchange rate) earn 2 percent p.a. interest; in Tanzania, Equity Ordinary Accounts with
more than TSh200,000 ($122 at February 2014 exchange rate) earn 3 percent p.a. interest.
Diversifying both funding and revenue sources. EBL
actively pursues business from large institutions
(corporations, NGOs, government and parastatal
institutions) in order to garner a much smaller number
of more expensive but exponentially larger deposits
and to generate signifcant transactional income
from such services as foreign exchange transactions,
SWIFT (Society for Worldwide Interbank Financial
Telecommunication) transfers, and letters of credit.
Despite the differences in operating environments and challenges, EBL followed a similar fundamental business strategy
in each of the three countries in which it established greenfeld subsidiaries. The hallmarks of this strategy are as follows:
5
Income from sources other than interest and fees on
loans accounted for about 50 percent of total income in
EBL Rwanda and EBL Tanzania in 2013.
Beginning operations in urban and peri-urban areas
where it is easier to break even, before moving into
more remote (and more costly) rural areas, thereby
boosting proftability in the short term.
Adopting a low-key ‘assimilation’ strategy to mitigate
resistance to a new Kenyan bank, with a focus on building
relationships and encouraging word-of-mouth referrals
rather than using high-visibility marketing techniques.
Focusing on developing the bank’s human resource
base. In both Rwanda and Tanzania, the bank recruited
about 100 staf in country and then brought the recruits
to Kenya for a year-long hands-on training programme
at EBL.
On the one hand, the greenfelds have beneftted from coming
into a new market as a full-fedged commercial bank, with
the technological support from and shared services provided
Table 3
Equity Bank Limited impact and profitability
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Average loan balance per borrower* 5,117 10,565 9,498
Average loan outstanding per borrower/
GNI per capita
339% 1,938% 1,776%
Average deposit balance per depositor* 1,309 254 1,027
Average deposit balance per depositor/
GNI per capita
87% 47% 192%
Return on assets 9% 0% 2%
Return on equity 54% 0% 13%
Operational self-sufciency 128% 96% 116%
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
by EBL headquarters in Kenya. As one director said, “Here in
Kenya, we captured small clients frst—consumers, retailers
and small businesses and then the corporations came to us.
The greenfelds can do the opposite because the Group invested
in and took the time to develop the systems.” This approach
has enabled EBL to offer services to the ‘high end’ of the
market at the outset, thereby enabling it to become proftable
quickly. While EBL is doing well reaching the lower segments
of the market via deposits, it is not yet reaching the ‘low end’
of the market via credit as well as it does in Kenya, due to the
challenges listed above.
In South Sudan and Tanzania, where the primary focus has
been on building relationships with and providing services to
large institutions and/or SMEs, the greenfelds have been able
to break even and/or achieve proftability. Whereas, in Rwanda,
where there is a much larger number of small-balance accounts
that demonstrate a more clear expression of EBL’s mission, the
bank does not expect to show a proft until the end of 2014.
Table 3 compares impact, as measured by balances per client
per gross national income (GNI) per capita, to proftability for
each of the three greenfelds.
6
South Sudan has been the most challenging. The country was in very early
stages of development when we arrived and so the strategy here was to focus
on transactional income (mainly foreign exchange) and targeting NGOs and
other big players. In South Sudan, the key to success was to
become proftable quickly and to contribute to the proftability of the Group
overall. There is still no agent or mobile banking but we have built a nice base
and the subsidiary is proftable. But it remains a challenge because this is
not really the Equity model. We want to be a leader in retail banking but we
haven’t really achieved this.
4
4, 5 Interview with EBL Senior Manager in headquarters.
Country-specifc adaptations of the strategy
In South Sudan, the EBL market penetration strategy
combined several key elements: assisting the Government to
bank its previously un-banked employees, thereby gaining
many small-balance depositors; providing financing to
SMEs involved in cross-border trade; and, capturing the
business of large institutions, which generated signifcant
foreign exchange profts. As the Government and the Bank of
South Sudan are still building internal capacities, they have
not yet been able to issue agent-banking or mobile-banking
regulations, and EBL has relied on traditional ‘brick and mortar’
structures (bank branches and a limited number of ATMs).
In Rwanda, EBL chose to invest in a comprehensive structure
initially, with 5 branches and 6 ATMs, when it began operations
in October 2011. In two years, it had expanded to 9 branches
and 13 ATMs. It also began with a full array of banking services,
including POS for merchants, credit and debit cards, e-banking
and mobile banking. Although agent banking guidelines
were in place by the time it began operations, EBL Rwanda
did not initiate agent banking until August 2012. Within the
broader strategy of developing large clients as a basis for
proftability, EBL has focused in Rwanda on capturing large
corporate accounts, exploring agricultural value-chain
financing and brokering government transactions such as
utility payments.
EBL Tanzania did not invest as much in bank structures as EBL
Rwanda and started by ofering only a few banking channels
(POS for merchants and ATMs); in a vastly larger country, it
had 4 branches and 6 ATMs as of June 2012 and had expanded
only to 6 branches and 7 ATMs by December 2013. In
Tanzania, EBL also experienced a delay in receiving approval
for agency banking; the Bank of Tanzania only issued agent
banking guidelines in February 2013 and approved the
EBL application to undertake agency banking in May 2013.
In order to generate business in the meantime, the bank
focused on what it refers to as ‘capturing the value chain.’
This translates to generating transactional income from
corporate accounts while providing the means to generate
business down the ‘chain,’ capitalizing on the institutional
relationship to bring in individual (low-balance and low-cost)
accounts from employees, suppliers and distributors. EBL
Tanzania is also working to attract SACCOs, village savings
and loan associations (VSLAs) and village community banks
(VICOBAs) as clients, with the goal of recruiting all members
as individual clients.
In Rwanda, because of its size and level of corporate governance, we could
follow the Equity Bank model and we rolled out branches and other access points
(mainly agents) fairly quickly. Rwanda is closest to the EB model at the moment,
and we have opened a signifcant number of bank accounts. But it was a
gamble, opening so many branches from day one. The challenge here has been
that we are not yet making a proft because of opening so many branches so
early. Acquiring customers has therefore been expensive.
5
7
We have been more conservative in Tanzania, even though it is much like Kenya
10 years ago. We were nervous because of other banks’ (negative) experience be-
fore we came. It’s a large country with a dispersed population and we didn’t want
to roll out a lot of branches right away because of the cost, so we took a completely
diferent approach. We are doing mainly SME lending and progress is encouraging
because we are already breaking even though operations started after Rwanda.
The management team was astute and held back on opening retail accounts be-
cause they wanted to break even as quickly as
possible. Because Tanzania is more skewed to the SMEs, it is not
following the EBL model with a lot of retail accounts. However, now that agent
banking has been authorized, we will go after the
large-scale retail banking market.
6
Each of the EBL greenfeld subsidiaries in East Africa has
achieved impressive outreach quickly, particularly in providing
low-balance deposit services. EBL South Sudan had almost
86,000 active depositors after 4.5 years of operations despite
an extremely challenging environment, EBL Rwanda had
215,000 active depositors after just over 2 years of operations,
and EBL Tanzania had 32,000 active depositors after less
than 2 years of operations. Of total active depositors in EBL
Rwanda and EBL Tanzania, the majority held balances of less
than $100—92 percent in Rwanda and 69 percent in Tanza-
nia. Table 4 shows the deposit breakdown by country as of
December 2013.
Equity Bank Limited greenfeld outreach
6 Interview with EBL Senior Manager in headquarters.
Table 4
Equity Bank Limited deposit breakdown
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Date operations began May 2009 October 2011 February 2012
Date agent banking began n/a August 2012 August 2013
Total deposit accounts 127,639 314,434 68,299
Accounts with a positive balance 85,656 215,371 32,433
Overdrawn accounts 22,900 17,685 3,172
Zero-balance accounts
19,083 81,378 32,694
Zero-balance accounts as percent
of total accounts
15% 26% 48%
Accounts with balance of $1 to $100 30,548 197,508 22,438
Accounts with balance of $1 to $100 as percent
of total accounts with a positive balance
36% 92% 69%
Accounts with balance >$100
55,108 17,863 9,995
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
8
The greenfelds have been less successful at lending. In
part, the slow growth in the number of borrowers is due to
the standard bank policy that prohibits new branches
from extending loans for the frst six months. However, this
does not explain the low number of borrowers compared to
depositors in the three countries after several years of operations.
