Equity eyes expansion, extends CEO contract

The bank’s CEO James Mwangi had his contract extended last month to steer the planned entry into 10 more African countries

Equity Bank plans to enter 10 more African countries in the next decade, in addition to the five it already serves, by building operations from scratch or acquiring existing lenders, its chief executive said yesterday.

James Mwangi told Reuters the bank, Kenya’s largest by number of customers, had extended his contract by 10 years in April, to steer the expansion. During his first 10-year term as CEO, Mwangi turned a specialist in small loans with 600,000 customers in Kenya into a full-scale commercial bank with 10 million customers, now also operating in Uganda, Tanzania, Rwanda and South Sudan.

He said the bank’s expansion strategy aimed at moving into Democratic Republic of Congo, Burundi, Zambia, Zimbabwe, Malawi, Mozambique, Botswana, Ghana and Nigeria. He also wants to enter Ethiopia, currently off limits to any foreign bank.

“It involves seeking to raise the number of customers from 10 million to 100 million over the same period,” Mwangi said.

Equity will consider acquisitions in Nigeria, Democratic Republic of Congo and Ethiopia, once it opens up, he said, adding it planned new operations in other markets.

“Our best experiences have been on greenfields, so for the small countries we know greenfield it will be,” Mwangi said, referring to Equity’s experience of expanding in East Africa.

For bigger markets, he said “sometimes you need an engine to scale as opposed to a greenfield.” With the exception of the move into Nigeria that may require a cash injection, the 10-nation expansion would be funded from operations, he added, citing Equity’s return on assets of 5.5 per cent and return on equity of 31 per cent last year.

dividend policy

Equity has also committed to preserving its dividend policy of paying out 40 per cent of available profit after tax even during the expansion, Mwangi said. The bank is testing a mobile phone-based banking service, Equitel, which it aims to formally launch in July and break even by September, he disclosed.

Equity has 768,000 active SIM card users after launching its network in partnership with telecoms operator Airtel Kenya, aiming to take on market heavyweight Safaricom’s M-Pesa service. Users of Equitel - a platform the bank say offers tools to make life easier - can transfer money, access credit and make payments by phone. It also offers typical mobile services of calls, text messages and Internet browsing.

Equity leases Airtel’s telecommunications infrastructure network, so it keeps all the revenue. “We have really focused on what we believe is the future infrastructure of banking,” Mwangi said. —Reuters