On Business Worthiness - Dr. James Mwangi, CBS

Dr. James Mwangi has been at the helm of Equity Group for the last 16 years. Over this period, he has redefined the Group to a purpose-driven organization that seeks to transform lives and livelihoods, giving dignity and expanding opportunities for wealth creation.



He recently won the prestigious 2020 Oslo Business for Peace Award, also known as the ‘Nobel Prize for Business’, for his ‘business worthy’ values in championing financial inclusion in East and Central Africa, a recognition of his strong belief in the practice of responsible banking.


Additionally, in September 2020, Dr. Mwangi joined a league of 14 global CEOs who have committed to championing cross–sector collaboration in the creation of a purpose-first economy. In a global call to action, through an open letter to global communities they outlined their vision for a new global economy that is more equal, inclusive and sustainable. The league envisions a global economy that is more resilient in the face of pandemics, climate change and many other global challenges.

Over the years Dr. Mwangi has also won several other global awards, including the Ernst & Young World Entrepreneur of the Year in 2012 and the Global Vision Award at the German G8 Summit in 2007.

Since inception, the Equity brand has now morphed beyond banking and has ventured into insurance, technology and telecom making the Institution one of the most diversified corporates in Kenya and the greater Eastern and Central Africa region.

In this candid interview with Mr. Ochieng Oloo, he talks about the Bank’s higher calling to its customers and staff at the height of the COVID -19 pandemic and Equity Afia which is the medical franchise of Equity Group Foundation.

He reveals Equity’s two-pronged strategy that will see the Bank emerge stronger after the COVID -19 pandemic and how the Bank has cushioned itself and its customers.


Dr. Mwangi also talks about Equity’s defining legacy for a better Kenya and his mission to empower promising young people to grow into leadership and to influence the communities around them.

The theme of this year’s banking awards and this survey is “Responsible Banking in a new era”. The concept of responsible banking is gaining currency globally, how is your bank engaged in responsible banking? Are you currently using any of the ESG (Environmental, Social and Governance) factors to measure your sustainability and the social impact of your business? In the wake of the COVID -19  pandemic how have you responded? Also how far are you from fully implementing the Banking Sector Charter? 


This year’s theme speaks directly into our corporate philosophy, which is transforming lives and livelihoods. As a Bank we exist for a purpose, which is the central theme of our organisation and a key part of who we are. When in doubt we always go back to our purpose which helps us establish solutions thus empowering our customers, staff, other stakeholders and the communities we operate in.


2020 came with a number of challenges including the unprecedented COVID-19 pandemic which has affected nations socially and economically across the globe.


As an institution, our first response, was to protect our customers and staff. Through Equity Afia, we designed communication collateral in form of information pamphlets and posters that were distributed to all branches to create awareness on COVID-19 and how to reduce the risk of exposure.  Equity Afia doctors were also involved in training both staff and customers in all our branches to sensitize them on the essential protocols that they needed to observe to keep safe.


After our staff and customers were trained and given the relevant information to protect themselves, Equity Group and its partners came together and mobilized Ksh1.1 billion to help the country respond to the COVID-19 pandemic.


The funds were donated directly to the Kenya COVID-19 Fund Board specifically to support public healthcare workers who are at the frontline of managing the medical care of Kenyans. Ksh 85 million was committed towards a mental wellness and psychosocial program to support 50,000 medics dealing with COVID-19 patients. A call centre manned by trained medics was also established to offer a listening ear to medics dealing with COVID-19.


Additionally, a total of Ksh 260 million was injected into the production of the first batch of PPEs and Ksh 135 million into the  second batch of PPEs. These PPEs included goggles, face shields, surgical gowns, nitrile gloves, surgical masks, N95 respirator masks, head covers, gumboots, medical scrubs and shoe covers to last for atleast 18 months.


This support has seen 68 hospitals across all 47 Counties including the national referral hospitals like Mathari Mental Hospital, Kenyatta National Hospital, Mbagathi Hospital, Kenyatta University Referral Hospital, Eldoret Teaching and Referral Hospital among others benefit from certified PPEs that meet both local and international quality standards.


Thereafter, we approached the presidents and chairs of the various medical associations such as the National Nurses Association, Kenya Medical Association, Association of the Anesthetists and that of Clinical Officers among others and together they formed a Technical Committee that played an important role in working closely with the manufacturers to achieve quality medical grade PPEs.