The vast majority of loans made by EBL are consumer loans,
most often provided to salaried employees. Although these
are the smallest loans provided by the bank, there is no clear
correlation between loan size and economic status of the
borrowers. However, if deposit and loan sizes are taken as
a proxy for the income level of clients, it would seem that
generally loans are provided to a more afuent clientele than
are deposit services. This pattern fts with global experience
that low-income clients, when presented with appropriate
products, prefer to save rather than borrow. EBL has made an
efort to reach the low-income microenterprise sector. With
funding from the United Nations Development Programme,
in 2008 it developed the Fanikisha group loan product for
Table 5
Equity Bank Limited loan distribution by type and country
(as of 31 December 2013)
South Sudan
2012 GNI/capita: $790
Rwanda
2012 GNI/capita: $600
Tanzania
2012 GNI/capita: $570
Total
outstanding
balance*
No. of
loans
Avg. size at
disb.*
Total
outstanding
balance*
No. of
loans
Avg. size at
disb.*
Total
outstanding
balance*
No.
of loans
Avg. size at
disb.*
Consumer 8,120,420 7,854 1,560 14,678,328 3,473 5,016 4,382,053 1,977 2,647
Micro 123,317 94 1,283 1,054,883 281 4,585 1,632,783 1,182 10,767
Lower SME 8,912,834 137 52,910 3,729,428 139 29,337 6,327,185 199 53,418
Upper SME 2,613,021 15 186,204 8,334,158 39 341,338
Corporate 12,988,015 11 1,184,173 11,502,911 5 2,341,412 8,844,433 6 1,370,469
Agriculture 0 0 n/a 0 0 n/a 0 0 n/a
Asset fnance 0 0 n/a 763,406 58 17,694 8,712,973 62 167,061
Mortgage 0 0 n/a 7,901,732 134 62,314 7,164,682 20 521,550
Other 0 0 n/a 0 0 n/a 5,170,877 2,022 1,952
Total 30,144,587 8,096 42,243,710 4,106 50,569,144 5,507
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
women, modeled on the Grameen Bank methodology. A
similar product has been piloted in both Rwanda and
Tanzania with mixed results and has yet to be implemented
bank wide. Table 5 shows the breakdown of the portfolio by
loan type for each country as of December 2013.
Agent banking
Agent banking has been the key to EBL’s ability to achieve its
mission of reaching what it calls the ‘bottom of the pyramid’ with
afordable and accessible deposit services. It will continue
to be the key as EBL expands the services provided through
agents. As expressed by a director in Rwanda, “Agency banking
will become a part of people’s lives. It will be the platform
for everything—utility payments, social payments, taxes and
insurance. We need to make agency banking more lucrative
for agents and ofer more services through agents—more
services make agents more relevant and will get people using
agencies.”
9
EBL Rwanda began agency banking in August 2012, ten
months after beginning operations in the country. EBL Tanzania
began one year later in August 2013, eighteen months after
beginning operations and six months after agent banking
guidelines were issued by the Bank of Tanzania.
As illustrated in table 6, there is a high correlation between
having an agent network in place and achieving success in
opening new mass market accounts. Just over a year after
beginning agent banking, EBL Rwanda had opened two
thirds of its accounts through agents. Whereas EBL Tanzania,
with agents newly in place, had opened just 3 percent of its
accounts via agents at the end of 2013.
Table 6
Equity Bank Limited channels and results in Rwanda and Tanzania
(as of 31 December 2013)
Rwanda Tanzania
Date began operations October 2011 February 2012
Agency guidelines issued by central bank September 2011 February 2013
First agents operational August 2012 August 2013
Number of branches and ATMs 9 branches, 13 ATMs 6 branches, 7 ATMs
Number of agents 540* 133
Number of accounts opened
296,749 68,299
Number of accounts opened via tellers 97,927 (33% of total) 66,306 (97% of total)
Number of accounts opened via agents 198,822 (67% of total) 1,993 (3% of total)
Percent of dormant (zero-balance) accounts 26% 48%
Deposits via tellers at branches
23% 77%
Deposits via ATMs
4% n/a
Deposits via agents
73% 15%
Deposits via TISS/EFT
0 8%
Withdrawals via tellers at branches
28% 50%
Withdrawals via ATMs
44% 47%
Withdrawals via agents
28% 3%
*As of 31 December 2013, there were 727 agents, of which 613 had been approved by the National
Bank of Rwanda and 540 were active.
Acronyms: TISS/EFT, Tanzania Inter-bank Settlement System/Electronic funds transfer
How agent banking works in
Equity Bank Limited
Following is a brief explanation of the way that agent banking works within EBL, which is helpful in understanding the
challenges faced by the bank in developing its agent networks in Rwanda and Tanzania:
The agent opens a separate bank account for the agency business. With each cash transaction performed by the
agent on behalf of the bank, this account is automatically debited (for client deposits) or credited (for client
withdrawals). The amount of money in this account therefore determines (and limits) the amount of business an agent
can handle on a daily basis, whether deposits or withdrawals.
EBL provides each agent with a GSM-enabled POS and cell phone, at no cost to the agent, which are able to connect directly
to the EBL server in Nairobi.
10
Challenges to developing agency banking
In Kenya, EBL has agency banking down to a science, with a
standard approach that includes seven days of on-site training
during which EBL branding takes place and results in new
agents being in business within two weeks. In Rwanda and
Tanzania, however, EBL has faced a number of challenges in
developing its agent networks, which have negatively
impacted the bank’s ability to reach its targets for large numbers
of small-balance depositors. These challenges, which are
both external and internal, include the following:
Agency banking is a new product/channel in these markets,
and EBL is a new, foreign bank in the market. So, initially,
there is a low/slow level of uptake of EBL agent services.
The low/slow level of uptake by potential customers
afects agents’ proftability, making it more difcult to
convince them that being an agent will be worth their
while. (In Rwanda, EBL management said that it takes
three to four years to really develop an agent business
to optimum proftability, which is a long time to keep an
agent interested.)
Agent foat is a big issue in Rwanda.
9
The amount of
money required to open an agent account, and the
amount of money most agents keep in their account, is
not sufcient to handle a successful and growing agent
business. Therefore, agents must either make multiple
trips to the nearest bank branch in a day to deposit cash
or to deposit money with another agent in the vicinity,
which then impacts that agent’s ability to undertake
further transactions.
EBL and its agents have experienced a number of
technical glitches. They are often due to connectivity
issues, such as lack of consistent service from MNOs in
the area or insufcient bandwidth. Other issues relate
to the confguration and performance of the EBL server;
while these issues were especially noticeable prior to
and immediately after the major system upgrade and
migration undertaken by EBL headquarters in Kenya in
late 2013, agents were still reporting difculties in early
2014.
10
The need to have a debit card to transact through an
agent has had drawbacks for clients, including the delay
in issuing cards (from Kenya) and the difculty of getting
the card if the customer is far from the branch.
There is not enough EBL staf responsible for managing
the growing agent network, an important drawback
given the amount of handholding needed for new
agents and the need to deal with almost daily transactional
issues reported by multiple agents.
There is a need for constant training at the agent level
because agents’ employees (who usually conduct the
transactions) often leave and their replacements have
to be trained. This is costly for the bank and currently
difcult given EBL’s understafng in this area.
Agents have been recruited without any strategic
distribution of agents geographically. Each agent is
attached to a specifc branch but not necessarily the
closest branch; an agent can be as many as 150 kilometres
away from the branch and is often at least 30 to 50
kilometres away. This has repercussions both for clients
who need to go to the branch to get their debit card
or complete their ID process in order to activate their
account, and for efective agent support and follow-up
by EBL staf.
Growing the menu-ofering to a full fnancial bufet,
from cash-in and cash-out to credit origination, payments
and insurance, is a key challenge for agency banking.
7. In Tanzania, because of the lack of a national ID and the central bank’s stringent KYC regulations, there is an additional step in activating the account (being able to withdraw or make payments): the
customer must go to the branch and complete the identifcation process using biometrics (fngerprints taken and used for the bank’s internal personal identifcation system).
8. Although a client can open an account with no money, the account is immediately debited for the amount of the debit card, resulting in a number of immediately overdrawn accounts.
9. Float was not raised as an issue in Tanzania, perhaps because the agent network is not yet mature enough to be dealing with this challenge.
