Equity Group Holdings has yet again reported a rise in profits despite harsh macroeconomic environment in 2017. The bank reported a 16% increase profits after tax from Ksh. 16.6 billion in 2016 to Ksh 18.9 billion in 2017.
“Equity Group business model has proven that the Group is not dependent on the loan book only to drive shareholder value.” Dr. Mwangi, Equity Group Chief Executive Officer. He also added, “Our talented, passionate and committed staff has greatly contributed to this performance.”
The bank was hard hit by the capping of interest rates just as her peers were. This made the group record a 10 per cent decrease in net interest income from Ksh 41.8 billion to Ksh 37.6 billion.
“Capping off interest rate has hindered us from doing what we were called to do; financial inclusion. Our objective is to help actualize the dreams of SMEs. This is the life and livelihood of many Kenyans. Now, the dreams of many are being shattered down because they cannot access credit.” Dr. Mwangi passionately explained.
He further explained that micro, small and medium enterprises have a high credit risk, but the interest rate expected to be charged on them by the regulator does not cater for this risk. Thus, the banks are not able to give them credit. “It is important to note that the bank does not determine the interest rate charged on various lenders, but the market and their credit risk determine the interest rates.” Dr.Mwangi noted.
Unlike shareholders of other institutions which have recorded decrease in profits or losses, Equity bank shareholders will receive dividends of Ksh 7.5 per share. This is similar to what they received last year. The shareholder funds grew by 18 per cent from Ksh 52.3 billion to Ksh. 61.9 billion.
The bank rides on technology to increase volumes of transactions and through it, it has also successfully made branches relationship and wealth management channels. The record shows that 75 per cent of transactions were self services in Equitel, mobile app transactions stood at 14 per cent while Merchant transaction took 2 per cent. ATM transactions were at 5 per cent while 4 percent of the transactions were at the branches. This contributed to reduction of operational cost at the Group.
Eazzy Biz, a cash management solution for SMEs has been well received by the customers. Its transaction value has increased from Ksh 48.8 billion to Ksh 139 billion. Large businesses will not need to go to branches for transaction such as processing of salaries.
“We do not allow betting in Eazy app and equitel. We uphold ethics and do not believe in short cuts.” Noted Dr. Mwangi
Equity’s contribution to the society is notable. Shared prosperity philosophy is their major drive. Through its corporate social responsibility arm, Equity Foundation, the bank has trained 1.6 million people on financial literacy, 36,000 people have been trained on entrepreneurship, 600, 000 farmers trained on agribusiness while 2,500 medium scale farmers supported to transform through value addition. These groups of people are the bedrock of Equity business model. These groups are in Gikomba, Kariobangi among other markets of SMEs.
Equity’s 2018 economic outlook is very bullish. Dr. Mwangi notes, “We start 2018 very confident and bullish. Whatever held us back is now behind us; political tension, two year drought, power rationing.” He is also hopeful that the interest rate cap is going to be repealed enabling them give loans to SMEs.
Dr. Mwangi revealed that they look forward to be in 15 countries in the next 10 years. Currently, they are in 6 countries; Kenya, Uganda, Rwanda, South Sudan, Tanzania and DRC.
Equity Bank also bets on implementation of the Big 4 by the government. Majorly, revamping of the Agriculture sector and value addition on the manufacturing sector will grow the SMEs making them large businesses. This will directly grow deposits and lending by Equity Group to these firms.