In the process, all the manufacturing firms that were deployed to assist in the national response, recalled their employees that they had let go and employed an additional 3,700. It has become evident that the PPEs initiative has addressed several challenges including those related to the global health pandemic, psychosocial challenges and has contributed to the creation and improvement of livelihoods for Kenyans. This clearly demonstrates Equity's response as a ‘business worthy’ organization that is not just profit driven, but one whose purpose comes first. We have become a Bank that has found that purpose can define the essence and the existence of an organization.


From a business perspective, lives and livelihoods were affected when there was restriction of movement and the enforcement of curfews. Sectors such as transport and logistics and the hospitality industry were greatly affected and this caused a significant shock or shift in how business was conducted.


As a financial institution, we decided to walk the journey with our customers and accommodated their loans of up to Ksh 92 billion giving them reprieve and the flexibility to adjust their business models. Our SME and Corporate customers operating within the aviation and the hospitality industries got up to four years of a complete break from repaying both the principal and interest repayments.


Private schools which have been forced to close for almost a year received a break of one and a half years, this means that even after the schools are opened, we still accommodate and support them to recoup and accumulate working capital from the fees that will be paid for the first term.


Our primary role remains to stimulate the growth of the economy by supporting our customers to survive, recover and thrive during and post the COVID-19 pandemic.


From an employer perspective, Equity still paid its staff bonuses of up to three months’ salary to enable them cope with the changing environment. We then focused on implementing a work from home schedule without interrupting business operations. Our Head Office normally hosts 1,500 staff on a daily basis but with COVID-19, we reduced our numbers to a maximum of 80 staff at any particular time.


We have also enhanced our staff health insurance scheme so that it covers COVID-19 management for up to Ksh. 2 million per member of staff and their individual households. To put this into perspective, we have a total of 15,000 staff members and their families, each covered for up to Ksh. 2 million for COVID-19.


I noticed that your loans actually grew in the first half of this year, which for a lot of banks is not the case. Was this also the result of your decision to support those that were positively impacted by the COVID-19 pandemic? You said you gave about Ksh.12 billion in loans to them.


We can attribute this growth to lending to customers in manufacturing and to the fruit and vegetable exporters. Also, there is a component of interest growth because we gave a break to 45% of all our customers. This simply means that the interest that has not been serviced is also contributing to the growth of the loan book, but the bulk is additional loans that we have disbursed to those who got reallocation opportunities.


Okay, let’s talk a bit more about the response, not just of your bank but of the entire banking sector, to the Covid-19 pandemic. I know that the Central Bank gave quite a few concessions to the banking sector, to what extent have these been useful in improving the situation that would otherwise have been quite difficult for a lot of people?


The COVID-19 pandemic quickly evolved and became an economic crisis and when this happened, the Central Bank of Kenya quickly convened a meeting with local banks. The outcome was a unilateral decision to lessen the burden on Kenyans by putting in place measures that supported both consumers and businesses.


First, CBK eased the cash ratio requirement which released about Ksh. 35 billion to the banks enabling them to meet the short-term cash ratio requirements, both for the customers and for banks themselves. That was a laudable initiative by the Central Bank.


Secondly, measures were put in place to reduce some of the banking charges that customers incur during transactions. By reducing some of these charges, we increased the disposable incomes of customers thus supporting their livelihoods rather than boosting bank profitability.


As Equity, we opted to waive all mobile banking charges up to 31st December 2020. 97% of all Equity transactions happen outside our traditional branches with a majority of these transactions being done via Equitel and the Eazzy Banking App. In our case, this meant that we forgo Ksh 200 million every month amounting to at least Ksh 2.4 billion annually, a move that has seen our income decline, by about 20%.


On the up side, there has been an increased uptake in digital banking solutions as a significant number of our customers opted to move to a free, self -service platform rather visit the branches and ATMs for banking services.


In support of the Government, CBK also played a significant role by setting aside two supplementary budgets. There was the Ksh. 10 billion that was allocated as a safety net to support the vulnerable groups and senior citizens. The second was the reduction of the tax burden for corporates. That really complemented and supported what we had given to the community. We got a small rebate from the Government through the tax regimes that were very supportive of the operating environment. There was also what one would call a massive stimulus package Kazi mtaani; getting young people to be engaged in improving infrastructure, particularly in the informal settlements. I would say that the effort by the Government and the banking industry, which maybe is the biggest industry in terms of private sector, came in handy to complement each other’s efforts.