10. According to a March 2014 article in Business Daily, EBL ’had to deal with a public relations crisis last year following system breakdowns that caused ATM outages attributed to system overload and
the upgrade process.’ The technical glitches were therefore widespread in both Kenya and in the greenfelds.
A new customer opens an account instantly upon presentation of an ID and completion of a simple one-page form with basic
personal information (no deposit is required).
7
The agent takes photographs of the customer, the form and the ID, completes a simple information form on his/her phone,
and then sends all to the EBL Central Processing Center in Kenya.
EBL immediately sends the agent and the new customer a SMS, acknowledging the new account and giving the customer
the account number. At this point, the customer can immediately begin to use the account to deposit funds.
Also at this point, EBL headquarters in Kenya issues a debit card to the customer (debiting his/her new account for the
associated charge that is about $5), which is needed to withdraw funds and/or make payments through an agent.
8
If a
customer has access to EBL mobile banking, he/she can withdraw via cell phone with an agent, using the agent’s third-
party card. However, rollout of mobile banking has been slow in both countries and few
low-end clients bank by phone.
11
Strategies to overcome agent banking challenges
The greenfelds are quite aware of the challenges and are working to fnd solutions that will enable
them to scale up their agent banking networks. Table 7 lays out some key strategies already being
implemented or being considered in EBL Rwanda and EBL Tanzania to address the challenges they face in
efectively rolling out their agency banking channels.
Table 7
Strategies to address agent banking challenges in Rwanda and Tanzania
Challenge Solutions
Unknown product/channel and unknown bank Currently, EBL’s marketing on behalf of agents has been limited to branding the agents’
premises (painting the storefront in EBL colors, including the EBL logo). In Tanzania,
where establishing agents has been more challenging, EBL tested the idea of identifying
clients on behalf of the agents and bringing them to the agents’ door (at no cost to the
agent). This idea did not prove sustainable. However, EBL is still contemplating allocating
staf time for door-to-door marketing together with agents or their employees in order to
generate more business, as well as adding more traditional marketing techniques such as
branded t-shirts and caps, producing and distributing fyers and creating small marketing
events in tents set up near agents’ businesses.
Insufcient agent foat EBL Rwanda is considering making loans to agents to help increase their business volume,
and therefore the ‘foat,’ in their agency accounts. It is experimenting with this approach
through a joint programme with Tigo, funded by the Cherie Blair Foundation for Women,
targeting Tigo Cash women agents. Under this programme, EBL Rwanda makes small
loans ($100?$200) to the Tigo Cash agents for 12 months, at a subsidized rate of 1 per-
cent per month fat interest, with monthly repayments. Results of the pilot programme
will guide EBL Rwanda in developing loan products for its own agents.
Recurring technical glitches Both EBL Rwanda and EBL Tanzania have addressed the issues of connectivity and
bandwidth by providing agents with multiple SIM cards; when one MNO’s network is not
functioning well, the agent can switch to another network.
Delayed or hard-to-access debit cards EBL acquired the technology necessary to produce its own debit cards in late 2013. The
equipment to produce the cards was sent to both EBL Rwanda and EBL Tanzania in Janu-
ary 2014 and was to be tested in one branch in each country by the end of February 2014.
After the trial has proven successful and the technology rolled out, each branch ultimately
will be able to produce its own ‘instant’ debit cards on site.
Geographic distribution At both EBL Rwanda and EBL Tanzania, managers are considering a more rational and
efective distribution of both agents and staf that supervise them. At EBL Rwanda,
branches are moving towards a system in which agents will be clustered, with each staf
person assigned to a particular area, to enable better control, supervision and communication.
EBL Tanzania plans to adopt a more strategic approach to recruiting agents in the frst
place, requiring agent supervisors to identify which neighborhoods and streets have the
most potential for agent banking and focusing the recruitment of new agents on these
locations.
Agent training Continued intensive training will be part of an ongoing strategy for the foreseeable
future. With more staf dedicated to developing the agent business, EBL greenfelds will
not only continue with, but intensify, regular training for agents and their employees.
In Rwanda, EBL is considering upgrading the quality of agents, focusing on recruiting
people who have a university degree and having management sit in on the selection
process.
12
What’s next for Equity Bank Limited?
EBL directors at both headquarters in Kenya and the greenfelds agree on the EBL vision for the near future:
Focusing frst on strengthening the existing ‘core’ while contemplating further regional expansion. As
one director said, “We haven’t changed our overall Africa vision. We would love to be present in all of the
East African countries, even though some of them would be a huge challenge. But, we learned from our
frst three greenfelds and we will be more cautious going forward.” Other directors echoed this sentiment,
saying that the priority is deepening EBL’s presence in existing markets. This means, in Tanzania,
increasing the number of agents and developing mobile banking and, in Rwanda, continuing to scale
up the agent banking network. Through this strengthening, EBL expects that its three greenfelds and
Uganda subsidiary will be able to contribute 25 percent of the Group’s profts within the next few years.
Continuing to invest in people. EBL has established a new department for Learning and Leadership
Development, which is separate from its Human Resources department. The department collaborates
with Human Resources to identify key competencies for now and for the future and to identify talented
staf capable of rising to the challenge. EBL is already partnering with Ivy League business schools in the
United States of America to provide advanced education opportunities for executive staf, and is piloting
an internal education and advancement programme for middle and line managers.
Capitalizing on the technological infrastructure in which the bank has invested heavily and moving
EBL to the forefront of 21st Century banking. As one director summarized the future direction for the
bank, “We have seen that bricks and mortar are no longer viable to overcome banking barriers, both
Lessons learned by Equity Bank Limited
in the frst greenfelds
Many EBL directors in Kenya, Rwanda and Tanzania cited the following key lessons learned from the experience
of expansion in Uganda, South Sudan, Rwanda and Tanzania:
Having tried both acquisition and greenfeld approaches, it is clear that establishing greenfeld
subsidiaries is the way to go in order to ensure that EBL instills its culture in each new bank.
Having a strong corporate parent at the centre is critical in driving innovations and growing and
sustaining the business.
It is possible to overcome human-resource defcits by identifying young people with high potential
in a new country and then providing hands-on training in Kenya, not only in technical aspects of job
performance but in bank expectations, attitudes and customer service. This approach will be adopted
in all future greenfelds.
For more rapid success, it is important to ensure that necessary permissions and regulations are in
place before beginning operations. Two of the most important considerations are having a banking
license before recruiting and training staf and ensuring that the necessary regulations are in place for
both agency and mobile banking.
It is imperative for the telecommunications infrastructure to be in place already so that the EBL model
can work.
Even in countries where the conditions seem to be right, it can be difcult to establish credibility. The
process needs a lot of good will. It is a long-term proposition, and it is expensive.
13
geographical (dealing with the distance to branches) and psychological (overcoming the banking
myth). In addition, the dynamics of current demographics, with a high percentage of youth in the
population, dictate a need for more fexible and responsive products. Society is moving to virtual
banking via mobile phones and payment cards; our goal is to make customers comfortable with mobile
money so that we can facilitate the move to a ‘cash-lite’ economy. At that point, banking will no longer
be an ‘event’ that needs to be demystifed.”
Developing new business lines, including insurance, brokerage services and mobile services. In Kenya,
the Equity Insurance Agency already issues 1.5 million policies per year; in fact, if it were an independent
company, it would be the third largest insurance company in Kenya. EBL plans to innovate around
micro-insurance products and to be able to introduce such products into the greenfeld markets within
two years.
Becoming a mobile virtual network operator (MVNO). EBL in Kenya has applied for and obtained a license
to become a MVNO; with its own SIM cards, the bank will be independent from existing competitor
MNOs and therefore gain greater control of the quality and reach of its mobile banking services.
MicroLead—A global thematic initiative
UNCDF’s frst global thematic initiative supports the expansion of fnancial service providers (FSPs) that pursue a
savings-led approach, in the belief that savings, not credit, will allow low-income populations to take control of
their complicated fnancial lives. Initiated in 2008 and funded by UNCDF and the Bill & Melinda Gates Foundation,
MicroLead frst focused on ‘greenfelding’ in least developed countries, awarding grants and loans to proven market
leaders. The programme’s goal was to reach 525,000 new clients by 2013. By the end of 2013, MicroLead partners
surpassed this goal by reaching 730,000 new depositors.
