About This Report
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ABOUT THIS REPORT This year we have produced an integrated report, covering our financial, operational, governance, social and environmental performance as well as the challenges and opportunities ahead. In line with our vision, this report reflects our commitment to sustainable development, given the region’s socio-economic and environmental context, and determination to entrench global best practices in all operations. It also reflects maturing reporting processes and confidence in our ability to set and measure progress towards targets. We now disclose on our performance across the six sustainability capitals and demonstrate their utilisation and subsequent outputs. Integrated reporting is a multi-year journey and we have begun the journey this year with an aim to continue making progress in enhancing our communication around value creation for our multiple stakeholder groups. This report covers the financial year from 1 January to 31 December 2016. The financial information presented is prepared in line with the International Financial Reporting Standards (IFRS) while non-financial information is presented in accordance with the guidelines on the International Integrated Reporting Council’s (IIRC) Framework. FOR THE YEAR ENDED 31 DECEMBER 2016 FOR EQUITY GROUP HOLDINGS LIMITED AND SUBSIDIARIES INTEGRATED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 CONTENTS Who we are Our Philosophies 24- GroupStructure 5 Notice of the Annual General Meeting 6 Key Group Highlights 7 - 8 Awards and Recognition 9 Group Board of Directors 10 - 11 Group Executive Management 12 - 13 Our Business Message from the Chairman 15 - 17 Interview with the CEO 18 - 20 MaterialIssues 21 Stakeholder Engagement 22 ValueCreation Process 23 Our Capitals FinancialCapital 25 Subsidiaries Performance 26 - 31 HumanCapital 3233- IntellectualCapital 34 Manufactured Capital 35 - 37 Social and Relationship Capital 38 - 47 Agriculture 39 Education and Leadership Development 40 - 42 Entrepreneurship 4243- Financial Education and Inclusion 43 - 45 Health 4546- Responsible Banking 4647- NaturalCapital 48 Control Environment Risk Management Statement 50 - 53 Corporate Governance Statement 54 - 62 Financial Review Group and Company Information 64 Report of the Directors 65 -66 Statement of Directors’ Responsibilities 67 Report of the Independent Auditor 68 - 72 Consolidated Statement of Comprehensive Income 73 - 74 Consolidated Statement of Financial Position 75 Consolidated and Bank Statement of Changes in Equity 76 Statement of Changes in Equity 77 Consolidated and Bank Statement of Cash Flows 78 Notes to the Consolidated Financial Statements 79 - 142 Other Information Board of Directors and Group Executive Management Profiles 144 - 165 ProxyForm 167 FOR THE YEAR ENDED 31 DECEMBER 2016 FOR 1 EQUITY GROUP HOLDINGS LIMITED AND SUBSIDIARIES INTEGRATED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 OUR PHILOSOPHIES OUR PURPOSE We exist to transform the lives and livelihoods of our people socially and economically by availing them modern and inclusive financial services that maximise their opportunities. OUR VISION To be the champion of the socio-economic prosperity of the people of Africa. OUR MISSION We offer inclusive, customer focused financial services that socially and economically empower our clients and other stakeholders. POSITIONING STATEMENT Equity provides inclusive financial services that transform livelihoods, give dignity and expand opportunities. OUR TAGLINE Your Listening Caring Partner. OUR MOTTO Growing Together In Trust. OUR VALUES Professionalism Integrity Creativity & Innovation Teamwork Unity of Purpose Respect & Dignity for Customers Effective Corporate Governance FOR THE YEAR ENDED 31 DECEMBER 2016 FOR 2 EQUITY GROUP HOLDINGS LIMITED AND SUBSIDIARIES INTEGRATED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 OUR PHILOSOPHIES (Continued) The Equity story is a story of local rural village community that upon this realisation they reverted to the true African way of set about to better itself by achieving one simple objective; coming together as a society to achieve a common goal; a social and economic empowerment through access to common good. By pulling in resources, they would have a financial services. Equity Bank is the only bank in the Eastern better and equal chance of achieving their goals. That was Africa region that prides itself of having its roots in a village the birth of Equity Building Society, in 1984, that heralded the and not in a major town or city. In the beginning we had only formation of Equity Group. three branches namely Kangema, Kiriaini and Murarandia. In We do not like to refer to ourselves as a bank, as it restricts between these three towns is a distance of seven kilometers our capability to impact on the lives of our members. We further underpinning the fact that our roots firmly lie in a rural became a bank 20 years after