You spoke earlier about Equity Afia. I'm curious about the value chain of Equity outside the banking business, you have Finserve, which innovated and launched Equitel , you have Equity Insurance Agency, you have Equity Investment Bank and you mentioned the role that Equity Afia played in your pandemic response, how does it fit into this picture? And how do the other subsidiaries other than the banking subsidiaries support the bigger business of Equity Group?


Many people get puzzled at how and why a bank would have an associate infrastructure in health. The same puzzle bothered many when I was appointed as the Chair of Kenya COVID-19 Fund Board’s Health Committee. The COVID-19 pandemic was new to all of us and our situation required leadership rather than technical skills. The situation called for us to lead in uncertain times, to think broadly and strategically.


As for the Equity Afia business model, we borrowed the concept from our purpose and identity. We realized that the lives of our customers are multi-dimensional and interdependent. The lives of human beings have economic, social, health and intellectual aspects. Essentially that is also why the bulk of our loans go to the socio sectors.


  A deep dive analysis of our loan book revealed that 40% of loan defaults occurred when our borrowers experienced a health issue which led to loss of the primary bread winners or hospitalization over long periods of time.


This motivated us to address the cause because that was a clear indicator that this was a systemic cause and no longer a credit default issue. We then innovated a health insurance program to provide a comprehensive health cover, that ensured that in the event of illness, business cash flow was not affected too much because we were offering our customers affordable insurance.


Today, Equity's NPL ratio is about 70% of the industry average. As we speak, Equity’s NPL is at 10% while the industry average is at 13.1%. Again, this is simply because we addressed the systemic cause of default. As we did this, our customers embraced the insurance products but the supply side of the health infrastructure failed us.


We then remembered that through the Equity Leaders Program, we had a database of over 16,000 alumni of whom about 350 were trained medics. This resulted in the birth of the Equity Afia franchise model, a model that aims to promote quality and affordable healthcare services. We have an ambition of further Increasing Equity Afia's footprint to 50 by 2021 and that we will have served 500,000 patients by the end of the year. In fact, just this year, we have opened a total of 16 clinics and the number is set to grow. A clear indication that COVID-19 has not slowed us down.


By standardizing the cost and quality of our service and by being transparent, many civil servant institutions and insurance companies have embraced Equity Afia as one of the preferred outpatient medical facilities.


The total cost of seeing a patient - doing diagnosis and providing the pharmaceutical solution is less than 40% of what other private sector health providers are charging. This means that we've been able to reduce the cost of health services by about 60%, even though we haven't reached our target of opening 1,000 clinics.


As Equity Group, we have found innovative ways of reducing up to 30% of Equity Afia’s establishment and operations costs. First, we enjoy economies of scale by purchasing drugs centrally. We also provide the IT infrastructure backbone for the clinics and provide them with branding support.


At the end of it all, the Equity Afia model has proven beneficial to Kenyans, our entrepreneural doctors and has contributed to a healthier loan book for the Bank.


Is there something that the insurance industry can learn from this? As you know, one of the biggest loss-making segments of the insurance industry is medical underwriting. The issue has always been the high cost charged by medical service providers. There is a blame game between the providers and the underwriters over who is to blame.  At this point in time it is not clear what direction the insurance industry is taking with regard to medical insurance but your model seems to work really well.


That’s true. There is so much that can be learnt by others. We are also still learning as well. The approach we have taken is very different from what the rest of the country has adopted including the insurance industry. We have taken an integrated approach and an ecosystem approach.


We can attribute our success to having a community of entrepreneurs that share the same values and ethics. The Equity Afia franchise is established strictly by ELP alumni who subscribe to the values of the Equity Afia brand and that of Equity Group Foundation.


Additionally, all Equity Afia clinics are supported by integrated IT systems that allows for information sharing. This means that whether you visit our Kakamega clinic or Changamwe clinic, your information will be in the system allowing our teams to serve you better.


What has also helped is that we have a view of the person in entirety. And then, we have standards for the franchise. We have standardized the cost of all drugs. Whichever Equity Afia clinic you go to, it will cost you the same for a particular drug and our consultation fee remains Ksh 500 regardless of whether you are making an out of pocket payment or insurance payment. Having a functional system and standardising our costs and services is what has made many insurance partners chose to work with us.


I guess it helps that these are doctors that you actually have known since they were students.