Since 2011, the programme has expanded with funding from The MasterCard Foundation and the Livelihoods and Food
Security Trust Fund (LIFT) in Myanmar. This new phase of the programme includes capacity-building by technical service
providers with FSPs poised for signifcant growth in providing deposit services to low-income populations, outreach to
rural areas and outreach to women. The new projects funded by MicroLead Expansion include bank downscaling
and ‘greenfelding,’ fnancial cooperative creation and strengthening, village savings and loan association linkages to
formal fnancial institutions, microfnance institution transformation into deposit-taking institutions, human-centred
product design development, and deployment of alternative delivery channels such as mobile money, agents and
point-of-sale devices. With specifc emphasis on deposit mobilization, women, rural markets, and technology,
MicroLead Expansion will reach over one million additional small-balance depositors by 2016.
MicroLead results in a nutshell
• To date, the programme has awarded funding, totalling $43.5 million, in 19 countries for 27 projects
(working with 36 FSPs).
• Eclipsing its own targets, MicroLead’s frst phase, which involved 19 of the 36 partner FSPs, surpassed its
2013 target of 525,000 new depositors and instead reached 730,000 new depositors.
• The target of MicroLead Expansion, working with 17 FSPs and ending in June 2017, is to reach over one
million rural depositors in sub-Saharan Africa and over 100,000 rural depositors in Myanmar.
July 2014
Copyright © UN Capital Development Fund
All rights reserved.
The views expressed in this publication are those
of the author(s) and do not necessarily represent
those of the United Nations, including UNCDF, or
their Member States
doc_895660671.pdf
In 1993, Equity Building Society in Kenya was failing but, by 2004, had turned itself around with remarkable results.
Summary
In 1993, Equity Building Society in Kenya was failing but, by 2004,
had turned itself around—with remarkable results. Transformed
into Equity Bank Limited (EBL), a commercial bank traded since
2006 on the Nairobi Securities Exchange, it had amassed 7.4
million accounts (57 percent of all bank accounts in Kenya) by
the end of 2013, with a continuing focus on and commitment to
small-balance depositors. The successful turnaround enabled EBL
to embark on a regional expansion plan in 2007, which led to the
acquisition of an existing microfnance institution in Uganda in
2008, and the establishment of greenfeld subsidiaries in South
Sudan in 2009, in Rwanda in 2011, and in the United Republic of
Tanzania in 2012.
The EBL greenfeld subsidiaries have expanded quickly and, in
keeping with the mission, are successfully
reaching the ‘bottom of the pyramid’ with
zero-opening-balance, no-minimum
accounts held by a signifcant number of
clients in each country. As of December
2013, Equity Bank Limited ? South Sudan (EBL South Sudan),
Equity Bank Limited – Rwanda (EBL Rwanda), and Equity Bank
Limited – Tanzania (EBL Tanzania) were serving more than
330,000 active depositors, of which 251,000 (76 percent) held
balances with less than US$100. Although EBL has been less
successful in providing loans to this segment of the market, it has
clearly contributed to increased fnancial inclusion in East Africa.
By capitalizing on the technological investments and shared
services provided by EBL headquarters in Kenya, the greenfelds’
fnancial performance has also been impressive; by the end of
2013, EBL South Sudan and EBL Tanzania were proftable and EBL
Rwanda was close to breaking even.
A key to EBL’s success in reaching the mass market for deposits
in Kenya has been its pioneering of and expertise in agency
banking. Although EBL was poised to capitalize on this
experience in its greenfield subsidiaries, challenges both
external and internal have limited its outreach via agents in
these countries as compared to its goals. EBL is working to address
these challenges and is now focused on riding the technological
wave into a ‘cash-lite,’ fnancially inclusive future.
Overview of Equity Bank Limited
EBL was founded as Equity Building Society (EBS) in 1984,
originally providing mortgage fnancing for mainly low-income
customers. In 1993, the Central Bank of Kenya declared EBS
technically insolvent. In a turnaround strategy presented to and
approved by the Central Bank, EBS shifted its focus from mainly
credit-oriented mortgage lending to deposit mobilization for the
masses.
The new model was based on ofering the low-income and
marginalized population convenient and afordable access to a
safe and secure place for their savings. The strategy also involved
capital injection by shareholders, signifcant support by donors
1
and the strengthening of management to help revive the
institution. At the same time, Kenya liberalized the fnancial
sector and, as a result, several major banks shifted focus from the
retail to the corporate sector and a number of banks closed their
rural branches, creating a gap in the retail sector and a steady
fow of new deposits to EBS. Poised to capture a new market,
EBS rose to the occasion, registering a 600-percent increase in
gross loans between 2000 and 2004. In 2004, EBS raised K Sh720
million ($9 million) via a private placement to support transition
to EBL, a commercial bank subsequently listed in August 2006 on
the Nairobi Securities Exchange.
Because of its growing success in Kenya, by 2007 EBL was
in a position to begin to realize its long-term dream of
expanding its reach first to neighbouring countries in East
Africa and then across the African continent. As one manager said,
“There were two driving forces to our expansion. First, by
2007, it looked like our model was working very well—in 20
years in Kenya, we had gone from insolvent to successful.
We saw the opportunity to replicate our success in
neighbouring countries where there was a huge bankable
but unbanked population, with high levels of poverty.
At the same time, we were experiencing the benefits of
regional integration with the revival of the East African
Community.”
Equity Bank:
South Sudan
Rwanda
Tanzania
INCREASING FINANCIAL INCLUSION IN EAST AFRICA:
Equity Bank’s Agent-Driven Model
By Ann Duval
MICROLEAD
1. United Nations Capital Development Fund (UNCDF) provided key strategic support for EBL’s transformation via MicroStart, which helped early on to establish EBL’s MIS, and via MicroSave, which
assisted EBL to develop as a market-led institution with a focus on customer service.
Case Study
2
EBL began its regional expansion by acquiring Uganda
Microfinance Limited in June 2008. The acquisition proved
to be a difficult experience; one manager commented,
“The Equity Bank model doesn’t favour acquisition—it’s
impossible to convert staf and management of an existing
institution to our culture.” Learning from this lesson, EBL re-
focused its efforts establishing greenfield subsidiaries. After
visits by a special headquarters team to several potential
locations, EBL chose Southern Sudan
2
for expansion and
established operations there in May 2009. This greenfield
subsidiary was followed by Rwanda in October 2011 and
Tanzania in February 2012.
With impressive results and an aggressive expansion
strategy, EBL has attracted major investors and donors,
including the following: Helios Investment Partners, which
acquired a 24.99 percent interest in EBL in 2007 with a
$178.7 million investment; and the International Finance
Corporation, which extended a $100 million loan to EBL in
2012 to support lending to small and medium enterprises
(SMEs), agricultural projects and women entrepreneurs in
Kenya, Uganda, South Sudan, Rwanda and Tanzania.
2. Southern Sudan Autonomous Region at the time of greenfeld establishment, which later became South Sudan.
Table 1 illustrates the massive growth of EBL (in Kenya) since 2004, both in terms of clients served and proftability:
Table 1
Equity Bank Limited in Kenya: Growth from 2004 through 2013
31 December 2004 31 December 2013 Percent growth
Number of borrowers 59,306 704,249 1,087%
Gross loan portfolio* 40 million 1.8 billion 4,400%
Number of depositors 413,095 7.4 million 1,691%
Total deposits* 65.6 million 1.8 billion 2,644%
Net income after
taxes and donations*
1.7 million
212.4 million 12,394%
Total assets* 86.8 million 2.7 billion 3,011%
Return on assets 2.5% 8.1% 224%
Total equity* 16.4 million 586.3 million 3,475%
Return on equity 15.2% 39.3% 159%
*Figures in US dollar equivalents
Source: Reports to MIX Market
Together with other donors and investors, MicroLead
fnanced the three EBL greenfeld subsidiaries in East Africa.
