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EQUITY Group Holdings Limited EQUITY Group Holdings Limited Democratizing Access to Finance and Social Impact in Sub Sahara Africa 1984- 2014 The Case for Equity Group Presentation by Dr James Mwangi,CBS MD & CEO Equity Group Cornell University September 2015 What is democratizing finance ? Who Are The Unbanked Globally? 3 4 The Case for Equity Group 5 Corporate Philosophies Purpose We exist to transform the lives and livelihoods of our people socially and economically by availing to them modern, inclusive financial services that maximise their opportunities. Vision To be the champion of the socio-economic prosperity of the people of Africa. Mission Statement We offer inclusive, customer-focused financial services that socially and economically empower our clients and other stakeholders. Values Professionalism Integrity Creativity & Innovation Teamwork Unity of purpose Respect & Dignity for customers Effective Corporate Governance The Early Years 7 Equity 0 Ø Beginning Ø Founders’ conviction Ø Founders’ social mission Ø Driven by needs of the local community Ø Turn around/re-engineer business model (i.e., creation of deposit taking and lending financial institution) Ø A powerful vision but limited capacity to deliver it 8 Deposits Loans 9 Profit (Loss ) Shareholders Funds 10 Total Assets INVESTMENT CAPITAL 11 Branch and Brand 12 CBK RATING AS AT 31ST DECEMBER 1993 OVERALL ASSESSMENT : EARNINGS & PROFITABILITY: § Institution technically insolvent n Society threatened to grind to a halt MANAGEMENT: n Deposits utilized to meet § Weak & Poor operating expenses n Return to profitability threatened by need for ASSET QUALITY: provision for bad & doubtful § Unsatisfactory, poor non performing loans debts 54% LIQUIDITY: n Liquidity of 5.8% compared to CAPITAL ADEQUACY: minimum legal requirement of § Capital fully eroded by accumulated losses. 20% n Deposits base volatile & unstable 13 Re-engineering the Business 14 STRATEGY Our 1994 2004 2014 Strategic EQUITY 1.0 EQUITY 2.0 EQUITY 3.0 Journey 1 Equity Bank 1st or 5 2nd depending on 10 ranking criteria 15 Equity Building Society - 18th • Strategic 20 positioning to Savings led Model Driving Financial 25 • • capture Inclusion by • High volume low disproportionate 30 scaling to micro, margin to offer share of $4 billion 35 small and medium accessibility and growth in East 40 enterprises to affordability Africa using a empower our 45 • Dignity and honor simple shared people create 50 to our people prosperity model. wealth and achieve 55 while changing Giving our people their lives and prosperity 60 Freedom, choice livelihoods 65 and control to scale Equity Building social and economic Society - 66th impact. Giving Dignity and Honour by Offering Access and Affordability with Savings-Led Model Equity 1.0 • Build strategy • Develop model Competition Mattress • Establish capacity • Build culture and philosophy C Equity Building Society - 66th 19941994 to 2004 2004 16 Creating Wealth and Prosperity By Driving Financial Inclusion and Scaling Enterprises Equity 2.0 • Reposition strategy • Scale Global for future distribution network • Build socio-economic • Change legal and brand operating structure Competition: Banks • High growth and financial leadership Equity Building Society - 18th 19941994 to 2004 to 20142004 2014 17 IMPACT 18 12000 Growth Number of Deposit Clients 11500 11000 10500 9,718 10000 9,660 9500 9000 8,407 8500 8000 7,838 7500 7,150 7000 6500 5,908 6000 5500 5000 4,372 4500 4000 3500 3,296 (In thousands of accounts) 3000 2500 1,840 2000 1500 1,014 1000 420 556 500 12 18 26 32 41 48 61 105 155 252 0 Home of 50% of all bank account holders in Kenya 19 Growth in Volume Customer Deposits 301,004 246,000 194,939 167,913 144,165 Millions 104,431 69,843 50,334 31,536 16,336 9,047 978 5,081 115 123 175 286 425 608 1,500 2,191 3,368 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Jun'15 20 Growth in Borrowing Clients 1200000 1000000 998,579 901,456 840,333 781,604 800000 744,544 619,561 605,849 600000 558,664 392,822 400000 252,147 200000 165,213 67,00094,566 9,03318000 41,000 0 298 347 695 9541,460 2,753 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Jun'15 21 Growth in Loan Portfolio 236,815 214,170 171,363 135,692 113,824 Millions 78,302 63,378 44,194 21,836 10,930 5,885 97 327 1,734 3,099 35 122 195 230 450 860 1,189 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Jun'15 22 Growth in Profit 22,364 KES 547 19,002 17,419 12,834 12,095 Millions 9,045 5,278 5,022 2,379 1,103 35 55 111 142 218 501 7 9 12 11 18 25 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Jun'15 23 Total Assets 400,993 KES 547 344,572 277,729 243,170 196,294 Millions 143,018 100,812 78,836 53,129 20,024 6,707 11,456 487 709 1,260 1,881 2,576 3,924 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jun'15 24 Share Holders Funds 64,996 63,776 KES 547 51,555 42,916 34,285 27,204 22,909 Millions 19,537 14,917 2,201 478 1,271 1,594 13 23 23 47 66 