Yes, they subscribe to the culture of Equity, our values, our systems and more importantly they are committed to the philosophies and ethos of the Bank. They have now become partners with Equity to further the purpose of the Bank of transforming lives and livelihoods and they are committed to what Equity Group Foundation stands for; shared prosperity and inclusion – everybody should enjoy access to quality healthcare.


Looking at your organization structure, I do not see Equity Afia anywhere. Where does it fall in the structure of the entire organization?

Equity Afia is the medical franchise of Equity Group Foundation. Each of the 27 clinics is owned by an individual doctor. But the doctor is a member of the Equity Afia franchise which is ideally a shared brand between the Bank, Equity Insurance and Equity Group Foundation (EGF).


Normally, we don’t consolidate Equity Group Foundation with the commercial arm, we can then say that Equity Afia, our health franchise, complement EGF's work in championing the socio-economic prosperity of communities and contributes to our philanthropy. Equity Afia is addressing social health needs within communities. We are completing the offering to society by leveraging on our economies of scale and our capability as an organization.


You are the Executive Chairman of the Equity Group Foundation (EGF). One of your biggest projects is actually the Equity Leadership Program (ELP) under the Education and Leadership Development pillar. Recently, you unveiled 93 scholars who have been admitted to 43 global universities, some of them Ivy league universities in the US and they receive scholarships through the Foundation. Now this program has been running on for the last 20 or so years and you have supported roughly about 633 students who have actually gone out of the country to study in universities abroad.


Don't you think it is time to start assessing the impact that this program has made to this country? How many of them have come back?

As you can see my face is beaming, you are speaking of a program that is very close to my heart, because I believe this is what is going to define the legacy of those of us who we are privileged to serve in this organization at this time. The ELP started in 1998 and one of our first students today is the Managing Director of Equity Bank, Uganda. This is evidence that this is a very promising program, living up to its essence and purpose of creating the next generation of leaders. 


This program involves joining the bank and being under my mentorship and coaching together with my colleagues for a year before going to university. The one- year period is instrumental in shaping the values, beliefs and ethics of these young people. We exploit that opportunity because it's easier to inculcate values and culture on our younger people. This is also a period for us to inspire that team of young people who have just come out of high school, and are super performers, to dream big and to believe more in themselves and raise their self-esteem.


You just talked about the 93 scholarships that we unveiled this year. Out of 93, 19 went to Ivy League universities with Harvard having the highest number of scholars at four while Stanford, Yale, Columbia, Cornell, Brown and Duke each had two. This proves that we inspire them to believe, stand out and achieve. 


Now in Africa, Kenya is having the biggest cohort of students going to Ivy League schools. Most of these schools are more than 400 years old. They have the best brand globally. Each of them is in the rank of the top 20 universities in the world. The fact that they make entry to these universities, reaffirms the belief that, whatever you put your mind to, you can achieve.


In just that short period we now have 633 students who have benefited from our airlift program. More importantly, it is not just a global airlift, it's one with the highest number of beneficiaries, at least 22 percent of those 633, having been enrolled into Ivy League schools.


Harvard so far has 34, so this is an extraordinary airlift. Yes it has parallels with the early sixties airlift but on a bigger scale and to the premier institution. The airlifts of the 60s were bilateral, government to government scholarships for university education, but now we have exposed our kids to the universities that have immense capabilities and competence.


 Secondly, ELP has a support infrastructure in that It operates within a network. We have over 600 scholars who have studies abroad and over 8,000 distributed across all our local universities. Every summer we bring those who are studying in the global universities to come and coach and mentor the next generation of leaders. This has proven beneficial as we keep improving annually. Last year we had 55 ELP scholars travelling to study abroad, in 2020 we have 93 while in our first year we had 4 scholars only.


Locally the ELP have their own associations in the various universities and TVETs that they study in and this contributes to their success within the university setting and even post university. We continue to learn and adopt news ways of doing things and this has really contributed to the success of the program.


The impact these young ones are making is best seen in how they are inspiring our secondary school students to join the program. We've been told that secondary education in Kenya is more competitive because the kids know that the best girl and the best boy who score an A in every sub-county will join the ELP and from there they move from wearing school uniform to wearing suits. You can imagine the impact on children who, in November, were doing exams in school uniforms and in January, are wearing the black and grey suits, with red ties. That aspiration has really upped the quality of our education and because we take a huge number, almost 700 every year, almost every village has the probability of producing an Equity Scholar.