Performance-based agreements were signed between
MicroLead and EBL for these greenfelds as follows:
with South Sudan in
December 2009 for $2.5 million
with Rwanda in
November 2011 for $2.0 million
and with Tanzania in
December 2012 for $2.0 million
Country background and challenges
for the greenfelds
SOUTH SUDAN
South Sudan presented a large untapped market in 2009
when EBL began operations, with an estimated population
of 8 million and extremely limited bank coverage. As one
manager said, “South Sudan was our first and easiest choice
for a subsidiary—other banks had already gone there and
we saw very high potential even though we also saw the
risks.” However, the challenges and risks only grew over
time. EBL began developing its market in the absence of a
well-functioning government and central bank. Progress
was impeded when South Sudan declared its independence
from the Sudan in 2011 and violence resurged. By early
2012, the country was in economic crisis as well. With
only nascent government structures in place to mitigate
continued ethnic confict and to ensure political and economic
Equity Bank Limited greenfields in South Sudan, Rwanda and Tanzania
3
stability, the tenuous peace disintegrated in December 2013
when the conflict between the Government and rebel forces
resumed. Despite a ceasefire negotiated in January 2014,
fighting continued as of February 2014 and left thousands
of people dead and close to 900,000 displaced. In light of this
particularly challenging environment,
EBL South Sudan has achieved impressive results, serving
close to 86,000 active depositors as of December 2013.
RWANDA
Rwanda presented an attractive though much smaller
market than that of other countries in which EBL has
established greenfield subsidiaries. The 2012 FinScope
report ‘Financial Inclusion in Rwanda 2008?2012’ indicated
that there is a relatively high level of financial inclusion
—72 percent of adults had or used financial products or
mechanisms and 42 percent were being formally served.
With a population of about 10.5 million in 2012, that
level of coverage left little room for new entrants to the
market. In this more limited market, the Government of
Rwanda is driving economic development more than the
private sector; while this situation also limits opportunities
for business financing by banks, it does permit savvy actors
to take advantage of technological and other systemic
advances pushed by the Government, and to partner with
it strategically to advance financial inclusion. In keeping
with this progressive outlook, the National Bank of Rwanda’s
attitudes towards development of the financial sector are
market driven and conducive to growth and innovation; for
example, it approved agency banking guidelines (a key to
EBL success) in September 2011, prior to EBL’s establishment in
Rwanda. EBL Rwanda has been able to take advantage of the
conducive environment, building a clientele of 215,000
active depositors in just over two years from October 2011
to December 2013.
TANZANIA
In some ways, Tanzania presents an opposite picture to
Rwanda—a vast potential market for banking services
coupled with a more cautious and restrictive government.
According to a 2009 FinScope study, only 12 percent of
the population of 45 million was considered to be ‘banked,’
although this number has certainly increased since then
and did not take into account the growing presence of
mobile network operators (MNOs) in the fnancial market and
use of their services. Tanzania boasts a vibrant and growing
economy driven by the private sector at all levels (formal and
informal) and in most sectors. The Government of Tanzania
is more cautious and restrictive than the Government of
Rwanda; for example, despite concerted lobbying efforts
by the financial community, including EBL, the Bank of
Tanzania only issued agency banking guidelines in February
2013. Although the Government tends to be risk averse, and
some banking regulations are considered onerous (including
know-your-customer [KYC] requirements associated with the
agent banking guidelines), it has recently endorsed a new National
Financial Inclusion Framework. It is hoped that this framework will
help loosen the regulatory environment. Although EBL Tanzania
was not able to begin agency banking until August 2013, it had
grown its active depositor base to 32,000 by December 2013.
CHALLENGES COMMON TO RWANDA AND TANZANIA
Despite operating environments that are quite different
at the macro level, EBL faces other, similar challenges in
Rwanda and Tanzania, and is struggling with implementing its
expansion plans and reaching its outreach targets despite
good financial performance. These challenges include the
following:
A low level of knowledge of and experience with
commercial banks by the general population, and
therefore a slow uptake of banking services. This is
especially true in Tanzania, with its very low percentage of
population that is ‘banked,’ but also in Rwanda where the
reported high level of fnancial inclusion is due in large
part to the Government-established Umurenge savings
and credit cooperatives (SACCOs).
Being a new, foreign bank in markets with many well-
established local players, not only including other
commercial banks but also specialized microfnance
banks, microfnance instutions and SACCOS.
A challenging lending environment, with a high degree of
lending fraud present in the market. Fraud is facilitated in
Tanzania by the lack of a national ID with which to identify
clients and by the lack of a credit reference bureau, the frst
only beginning operations in June 2013. In Rwanda, fraud has
been coupled with a high level of competition in the fnancial
sector and lax and/or inefective lending practices; although
non-performing loans in the sector have declined from 20
percent in 2003, they still remained at 7 percent in 2013.
4
Common market-entry strategies
for the greenfelds
Aggressively opening zero-balance accounts from the
beginning. These Equity Ordinary Accounts, which are
primarily transactional accounts, are used as a marketing
tool to demystify banking for the general population,
demonstrating that anyone can open an account with
EBL. Equally important, this element of the strategy
allows the banks to begin immediately to build the base
of low-cost deposits on which they rely for their proft-
ability.
3
Table 2 shows the breakdown of EBL interest-
bearing accounts in South Sudan, Rwanda and Tanzania
as of December 2013.
Increasing and serious competition from MNOs that
are reaching very large numbers of the same clients
that EBL targets, with very similar fnancial products
(deposits, withdrawals and payments), throughout the
countries. As of December 2013, the Rwanda Utilities
Regulatory Authority reported 6.7 million telephone
subscribers, or 63.5 percent of the population. Of these
subscribers, Tigo (a major MNO) estimates that there
are 2.5 million registered mobile money users, of whom
about 50 percent actively use their accounts. In Tanzania,
the Alliance for Financial Inclusion reported 31.8 million
registered e-money accounts held through 4 MNOs
and 14 banks as of 31 December 2013, and more than
94 percent of the adult population having an e-money
account, with over 49 percent actively using these
services.
Low local-skills levels across the board, from internal
staf to external agents. The lack of experienced staf,
particularly in lending, is exacerbated in Tanzania where
the Government has restricted EBL Tanzania to eight
Kenyan nationals on staf. Despite a largely inexperienced
staf, EBL Tanzania has expanded rapidly, with resulting
gaps most evident in management structures
(particularly in the credit and operations departments)
and in the pool of staf and managers responsible for
developing the agent network. The agents in turn tend
to be minimally literate, with semi-formal businesses
and no experience with the kinds of technology and
transactions required by agent banking.
Table 2
Equity Bank Limited interest-earning accounts
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Ordinary Accounts with more than $100 balance 40,954 6,480 7,855
Jijenge Savings Accounts 72 3,243 1,970
Super Junior Savings Accounts 222 2,433 752
Call and fxed deposits 39 142 160
Total interest-earning accounts 41,287 12,298 10,737
Interest-earning accounts as percent of total
accounts
32% 4% 16%
Interest-earning accounts as percent of funded
accounts
48% 6% 33%
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
3. In Rwanda, Equity Ordinary Accounts with more than Rf100,000 ($148 at February 2014 exchange rate) earn 2 percent p.a. interest; in Tanzania, Equity Ordinary Accounts with
more than TSh200,000 ($122 at February 2014 exchange rate) earn 3 percent p.a. interest.
Diversifying both funding and revenue sources. EBL
actively pursues business from large institutions
(corporations, NGOs, government and parastatal
institutions) in order to garner a much smaller number
of more expensive but exponentially larger deposits
and to generate signifcant transactional income
from such services as foreign exchange transactions,
SWIFT (Society for Worldwide Interbank Financial
Telecommunication) transfers, and letters of credit.
Despite the differences in operating environments and challenges, EBL followed a similar fundamental business strategy
in each of the three countries in which it established greenfeld subsidiaries. The hallmarks of this strategy are as follows:
5
Income from sources other than interest and fees on
loans accounted for about 50 percent of total income in
EBL Rwanda and EBL Tanzania in 2013.
Beginning operations in urban and peri-urban areas
where it is easier to break even, before moving into
more remote (and more costly) rural areas, thereby
boosting proftability in the short term.
Adopting a low-key ‘assimilation’ strategy to mitigate
resistance to a new Kenyan bank, with a focus on building
relationships and encouraging word-of-mouth referrals
rather than using high-visibility marketing techniques.
Focusing on developing the bank’s human resource
base. In both Rwanda and Tanzania, the bank recruited
about 100 staf in country and then brought the recruits
to Kenya for a year-long hands-on training programme
at EBL.
