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Banking on the poor puts Equity ahead

When Joyce Tina was issued with a Sh10,000 pay cheque by her employer over a decade ago, she did not know what to do since she didn’t have a bank account.

Her efforts to convince her boss to pay her in cash fell on deaf ears as he insisted that it was against company policy. 

Ms Tina, a new entrant into the job market was confused. The money was hardly enough to open a savings account in any bank.

In fact, it was only enough to maintain a minimum balance; she needed more to open an account and meet the cost mandatory documents. 

While pondering on what to do, a colleague directed her to Equity Bank, Tom Mboya Street. Armed with the cheque and her identity card, she opened a savings account in 20 minutes. She couldn’t believe her luck.

“I was able to withdraw some money after four days and the minimum balance was only Sh400. There was no ledger fee as well,” she said.

This is the scenario that many Kenyans faced when big banks, both domestic and foreign withdrew from the rural areas in the late 90s. The banks also raised their service charge to lock out the poor. 

However, their decision provided an opportunity to new banks such as Equity which came up with a new model that served the poor. 

Equity’s story has been told many times in different fora. However, this success story continues and the World Bank in its latest report said Equity had emerged as the symbol of banking for the poor in Kenya. It has become a case study on how to offer banking services to Africa’s poor.

“Equity Bank was more likely to enter previously under-served districts and the association between its presence and increased usage of bank accounts was larger for Kenyans with less wealth and education, that did not own a permanent home, and that lacked a salaried job,” said World Bank’s report titled Resolving the African Financial Development Gap.


“The presence of Equity Bank in specific districts is strongly positively related to the residents’ probability of having a bank account and/or a bank loan, which goes beyond the effect of bank branch expansion and presence of other commercial banks in Kenya.”

The report by a team from World Bank’s Finance and Private Sector Development led by Franklin Allen further said Equity’s expansion showed that it was possible to serve poorer Africans while generating sustainable profits.

By 2010, Equity had almost six million customers of which 5.4 million were in Kenya, 474,000 in Uganda and 28,000 in South Sudan. 

As a result of the expansion, it became the fifth largest bank in Kenya in terms of the share of gross assets and deposits of the whole system. 

It has the highest number of deposit and loan accounts which represent about 50 per cent and 30 per cent of the total number of deposit and loan accounts in Kenya, respectively.

However, it is the deliberate move to woo the poor that remains the focus of attention with the World Bank report saying while foreign banks prefer urban areas to cherry-pick a set of elite customers, domestic private banks seem to exploit their superior knowledge of the culture and have also entered the rural and arid and semi-arid areas. 

“For example, as part of its expansion strategy, Equity Bank focused on the use of local languages in its branches. This strategy is important considering that 30-40 per cent of the people in Kenya cannot speak either English or Swahili, and thus speak only a minority language,” said the report. 


The report said while Equity had branches in 48 per cent of the districts in Kenya in 2006, they had risen to 87 per cent 2009, while during the 2006-2010 period, its assets increased seven-fold; while its customers and customer deposits increased by a factor of six. 

To most analysts back then, Equity‘s move was poised to fail what with most established banks closing shop in rural areas and moving to towns and cities as the economy deteriorated in the late 90s.

However, the bank’s model has not only expanded the use of financial services to broader segments of the population but it also created profits in the process.

“Equity Bank’s profits before taxes and shareholder funds have experienced a strong positive trend. There is evidence that branch expansion and emergence of the bank has paid off in terms of access to banking services in Kenya,” said WB report.

The report said the momentum the bank had gathered was unstoppable though it now presented a new challenge to the regulators especially the Central Bank of Kenya.

“A single bank now maintains 55 per cent of the deposit accounts in the banking system and those deposits are covered by a deposit insurance fund, which could have implications for systemic stability,” said the report.

However, it is clear that Equity’s story is far from over­.