The most dramatic change of this program was revealed back in 2011 when we analyzed and realized that a majority of our ELP scholars came from the middle-income families. We asked ourselves what happened to the children of the less fortunate. Our research and analysis revealed that when you go to primary education and look at the distribution of intelligence as demonstrated by the results, even children from very challenging backgrounds were getting scores above 400, but they were never able to transit from the free primary education to the paying secondary education. That is where we lost them and that is when we started the Wings to Fly program. We thought we could bridge this gap by picking the most gifted in every county, one must be in the top five percentile of the best performing students in the county, so that we could feed into the leadership program. And they must be needy. I'm glad that the program has grown beyond what any of us had imagined.


As at last year we had about 17,000 Wings to Fly scholars, with 96% of all of them completing form four and 82 percent of all those who have finished form four graduating to university. This program improved the scope of orphans because they saw it as the only way out of poverty and they performed well. They have inspired every bright but needy child in primary school to aspire to join the program. On average, we have had 3,000 scholars per year, a number that indicated that we have enough scholars to inspire the whole nation.


Because of the success of this program, the Government in partnership with the World Bank agreed to scale the program and today we have another 18,000 scholarships from the World Bank. We gave out 9,000 last year bringing our Wings to Fly and Elimu Scholars to 26,304. Now we have 10,000 scholarships to give in the coming year which will bring the total number of Wings to Fly scholars to more than 36,000 scholars. The impact of that program is even bigger than the ELP because it has now given equal opportunities to the most gifted kids from poor background, to join their peers in reaping from the available opportunities.


The best Wings to Fly kids who score an A- grade and above, join the Equity Leadership Program and they compete on the same platform. I'm happy to say that out of the 93 scholars joining universities abroad and 21% of them who received admission to Ivy League universities, came from the Wings to Fly program.


To sustain the Wings to Fly and Elimu Program, we are working closely with the communities in an inclusive process that allows the various communities to champion the selection process. We have given equal opportunities to children without discriminating them because of their social status. As soon as they join the program, they will finish their secondary education and they will be able to finish their university education. And if it's their desire, they will be given a chance to compete for global scholarships. Allow me to thank Mastercard Foundation because they helped us to initiate this program.  Out of the 38,000 scholarships, 10,000 are courtesy of MasterCard Foundation, who have stood with us.


This program is well integrated such that despite the prevailing global challenges, our Wings to Fly scholars are getting a monthly stipend of Ksh. 3,000 per month to support them in buying necessities such as food and other hygiene items like sanitary towels. We have also provided each scholar with a solar powered lamp which also has a transistor radio and a mobile charging unit allowing the learners to access lessons that are being aired in Government- owned radio and TV stations.


We have keeping a keen eye on our scholars and this has helped in keeping them out of trouble. Every month they have to go to what we call their parents - the Branch Managers of their local Equity Bank to pick their Ksh. 3,000. It's then that the Branch Manager mentors them. Every three months, the Equity Community Scholarship Selection Board (CSSB) must meet all its children to ensure that they remain grounded in their culture. With the ELP having 7,000 kids and Wings to Fly, having 37,000 kids, we're talking now of 45,000 gifted kids within one network, a majority of whom have attained or will get university education within a generation of ten years.


This means that Equity has created a critical mass of 45,000 potential leaders, most gifted, well-educated and 10% of them with global exposure (the rate of airlift is 10% of all the kids).  This year we had 700 and 93 are on the airlift, which is about 13% of the kids. So as the others go to public universities, 13% go to global universities. They bring culture, local experience, global experience and global socialization. They are the face of Kenya, every tribe, every village is represented among the 45,000 kids. Either the village has produced one of the best students in the constituency or it has produced one of the most gifted needy children in the community. We are hopeful that these kids, that we have mentored live a purposeful life and will differentiate themselves.


One of the things I like about this program is the infrastructure behind it. Your ability to engage and monitor whatever is going on with each of these beneficiaries throughout the entire process. Well, I pointed out earlier that it's been 20 years since the program started, The other lot of engineers, economists, political scientists e.t.c. They are studying all sorts of things. Do you have any specific cases or some who have gotten into these sectors and already making a difference?


We encourage our global scholars not to quickly come back home. We said go get the best education and practice it in the some of the best environments. Stay out for five years and come back home to share what you have learnt with the rest of the community. For example, we have Engineer Anthony Soloi, one of the early scholars who is today an engineer with the NASA Enterprise Managed Cloud Computing Service Office. You can see now how much they will bring back.