On the one hand, the greenfelds have beneftted from coming
into a new market as a full-fedged commercial bank, with
the technological support from and shared services provided
Table 3
Equity Bank Limited impact and profitability
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Average loan balance per borrower* 5,117 10,565 9,498
Average loan outstanding per borrower/
GNI per capita
339% 1,938% 1,776%
Average deposit balance per depositor* 1,309 254 1,027
Average deposit balance per depositor/
GNI per capita
87% 47% 192%
Return on assets 9% 0% 2%
Return on equity 54% 0% 13%
Operational self-sufciency 128% 96% 116%
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
by EBL headquarters in Kenya. As one director said, “Here in
Kenya, we captured small clients frst—consumers, retailers
and small businesses and then the corporations came to us.
The greenfelds can do the opposite because the Group invested
in and took the time to develop the systems.” This approach
has enabled EBL to offer services to the ‘high end’ of the
market at the outset, thereby enabling it to become proftable
quickly. While EBL is doing well reaching the lower segments
of the market via deposits, it is not yet reaching the ‘low end’
of the market via credit as well as it does in Kenya, due to the
challenges listed above.
In South Sudan and Tanzania, where the primary focus has
been on building relationships with and providing services to
large institutions and/or SMEs, the greenfelds have been able
to break even and/or achieve proftability. Whereas, in Rwanda,
where there is a much larger number of small-balance accounts
that demonstrate a more clear expression of EBL’s mission, the
bank does not expect to show a proft until the end of 2014.
Table 3 compares impact, as measured by balances per client
per gross national income (GNI) per capita, to proftability for
each of the three greenfelds.
6
South Sudan has been the most challenging. The country was in very early
stages of development when we arrived and so the strategy here was to focus
on transactional income (mainly foreign exchange) and targeting NGOs and
other big players. In South Sudan, the key to success was to
become proftable quickly and to contribute to the proftability of the Group
overall. There is still no agent or mobile banking but we have built a nice base
and the subsidiary is proftable. But it remains a challenge because this is
not really the Equity model. We want to be a leader in retail banking but we
haven’t really achieved this.
4
4, 5 Interview with EBL Senior Manager in headquarters.
Country-specifc adaptations of the strategy
In South Sudan, the EBL market penetration strategy
combined several key elements: assisting the Government to
bank its previously un-banked employees, thereby gaining
many small-balance depositors; providing financing to
SMEs involved in cross-border trade; and, capturing the
business of large institutions, which generated signifcant
foreign exchange profts. As the Government and the Bank of
South Sudan are still building internal capacities, they have
not yet been able to issue agent-banking or mobile-banking
regulations, and EBL has relied on traditional ‘brick and mortar’
structures (bank branches and a limited number of ATMs).
In Rwanda, EBL chose to invest in a comprehensive structure
initially, with 5 branches and 6 ATMs, when it began operations
in October 2011. In two years, it had expanded to 9 branches
and 13 ATMs. It also began with a full array of banking services,
including POS for merchants, credit and debit cards, e-banking
and mobile banking. Although agent banking guidelines
were in place by the time it began operations, EBL Rwanda
did not initiate agent banking until August 2012. Within the
broader strategy of developing large clients as a basis for
proftability, EBL has focused in Rwanda on capturing large
corporate accounts, exploring agricultural value-chain
financing and brokering government transactions such as
utility payments.
EBL Tanzania did not invest as much in bank structures as EBL
Rwanda and started by ofering only a few banking channels
(POS for merchants and ATMs); in a vastly larger country, it
had 4 branches and 6 ATMs as of June 2012 and had expanded
only to 6 branches and 7 ATMs by December 2013. In
Tanzania, EBL also experienced a delay in receiving approval
for agency banking; the Bank of Tanzania only issued agent
banking guidelines in February 2013 and approved the
EBL application to undertake agency banking in May 2013.
In order to generate business in the meantime, the bank
focused on what it refers to as ‘capturing the value chain.’
This translates to generating transactional income from
corporate accounts while providing the means to generate
business down the ‘chain,’ capitalizing on the institutional
relationship to bring in individual (low-balance and low-cost)
accounts from employees, suppliers and distributors. EBL
Tanzania is also working to attract SACCOs, village savings
and loan associations (VSLAs) and village community banks
(VICOBAs) as clients, with the goal of recruiting all members
as individual clients.
In Rwanda, because of its size and level of corporate governance, we could
follow the Equity Bank model and we rolled out branches and other access points
(mainly agents) fairly quickly. Rwanda is closest to the EB model at the moment,
and we have opened a signifcant number of bank accounts. But it was a
gamble, opening so many branches from day one. The challenge here has been
that we are not yet making a proft because of opening so many branches so
early. Acquiring customers has therefore been expensive.
5
7
We have been more conservative in Tanzania, even though it is much like Kenya
10 years ago. We were nervous because of other banks’ (negative) experience be-
fore we came. It’s a large country with a dispersed population and we didn’t want
to roll out a lot of branches right away because of the cost, so we took a completely
diferent approach. We are doing mainly SME lending and progress is encouraging
because we are already breaking even though operations started after Rwanda.
The management team was astute and held back on opening retail accounts be-
cause they wanted to break even as quickly as
possible. Because Tanzania is more skewed to the SMEs, it is not
following the EBL model with a lot of retail accounts. However, now that agent
banking has been authorized, we will go after the
large-scale retail banking market.
6
Each of the EBL greenfeld subsidiaries in East Africa has
achieved impressive outreach quickly, particularly in providing
low-balance deposit services. EBL South Sudan had almost
86,000 active depositors after 4.5 years of operations despite
an extremely challenging environment, EBL Rwanda had
215,000 active depositors after just over 2 years of operations,
and EBL Tanzania had 32,000 active depositors after less
than 2 years of operations. Of total active depositors in EBL
Rwanda and EBL Tanzania, the majority held balances of less
than $100—92 percent in Rwanda and 69 percent in Tanza-
nia. Table 4 shows the deposit breakdown by country as of
December 2013.
Equity Bank Limited greenfeld outreach
6 Interview with EBL Senior Manager in headquarters.
Table 4
Equity Bank Limited deposit breakdown
(as of 31 December 2013)
South Sudan Rwanda Tanzania
Date operations began May 2009 October 2011 February 2012
Date agent banking began n/a August 2012 August 2013
Total deposit accounts 127,639 314,434 68,299
Accounts with a positive balance 85,656 215,371 32,433
Overdrawn accounts 22,900 17,685 3,172
Zero-balance accounts
19,083 81,378 32,694
Zero-balance accounts as percent
of total accounts
15% 26% 48%
Accounts with balance of $1 to $100 30,548 197,508 22,438
Accounts with balance of $1 to $100 as percent
of total accounts with a positive balance
36% 92% 69%
Accounts with balance >$100
55,108 17,863 9,995
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
8
The greenfelds have been less successful at lending. In
part, the slow growth in the number of borrowers is due to
the standard bank policy that prohibits new branches
from extending loans for the frst six months. However, this
does not explain the low number of borrowers compared to
depositors in the three countries after several years of operations.
The vast majority of loans made by EBL are consumer loans,
most often provided to salaried employees. Although these
are the smallest loans provided by the bank, there is no clear
correlation between loan size and economic status of the
borrowers. However, if deposit and loan sizes are taken as
a proxy for the income level of clients, it would seem that
generally loans are provided to a more afuent clientele than
are deposit services. This pattern fts with global experience
that low-income clients, when presented with appropriate
products, prefer to save rather than borrow. EBL has made an
efort to reach the low-income microenterprise sector. With
funding from the United Nations Development Programme,
in 2008 it developed the Fanikisha group loan product for
Table 5
Equity Bank Limited loan distribution by type and country
(as of 31 December 2013)
South Sudan
2012 GNI/capita: $790
Rwanda
2012 GNI/capita: $600
Tanzania
2012 GNI/capita: $570
Total
outstanding
balance*
No. of
loans
Avg. size at
disb.*
Total
outstanding
balance*
No. of
loans
Avg. size at
disb.*
Total
outstanding
balance*
No.
of loans
Avg. size at
disb.*
Consumer 8,120,420 7,854 1,560 14,678,328 3,473 5,016 4,382,053 1,977 2,647
Micro 123,317 94 1,283 1,054,883 281 4,585 1,632,783 1,182 10,767
Lower SME 8,912,834 137 52,910 3,729,428 139 29,337 6,327,185 199 53,418
Upper SME 2,613,021 15 186,204 8,334,158 39 341,338
Corporate 12,988,015 11 1,184,173 11,502,911 5 2,341,412 8,844,433 6 1,370,469
Agriculture 0 0 n/a 0 0 n/a 0 0 n/a
Asset fnance 0 0 n/a 763,406 58 17,694 8,712,973 62 167,061
Mortgage 0 0 n/a 7,901,732 134 62,314 7,164,682 20 521,550
Other 0 0 n/a 0 0 n/a 5,170,877 2,022 1,952
Total 30,144,587 8,096 42,243,710 4,106 50,569,144 5,507
*Figures in US dollar equivalents
Source: Reports to UNCDF/MIX Market
women, modeled on the Grameen Bank methodology. A
similar product has been piloted in both Rwanda and
Tanzania with mixed results and has yet to be implemented
bank wide. Table 5 shows the breakdown of the portfolio by
loan type for each country as of December 2013.