we were formed. Rather we see community. ourselves as the embodiment of the African communal spirit To truly understand who we are, you must have an appreciation that is geared at promoting the wellbeing of its members by of the traditional African society. In the African society, the offering tools to help these members achieve whatever it is concept of individualism did not exist unless in the context of they set out to achieve. When we interact with our members, being a member of a wider society. Groupings were the most we ask ourselves; what problems are they facing? What do important units of African society starting from the nuclear they want to achieve? How can we help? Our work is to provide family, the extended family, the clan, the age group and into the specially made tools to these members that will enable them larger community. These groups not only give their members gain solutions to their problems and achieve their goals. It a sense of belonging but they accorded them the rights that is only because the tools we provide are financial in nature dignified them as human beings. All resources belonged to that this engine for social and economic change took the form the community as a whole and by virtue of being a member of a bank. But we believe we serve a higher purpose and we of that community, access to these resources such as land, can change into any form of enterprise as long as it enables water and knowledge was guaranteed. Indeed even children us to continue availing to our members, unique tools for belonged to the community and in fact, the term ‘orphan’ did transformation. not exist within the traditional African context. The community We exist to transform the lives and livelihoods of our set-up afforded its members dignity by ensuring that they all people, socially and economically, by availing to them, had equal access to resources from which they could derive modern and inclusive financial services that maximize a livelihood. their opportunities. In any activity we engage in, we focus The village in which Equity was formed was primarily an first on the wellbeing and dignity of a society and economic agricultural community of mainly subsistence farmers who growth is normally natural and a secondary occurrence. had no access to financial services. In fact, out of the entire Economic growth is the most evident outcome of any population in that village, only a few people like the headmaster society’s development but there are other intangible and of the local secondary school had a bank account. But this more valuable outcomes like improvements in the quality did not mean that the other members of the community had of life such as better health, better housing, improved no aspirations to enhance the quality of their lives. To move literacy, self-advancement, self-sustenance and dignified from subsistence farming to more commercialised farming, livelihoods. We set out to help our people improve their to build and own permanent houses, to have their children lives and livelihoods knowing that one of the natural results access higher education, to start commercial businesses and of this would be their own economic betterment. small industries to name but a few. The only road block they And when they prosper, we also prosper as our success is also faced was the lack of access to basic financial services that a natural outcome of theirs. When Equity Building Society was would help them save and access credit in order to actualise formed it had a nominal share capital of KShs. 1 million and on their aspirations. this remains up to date. This capital was contributed by initial This honorable aspiration of the people is entrenched in our shareholders so that they could pool resources together and logo, the house. The brown symbolises the earth, the colour of advance themselves by gaining access to financial services the soil from which a simple farmer ekes out a living and from which would in turn help them transform their lives and give the earth, the house, which is the aspiration to transform them the ability to own descent homes. One thing most people that basic agricultural activity into a tool that can help that do not know about us is that in the first 11 years of existence farmer achieve bigger goals of which, owning a decent home the society was making losses to a point that it faced closure was at the core. The ability to provide a warm and comfortable by the Central Bank of Kenya because the idea was deemed shelter for the family unlike the mud and grass thatch huts. commercially unviable. But it still pushed ahead on its mission and that is why it is a business force to reckon with today. The realisation for this community is that they needed access Without that sense of social purpose, then the society would to financial services so that they can first actualise on their have shut down its doors a long time ago. We were never in basic human needs of food, clothing, shelter and education.