When I go to Boston, I am always hosted by these Alumni. I think we have four investment bankers in Wellington and four in Fidelity, the two largest, asset managers on earth. That is the type of skill we need to be bringing back home. It may be too early to demonstrate the impact of ELP.


One of our early alumni as I said is the MD of Equity Bank Uganda. Uganda is growing much faster than Kenya.  Each of the alumni is a seed of greatness and I believe in them. You can imagine when you put them in a network, how much more explosive power they will have when they are mature in their 40s and seasoned enough. I see better days for Kenya because of the investment we have made in young, gifted and talented people by giving them the best exposure one would ever think of.


Let me say that most importantly, I hope they will be committed to a life of giving back and that they know when they have had enough, such that they don't fall into the trap of primitive accumulation that greed leads people to. We are betting on the individual impact each of them will make.


I already see transformation in the families were these young men and women come from. They have brought about inspiration, powered by hope to their homes. Take the story of Engineer Anthony from Moiben, having gone to Harvard and now working with NASA. What do you think that story truly means to his family?


Imagine a Maasai girl from the village who has been admitted to Harvard, what that means to the family, to the other girls in her village and what it does in stopping early marriage is such a community. In fact, the examples are so laud that I don't have to wait for 20 years, I'm seeing it in individual families where hope for better days is planted because the financially challenged families are able to get the same opportunities like children of well to do families. When I look at to the quality of grades that children from needy families are achieving, they're demonstrating equal competence because of hope. I am satisfied. The change is unstoppable and as you rightly said, we will celebrate this in the next 20 years or so.


We've spoken quite a bit about Equity Group Foundation. Briefly take us through the other pillars, because I think the focus has been a lot more on education than anything else. What are the other pillars of the Equity Group Foundation?


Maybe our most uncelebrated program is the Equity Safety Net Program that targets partnerships with the UN agencies, 18 of them, and the Kenya Government to bring honour and dignity to social safety nets.


Through our various social protection programs, we can impact the lives of Kenyans while respecting them and giving them dignity. Money from Government reaches the beneficiaries as intended and they can utilize this without making long queues or being identified as a beneficiary of financial aid.


To date, Equity has served over 3 million beneficiaries of social payments. They walk with dignity to the Bank to withdraw their cash, whether it's from the UN agencies, from philanthropists, or government support. 


Through EGF, we have also invested in training beneficiaries of our social protection initiatives. We teach them about identifying business opportunities, personal money management and the importance of investing. This has seen many of our customers establish retail shops, agribusiness ventures and so on. They have also become significant retail credit customers who use their anticipated social payment as collateral.


We have now gone to the refugee camps, both in Dadaab and Kakuma and set up Equity branches and told refugees that the social payments they receive can be used as seeding cashflow. So we have integrated the local community and refugees and asked them to form partnerships and we are giving them funding. Now all our agencies in refugee camps are partnership between the host community and the refugees.


These are huge refugee camps. You can imagine the peace we are promoting as a business in those refugee camps. So I would say we have redefined the concept of philanthropy. That is why Equity Bank pumps two percent of its revenue into the foundation but spends it in a sustainable way.


All these programs are administered for free, the bank doesn't charge the UN agencies to do this. The agencies can meet the cost but the bank won’t profit from it.  So that is the second largest pillar of EGF.


The third one is the Innovation Hub. We have introduced and exposed young people to the APIs of the entire Equity Group, whether it is Telecom, payment APIs, loan APIs, savings APIs. We have challenged young gifted Kenyans particular with bias to mobile technology to develop solutions and leverage for free on the capability and capacity of the bank. We are seeing amazing things happening through the Innovation Hub.


Our oldest program is about agriculture.  We provide the oxygen that farmers need in the form of financial access across the country. We have about 140 branches that support agricultural communities. Over the last ten years we have transformed 638,000 peasant farmers into agribusinesses. We are modernising agriculture and bringing sustainability and scalability in agriculture and linking farmers with the markets. We have a partnership with KFW of Germany and so far, we have rolled out 24 irrigation schemes, in partnership with the farmers and we are finding that farmers are able to pay for this infrastructure.  We have farmers who are now major exporters of fruits and vegetables because we link them with the ecosystem and the value chain all the way to export. Previously, peasant farmers had no access that would make them become agribusinesses capable of selling in international markets. So agriculture is very huge for us.