Agent banking
Agent banking has been the key to EBL’s ability to achieve its
mission of reaching what it calls the ‘bottom of the pyramid’ with
afordable and accessible deposit services. It will continue
to be the key as EBL expands the services provided through
agents. As expressed by a director in Rwanda, “Agency banking
will become a part of people’s lives. It will be the platform
for everything—utility payments, social payments, taxes and
insurance. We need to make agency banking more lucrative
for agents and ofer more services through agents—more
services make agents more relevant and will get people using
agencies.”
9
EBL Rwanda began agency banking in August 2012, ten
months after beginning operations in the country. EBL Tanzania
began one year later in August 2013, eighteen months after
beginning operations and six months after agent banking
guidelines were issued by the Bank of Tanzania.
As illustrated in table 6, there is a high correlation between
having an agent network in place and achieving success in
opening new mass market accounts. Just over a year after
beginning agent banking, EBL Rwanda had opened two
thirds of its accounts through agents. Whereas EBL Tanzania,
with agents newly in place, had opened just 3 percent of its
accounts via agents at the end of 2013.
Table 6
Equity Bank Limited channels and results in Rwanda and Tanzania
(as of 31 December 2013)
Rwanda Tanzania
Date began operations October 2011 February 2012
Agency guidelines issued by central bank September 2011 February 2013
First agents operational August 2012 August 2013
Number of branches and ATMs 9 branches, 13 ATMs 6 branches, 7 ATMs
Number of agents 540* 133
Number of accounts opened
296,749 68,299
Number of accounts opened via tellers 97,927 (33% of total) 66,306 (97% of total)
Number of accounts opened via agents 198,822 (67% of total) 1,993 (3% of total)
Percent of dormant (zero-balance) accounts 26% 48%
Deposits via tellers at branches
23% 77%
Deposits via ATMs
4% n/a
Deposits via agents
73% 15%
Deposits via TISS/EFT
0 8%
Withdrawals via tellers at branches
28% 50%
Withdrawals via ATMs
44% 47%
Withdrawals via agents
28% 3%
*As of 31 December 2013, there were 727 agents, of which 613 had been approved by the National
Bank of Rwanda and 540 were active.
Acronyms: TISS/EFT, Tanzania Inter-bank Settlement System/Electronic funds transfer
How agent banking works in
Equity Bank Limited
Following is a brief explanation of the way that agent banking works within EBL, which is helpful in understanding the
challenges faced by the bank in developing its agent networks in Rwanda and Tanzania:
The agent opens a separate bank account for the agency business. With each cash transaction performed by the
agent on behalf of the bank, this account is automatically debited (for client deposits) or credited (for client
withdrawals). The amount of money in this account therefore determines (and limits) the amount of business an agent
can handle on a daily basis, whether deposits or withdrawals.
EBL provides each agent with a GSM-enabled POS and cell phone, at no cost to the agent, which are able to connect directly
to the EBL server in Nairobi.
10
Challenges to developing agency banking
In Kenya, EBL has agency banking down to a science, with a
standard approach that includes seven days of on-site training
during which EBL branding takes place and results in new
agents being in business within two weeks. In Rwanda and
Tanzania, however, EBL has faced a number of challenges in
developing its agent networks, which have negatively
impacted the bank’s ability to reach its targets for large numbers
of small-balance depositors. These challenges, which are
both external and internal, include the following:
Agency banking is a new product/channel in these markets,
and EBL is a new, foreign bank in the market. So, initially,
there is a low/slow level of uptake of EBL agent services.
The low/slow level of uptake by potential customers
afects agents’ proftability, making it more difcult to
convince them that being an agent will be worth their
while. (In Rwanda, EBL management said that it takes
three to four years to really develop an agent business
to optimum proftability, which is a long time to keep an
agent interested.)
Agent foat is a big issue in Rwanda.
9
The amount of
money required to open an agent account, and the
amount of money most agents keep in their account, is
not sufcient to handle a successful and growing agent
business. Therefore, agents must either make multiple
trips to the nearest bank branch in a day to deposit cash
or to deposit money with another agent in the vicinity,
which then impacts that agent’s ability to undertake
further transactions.
EBL and its agents have experienced a number of
technical glitches. They are often due to connectivity
issues, such as lack of consistent service from MNOs in
the area or insufcient bandwidth. Other issues relate
to the confguration and performance of the EBL server;
while these issues were especially noticeable prior to
and immediately after the major system upgrade and
migration undertaken by EBL headquarters in Kenya in
late 2013, agents were still reporting difculties in early
2014.
10
The need to have a debit card to transact through an
agent has had drawbacks for clients, including the delay
in issuing cards (from Kenya) and the difculty of getting
the card if the customer is far from the branch.
There is not enough EBL staf responsible for managing
the growing agent network, an important drawback
given the amount of handholding needed for new
agents and the need to deal with almost daily transactional
issues reported by multiple agents.
There is a need for constant training at the agent level
because agents’ employees (who usually conduct the
transactions) often leave and their replacements have
to be trained. This is costly for the bank and currently
difcult given EBL’s understafng in this area.
Agents have been recruited without any strategic
distribution of agents geographically. Each agent is
attached to a specifc branch but not necessarily the
closest branch; an agent can be as many as 150 kilometres
away from the branch and is often at least 30 to 50
kilometres away. This has repercussions both for clients
who need to go to the branch to get their debit card
or complete their ID process in order to activate their
account, and for efective agent support and follow-up
by EBL staf.
Growing the menu-ofering to a full fnancial bufet,
from cash-in and cash-out to credit origination, payments
and insurance, is a key challenge for agency banking.
7. In Tanzania, because of the lack of a national ID and the central bank’s stringent KYC regulations, there is an additional step in activating the account (being able to withdraw or make payments): the
customer must go to the branch and complete the identifcation process using biometrics (fngerprints taken and used for the bank’s internal personal identifcation system).
8. Although a client can open an account with no money, the account is immediately debited for the amount of the debit card, resulting in a number of immediately overdrawn accounts.
9. Float was not raised as an issue in Tanzania, perhaps because the agent network is not yet mature enough to be dealing with this challenge.
10. According to a March 2014 article in Business Daily, EBL ’had to deal with a public relations crisis last year following system breakdowns that caused ATM outages attributed to system overload and
the upgrade process.’ The technical glitches were therefore widespread in both Kenya and in the greenfelds.
A new customer opens an account instantly upon presentation of an ID and completion of a simple one-page form with basic
personal information (no deposit is required).
7
The agent takes photographs of the customer, the form and the ID, completes a simple information form on his/her phone,
and then sends all to the EBL Central Processing Center in Kenya.
EBL immediately sends the agent and the new customer a SMS, acknowledging the new account and giving the customer
the account number. At this point, the customer can immediately begin to use the account to deposit funds.
Also at this point, EBL headquarters in Kenya issues a debit card to the customer (debiting his/her new account for the
associated charge that is about $5), which is needed to withdraw funds and/or make payments through an agent.
8
If a
customer has access to EBL mobile banking, he/she can withdraw via cell phone with an agent, using the agent’s third-
party card. However, rollout of mobile banking has been slow in both countries and few
low-end clients bank by phone.
11
Strategies to overcome agent banking challenges
The greenfelds are quite aware of the challenges and are working to fnd solutions that will enable
them to scale up their agent banking networks. Table 7 lays out some key strategies already being
implemented or being considered in EBL Rwanda and EBL Tanzania to address the challenges they face in
efectively rolling out their agency banking channels.