195 227 324 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Jun'15 -19 25 Growth in Staff 9,000 8,690 7,788 7,060 6,243 5,563 5,093 4,526 2,418 1,395 884 585 354 57 65 109 165 210 35 48 92 117 94 95 96 97 98 99 20002001 2002 20032004 20052006 2007 20082009 20102011 2012 20132014Jun'15 26 Turn Equity from Somewhere You Go to Something You Do - Lifestyle (Freedom, Choice, Control) Equity 3.0 • Disrupt our self - • Seamlessly integrate virtualization channels to improve • Scale agency banking experience n Leverage on technology • Digitize process and innovation • Increase access and n Convergence of financial Equity Bank 1st or 2nd products and services enhance experience dependingEquity on B rankingank 1scriteriat or 2nd depending on n Segment inclusion for focused strategic Re-desrankiignng opercriteraiating delivery model for efficiency and high performancen Scale brand visibility and Competition loyalty Cash n Fanatical operational discipline 1994 to 2004 to 2014 to2004 2024 2014 2024 27 Equity Group is comprised of 5 major components Socio-Economic Transformation is at our Core - Partnerships for a Green Revolution - Initiatives to Support Agribusiness Livestock and Dairy Farmers and to Deliver Crop Insurance - Collaboration with Coffee Board Horticulture Association, Kickstart, Africa Harvest - Fanikisha: Partnerships with Women Enterprise Fund to offer Training and Women's Financing Lenging - Loan products that have increased loan repayment periods and reduced interest rates including a $59 million fund exclusively for rural women Youth Enterprise - Vijana Business Loans to Financing Youth: Offering Flexible Collateral, Quick Approvals and Flexible Repayment Terms as well as Business Training to support Youth Enterprise. - Hunger Safety Net Program (HSNP) - Social Payments for Food Financial Security - Orphaned and Vulnerable Inclusion Children Program (OVC) Established the Equity Group Foundation (EGF) in 2008 to maximize socio-economic impact and leverage Equity Bank's unique assets and position at the base of the pyramid. - Commits 2% of revenue to EGF - Unlocks its branch infrastructure to support and implement EGF programs - Develops financial instruments that respond to user needs 29 We have Developed an Economic and Social Brand through the Foundation… … with tangible and scalable impact to date 31 Equity has a strong starting point among Africa’s leading banks in terms of both growth and profitability 2013 assets (USD bn) Assets CAGR (LC terms), 2008-2013, Percent RoA 58 2013, Percent “Growth “Profitable with low Capitec growth” 5.1 28 profitability” Equity 26 RoE 24 BESA1 2013, Percent 2.0 First Bank of Nigeria 22 0.8 28.1 0.7 20 23.4 18 Ecobank BPC Equity First- BMCE Eco- GT Bank Rand bank 16 14 Access KCB C/I ratio Bank Populaire BAI1 12 8.4 2013, Percent BMCE 6.9 Zenith Bank 10 70.1 UBA BFA1 60.2 8 52.5 Investec Ltd Attijariwafa 48.5 6 Nedbank Standard Bank Group Equity First- BMCE Eco- Rand bank 4 Soc Gen Morocco FirstRand Bank “Poor 2 performers “Profitable, but ” BMCI Absa Group low growth” 0 0 5 10 15 20 25 30 35 40 45 Equity Firs- BMCE Eco- Rand bank ROE, 2013, Percent NOTE: Africa (excluding Egypt) largest 20 banks in terms of assets, plus selected exciting banks (Capitec, Equity & KCB) 1 2008-2012 assets CAGR, and 2012 assets SOURCE: Bank annual reports; KPMG Angola Banking Report; press articles Equity has set an ambitious growth target across Africa over the next 10 years Today 2024 6 countries in East Africa 15 countries across Africa ▪ population of ~245 million ▪ population of ~810million (~29 million are banked) ▪ nominal GDP of ~USD 2,259 Bn ▪ nominal GDP of ~USD 129 Bn ▪ ~100 million members ▪ ~10million members SOURCE: McKinsey & Company Financial Inclusion & Profile of Clients- Equity Bank Sub Sahara Africa Footprint Countries Country GNI Findex- Mobile Has Saved at a Borrowed Insurance Capital Markets per 2014- Account debit financial from a Penetration Rate Penetration Rate capita Financial (% age card institution financial (total (total market ($) Institution 15+) (% age (% age 15+) institution Premiums/GDP capitalization/GD Account 15+) (% age 15+) % ) P% )- Source- (% age (Source- ASEA 15+) Regulators) Kenya $1160 55.2% 58.4% 34.7% 30.2% 14.9% 3.4% 55.83% (2013) Uganda $600 27.8% 35.1% 17.8% 16.8% 15.7% 0.85% 38.23% (2013) Tanzania $860 19% 32.4% 11.5% 9% 6.5% 0.9% 33.4% (2014) Southern $950 N/A N/A N/A N/A N/A N/A N/A Sudan Rwanda $630 38.1% 18.1% 4.5% 25.5% 8.2% 2.3% 26% (2011) DR $430 10.9% 9.2% 3.8% 4.7% 3.4% N/A N/A Congo Sources: Swiss Re, Sigma Report No.3/2014 ; The Little Data Book on Financial Inclusion 2015; Regulators Annual Reports , African Securities Exchanges Association, World Bank 34 … and willCOUNTRY result SELECTION in a 26% annual growth rate in the member base Members Projected members, mid-part of range (Millions) (Millions, 2024) 102.2 Zambia 0.7 Zimbabwe 0.7 85.3 Malawi 0.9 72.8 Mozambique 1,3 +26% p.a.
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