But what I would say has also been quite impactful is our program on financial literacy. We accepted that we are moving away from the traditional non-commercialized world of peasant farming to a commercial world. To speak English, you and I had to go to school, but we assumed that peasant farmers would jump into a commercial world and thrive once they had access to funds. That was the biggest mistake that we made. That is why we see massive failures of micro-enterprises. To succeed in business, you need to understand bookkeeping, profit, loss and the balance sheet so that you can be able to relate with financial service providers. We have invested in training our customers. So far, we have taken 2.1 million people on a 13-week financial literacy program that makes them ready for the commercial world. Now, they can negotiate and they can understand at what rates to borrow and what to do with borrowed money. That explains why the default rate of Equity is always 300 to 400 basis points lower than the average industry NPL. We delist our customers through financial literacy.


We have now scaled that training with our partner, MasterCard Foundation, to what we are calling Young Africa Works.  We have an ambition of creating five million jobs within the next five years for young people through financial literacy. From our financial literacy programme, we take the best performers, now we have 97,000, through a three-year entrepreneurship program so that we create a ladder where they start as a micro-enterprise, become an SME, move on to large enterprise and hopefully become a corporate.  We need to structure and formalize those businesses and we are doing that through entrepreneurship training. This means that promoting entrepreneurship has become big project for us, because we are strong believers in generating local capital through local entrepreneurship and integrating the local communities to the economic activities of their countries. We also strongly believe that Africa's biggest problem is poverty and the cure for poverty is wealth creation. It is entrepreneurs who create wealth and we know it will not happen unless we train people to become financially literate. Our people will only thrive as entrepreneurs if we train them to become great entrepreneurs.


Let's talk a little about your performance over the last one years or so by me making a small assessment. Half year results 2020 for a few banks are actually out and the situation is looking bleak. Of course, we blame it on COVID-19. Your PBT is down 29% for the half year 2020 compared to 2019. Loan loss Provisions are up 1,582%. Let me understand from you how this year compares to 2019 holistically. I think this will help us understand the real impact of Covid-19 on Kenya's economy and the banking sector.


We're still analyzing our results for insights that we can pick from them. But one of the most amazing things is that we are up by about 13% on our topline. On profits before provisions we are up 25%.


The bank was very responsible, I owe it to my colleagues that they were able within a very short time to contain our cost in line with the expected revenue and that has seen our cost income ratio decline from 52% to 48% within six months.


The top line grew simply because we chose to take both a defensive and offensive strategy. On the offensive, we have continued to grow our loan book, so interest income has continued to grow. On the defensive side, we decided to recognise all the loans that were struggling before and accelerated them to non-performing status so that they couldn't benefit from Covid-19 breaks or accommodation. As a result in our first quarter, our NPLs went up by 42%. But we quickly saw stability in the second quarter and our NPLs only grew by 2%, mainly because of the interest that accrued on what we had declared in our non-performing loan book.


We've been monitoring to see if these businesses are still operating. I'm happy to say that so far, we haven't seen huge challenges in terms of complete closure. The trickling down effect that reflect a decline in economic activities are visible, but we gave most of the businesses a lifeline to survive and they are surviving. We are supporting them slowly and we are still offering a few loans to those who want to transform themselves, those who require support to recover and those seeking to realign themselves to the new normal. This simply means that we are still disbursing funds.


As a brand, we feel that our ultimate success will be measured how many Equity customers will survive the Covid-19 shock. We shall answer one simple question which is, how many of our customers will quickly recover and start thriving when this pandemic is behind us?


 That is what will define my legacy as a banker. That is what will define the leader I am. I want to be remembered as the leader who was able to differentiate himself by how I pursued purpose before profit.


For Equity, this year is not about profit, it is about supporting our customers to survive, to recover and to bounce back. As a result, our customers have not shown default because they are in maintenance mode. We have given them loan breaks.


We are not naive to assume that all of them will recover. Consequently, we have accelerated a recognition of the risk of the entire portfolio and that is why we are creating massive portfolio provisions, just to mitigate the Bank from the impact of our actions. While we seek the customers to survive, we don't want the bank to be impacted.


As at 30th June, our provisions had gone up 15 times. In the first quarter we held 60% of the entire banking industry's portfolio of provisions for a similar period last year. That's how we decided to be conservative and cautious about the unknown.


The second thing we have done which is not in the public domain is that we have accommodated all these loans for up to four years. Yes, we have lost cash flow in form of repayments but to ensure that doesn't affect the bank's cash flow, we have gone internationally and borrowed Ksh 60 billion (600 million dollars) to ensure that the bank can't get liquidity shocks because of forgiven repayments that were contributing to the cash flow.