Table 7
Strategies to address agent banking challenges in Rwanda and Tanzania
Challenge Solutions
Unknown product/channel and unknown bank Currently, EBL’s marketing on behalf of agents has been limited to branding the agents’
premises (painting the storefront in EBL colors, including the EBL logo). In Tanzania,
where establishing agents has been more challenging, EBL tested the idea of identifying
clients on behalf of the agents and bringing them to the agents’ door (at no cost to the
agent). This idea did not prove sustainable. However, EBL is still contemplating allocating
staf time for door-to-door marketing together with agents or their employees in order to
generate more business, as well as adding more traditional marketing techniques such as
branded t-shirts and caps, producing and distributing fyers and creating small marketing
events in tents set up near agents’ businesses.
Insufcient agent foat EBL Rwanda is considering making loans to agents to help increase their business volume,
and therefore the ‘foat,’ in their agency accounts. It is experimenting with this approach
through a joint programme with Tigo, funded by the Cherie Blair Foundation for Women,
targeting Tigo Cash women agents. Under this programme, EBL Rwanda makes small
loans ($100?$200) to the Tigo Cash agents for 12 months, at a subsidized rate of 1 per-
cent per month fat interest, with monthly repayments. Results of the pilot programme
will guide EBL Rwanda in developing loan products for its own agents.
Recurring technical glitches Both EBL Rwanda and EBL Tanzania have addressed the issues of connectivity and
bandwidth by providing agents with multiple SIM cards; when one MNO’s network is not
functioning well, the agent can switch to another network.
Delayed or hard-to-access debit cards EBL acquired the technology necessary to produce its own debit cards in late 2013. The
equipment to produce the cards was sent to both EBL Rwanda and EBL Tanzania in Janu-
ary 2014 and was to be tested in one branch in each country by the end of February 2014.
After the trial has proven successful and the technology rolled out, each branch ultimately
will be able to produce its own ‘instant’ debit cards on site.
Geographic distribution At both EBL Rwanda and EBL Tanzania, managers are considering a more rational and
efective distribution of both agents and staf that supervise them. At EBL Rwanda,
branches are moving towards a system in which agents will be clustered, with each staf
person assigned to a particular area, to enable better control, supervision and communication.
EBL Tanzania plans to adopt a more strategic approach to recruiting agents in the frst
place, requiring agent supervisors to identify which neighborhoods and streets have the
most potential for agent banking and focusing the recruitment of new agents on these
locations.
Agent training Continued intensive training will be part of an ongoing strategy for the foreseeable
future. With more staf dedicated to developing the agent business, EBL greenfelds will
not only continue with, but intensify, regular training for agents and their employees.
In Rwanda, EBL is considering upgrading the quality of agents, focusing on recruiting
people who have a university degree and having management sit in on the selection
process.
12
What’s next for Equity Bank Limited?
EBL directors at both headquarters in Kenya and the greenfelds agree on the EBL vision for the near future:
Focusing frst on strengthening the existing ‘core’ while contemplating further regional expansion. As
one director said, “We haven’t changed our overall Africa vision. We would love to be present in all of the
East African countries, even though some of them would be a huge challenge. But, we learned from our
frst three greenfelds and we will be more cautious going forward.” Other directors echoed this sentiment,
saying that the priority is deepening EBL’s presence in existing markets. This means, in Tanzania,
increasing the number of agents and developing mobile banking and, in Rwanda, continuing to scale
up the agent banking network. Through this strengthening, EBL expects that its three greenfelds and
Uganda subsidiary will be able to contribute 25 percent of the Group’s profts within the next few years.
Continuing to invest in people. EBL has established a new department for Learning and Leadership
Development, which is separate from its Human Resources department. The department collaborates
with Human Resources to identify key competencies for now and for the future and to identify talented
staf capable of rising to the challenge. EBL is already partnering with Ivy League business schools in the
United States of America to provide advanced education opportunities for executive staf, and is piloting
an internal education and advancement programme for middle and line managers.
Capitalizing on the technological infrastructure in which the bank has invested heavily and moving
EBL to the forefront of 21st Century banking. As one director summarized the future direction for the
bank, “We have seen that bricks and mortar are no longer viable to overcome banking barriers, both
Lessons learned by Equity Bank Limited
in the frst greenfelds
Many EBL directors in Kenya, Rwanda and Tanzania cited the following key lessons learned from the experience
of expansion in Uganda, South Sudan, Rwanda and Tanzania:
Having tried both acquisition and greenfeld approaches, it is clear that establishing greenfeld
subsidiaries is the way to go in order to ensure that EBL instills its culture in each new bank.
Having a strong corporate parent at the centre is critical in driving innovations and growing and
sustaining the business.
It is possible to overcome human-resource defcits by identifying young people with high potential
in a new country and then providing hands-on training in Kenya, not only in technical aspects of job
performance but in bank expectations, attitudes and customer service. This approach will be adopted
in all future greenfelds.
For more rapid success, it is important to ensure that necessary permissions and regulations are in
place before beginning operations. Two of the most important considerations are having a banking
license before recruiting and training staf and ensuring that the necessary regulations are in place for
both agency and mobile banking.
It is imperative for the telecommunications infrastructure to be in place already so that the EBL model
can work.
Even in countries where the conditions seem to be right, it can be difcult to establish credibility. The
process needs a lot of good will. It is a long-term proposition, and it is expensive.
13
geographical (dealing with the distance to branches) and psychological (overcoming the banking
myth). In addition, the dynamics of current demographics, with a high percentage of youth in the
population, dictate a need for more fexible and responsive products. Society is moving to virtual
banking via mobile phones and payment cards; our goal is to make customers comfortable with mobile
money so that we can facilitate the move to a ‘cash-lite’ economy. At that point, banking will no longer
be an ‘event’ that needs to be demystifed.”
Developing new business lines, including insurance, brokerage services and mobile services. In Kenya,
the Equity Insurance Agency already issues 1.5 million policies per year; in fact, if it were an independent
company, it would be the third largest insurance company in Kenya. EBL plans to innovate around
micro-insurance products and to be able to introduce such products into the greenfeld markets within
two years.
Becoming a mobile virtual network operator (MVNO). EBL in Kenya has applied for and obtained a license
to become a MVNO; with its own SIM cards, the bank will be independent from existing competitor
MNOs and therefore gain greater control of the quality and reach of its mobile banking services.
MicroLead—A global thematic initiative
UNCDF’s frst global thematic initiative supports the expansion of fnancial service providers (FSPs) that pursue a
savings-led approach, in the belief that savings, not credit, will allow low-income populations to take control of
their complicated fnancial lives. Initiated in 2008 and funded by UNCDF and the Bill & Melinda Gates Foundation,
MicroLead frst focused on ‘greenfelding’ in least developed countries, awarding grants and loans to proven market
leaders. The programme’s goal was to reach 525,000 new clients by 2013. By the end of 2013, MicroLead partners
surpassed this goal by reaching 730,000 new depositors.
Since 2011, the programme has expanded with funding from The MasterCard Foundation and the Livelihoods and Food
Security Trust Fund (LIFT) in Myanmar. This new phase of the programme includes capacity-building by technical service
providers with FSPs poised for signifcant growth in providing deposit services to low-income populations, outreach to
rural areas and outreach to women. The new projects funded by MicroLead Expansion include bank downscaling
and ‘greenfelding,’ fnancial cooperative creation and strengthening, village savings and loan association linkages to
formal fnancial institutions, microfnance institution transformation into deposit-taking institutions, human-centred
product design development, and deployment of alternative delivery channels such as mobile money, agents and
point-of-sale devices. With specifc emphasis on deposit mobilization, women, rural markets, and technology,
MicroLead Expansion will reach over one million additional small-balance depositors by 2016.
MicroLead results in a nutshell
• To date, the programme has awarded funding, totalling $43.5 million, in 19 countries for 27 projects
(working with 36 FSPs).
• Eclipsing its own targets, MicroLead’s frst phase, which involved 19 of the 36 partner FSPs, surpassed its
2013 target of 525,000 new depositors and instead reached 730,000 new depositors.
• The target of MicroLead Expansion, working with 17 FSPs and ending in June 2017, is to reach over one
million rural depositors in sub-Saharan Africa and over 100,000 rural depositors in Myanmar.
July 2014
Copyright © UN Capital Development Fund
All rights reserved.
The views expressed in this publication are those
of the author(s) and do not necessarily represent
those of the United Nations, including UNCDF, or
their Member States
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