The third thing is that there is no guarantee that all these businesses will bounce back in four years, so we went internationally and, using the Bank's resources, paid for Ksh. 40 billion in terms of credit enhancement guarantees, such that the loans to the businesses that will fail, do not hit the balance sheet of Equity Bank. They are covered by a credit enhancement guarantee. This proactiveness will go a long way in cushioning our business.


2020 has been all about sustaining lives and livelihoods and that is how I would suppose we would measure our performance this year. Our performance will be gauged by two key Indicators which include but are not limited to; first, the number of businesses that survive and two, how well we cushion the Bank by being prudent and conservative through making massive provisions, getting credit guarantees and getting credit lines to ensure we don't get a default shock or a liquidity shock. That is how we will have defended the Bank while supporting our 14.2 million customers to fend for their families, maintain the livelihoods of their employees and ensure none of the enterprise's fail because of what Equity has been able to do for them.


Sure, we've spoken quite a bit about the customer and of course Equity's performance, but I'm still curious. You have had a very robust run over the last 10 years or so. I'm trying to put myself in the position of a shareholder of Equity. If I was a shareholder say five years ago  up to now, how would I have benefited from your robust performance?


If I take a long-term view because most of the shareholders of Equity take a long-term view, I think they have been laughing all the way to the bank. The bank itself initially experienced 15 years of compounded growth averaging 127% and of course generated significant value. The first great value that we realised was that everybody who had one share in the year 2000 today has 600 shares out of bonus issues and share splits. You can imagine a share which was that time valued Ksh. 20 is today valued at Ksh 37, the price that the share was yesterday. If you work it out, that share has gone up by 109% during that entire period. This indicates that we have continued to exponentially grow the wealth of our shareholders who took a long-term view. I would also like to say the staff of the bank have also enjoyed the same level of growth.


So, we do not only take care of our customers, we have benefitted our shareholders substantially and benefited our staff because we abide by a shared prosperity model. If you look, 5% of the shareholding of the Bank is held by the staff, this means that they work for themselves while working for others. That shared prosperity model has really become central to everything we do. It's a philosophy that defines Equity.


Your investment in technology and has been of great help to the bank so far, but I don't want to focus on that directly, tell us more about the strategy of the bank going forward. You have began a pan-Africa expansion. You are now in about six African countries, and a representative office in Ethiopia. Also, you've been in this organisation for 30 or so years and your performance, one would say, has been exemplary. Tell me about your strategy going forward and your succession plan.


Let me talk a bit about technology. I strongly believe that Equity is a big-tech. We are a technology company but in the banking business. Maybe the most insightful thing we ever did was to focus on technology because as you can see it has now enabled us to respond to the pull demand where customers wanted to have access to their Bank without coming to the Bank. Today as we speak 98% of all transactions happen outside the banking hall.


We have become more of a virtual bank, allowing customers to have access to their money to support their lifestyle wherever they are, whatever time, without limitation.


The second point is that it has allowed us flexibility in everything in the sense that we are now not only able to digitize cash, but we are now digitizing retail commerce in the entire country. We are the drivers of the digitization of retail commerce to enable our customers to give live the lifestyle that they want to live. 


Lastly in terms of vision, the dream is not about how many countries we are in, it's not about the size of the balance sheet it is how many people have we made financially included. For me my success is about Equity having 100 million customers in the next five years (by 2025). Whether they will come from 10 countries or the six countries we are already in, the issue is how many people have we reached, how much we have contributed to financial inclusion and how much we have enabled people to change their lives and livelihood. That to me that is the big dream. 


  If you look at Kenya, our balance sheet is now the biggest in terms of market capitalization, profitability and number of customers. We have repeated the same feat in DRC. We're number four in Rwanda. We are number six in Uganda so you can see we are being rewarded by scale and size but it's because we have become an aggregator of those who are seeking financial inclusion and those seeking to change their lives by making their dreams come true. We enabled them to live those dreams. 


On the succession issue. First it is open. The Board has given me the next job as the Executive Chairman of the Equity Group Foundation. It has allowed me to get the best talent Kenya has ever developed, I believe that we have capable executives who have the capability to steer Equity into greater heights.


But, I'm only in my 50s. I hope that in the next few years, I will continue to meet the objectives of the Board but most of all to champion the socio-economic prosperity of the people of Africa.


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