This is part of a series of articles sponsored by NIC Bank. NIC is currently having a rights issue that will close on September 14^th. See part one here and part two here.

PART 3: THE NDEGWAS

“As the family goes, so goes the nation and so goes the whole world in which we live.”

                                                                                    —Pope John Paul II

The History of Banking is the history of prominent banking families; notable ones being the Houses of Egibi and Murashu of Ancient Mesopotamia, the 12^th Century Solaro Family, the Bardis and Peruzzis and Medicis of the 14^th, 15^th and 16^th Centuries, the Warburgs and the Berenberg-Gossler-Seyler dynasty of Hamburg and, of course, the pan-European Rothschilds. The last three families came to prominence in the 17^th Century and have remained so to this date.

The industrial revolution and subsequent developments in the 20^th Century increased the demands made on financial institutitions. These demands far outstripped the resources available to individual banking families. Mergers and IPOs since—to widen capital bases and so increase financial heft— have lessened the prominence of these families and others, but not their influence. Banking families persist still.

And it makes sense. Banking relies on relationships especially in the areas of private banking, business banking and investment banking. Retail banking relies less so on relationships between the bank and the customer (beyond face time with clerks and tellers—automated or otherwise) perhaps because of the large number of accounts involved, but banks still try to reward loyalty and longevity. Relationship or relational banking seems less a type of banking then what should generally (and for the most part is) basic industry practice. Continuity is thus key in banking and family dynasties provide stability.

NIC Bank's history is tied to a prominent family as well.

The Ndegwa Family.

Philip Ndegwa, the founding patriarch, was one of independent Kenya’s premier economists. He joined the Civil Service in 1965 and was a noted government advisor on economic issues and planning. He served as Permanent Secretary in the Ministries of Finance, Agriculture and Economic Planning, as Governor of the Central Bank of Kenya and later as the Chairman of the Kenya Revenue Authority. His roles in the private sector included service as the Chairman of several financial institutions among them the Kenya Commercial Bank, the National Bank of Kenya and the Agricultural Finance Corporation. He was also crucial in developing the model for privatisation of government owned companies laying the groundwork with Kenya Airways as the Chairman of its board.

The UN Secretary General appointed Philip Ndegwa to a panel of international economists commissioned to analyze Africa’s debt crisis in 1987. He was, at that time, a research fellow and lecturer in economics at his Alma Mater, Makerere University, and had authored books arguing for development stemming from an ideology of nationalism within African countries as the basis for regional and pan-African economic cooperation.

He had been following this doctrine in his personal investments for over a decade having founded First Chartered Securities Limited (FCS) with fellow civil servants and business colleagues in 1974. Their first major investment was the acquisition of Insurance Company of East Africa (ICEA) from Eagle Star Insurance Company and Welfare Insurance Company, both of the UK, and the New Zealand Insurance Company, making ICEA the first major indigenously owned insurance in Kenya.

Philip Ndegwa’s nationalism is reflected in an anecdote told of his first visits to Karen Country Club. His host, a European lecturer visiting the University of Nairobi, had been reprimanded for inviting him three times in one month—an apparent bylaw prohibited this. Mr. Ndegwa’s host believed the problem was skin color. Mr. Ndegwa went on to join the club and served as Chairman at one point.

FCS has stayed true to this course of ‘repossession’, acquiring several local business interests from foreign companies like the British-based Inchcape Group and from Barclays Bank, from which a controlling stake in NIC was acquired.

The privately owned holding company has also done well to spread its investments across the region merging ICEA with Lion of Kenya Insurance Company Limited to form the ICEA Lion group with wholly and partially owned subsidiaries in Tanzania and Uganda. Both companies were majority owned by FCS; the current family patriarch and current Chairman of NIC Bank Group, James P.M Ndegwa, Philip Ndegwa’s eldest son, was once the Managing Director of Lion of Kenya. Owning both companies made the merger easier and faster for the Ndegwa Family—a necessary move to meet new industry standards set by the government of Kenya including an increase in the requisite capital base for insurance companies as well as the separation of short-term general insurance businesses from the more long-term life insurance accounts.

The Ndegwas pulled a similar move in 1997 merging NIC Bank with African Mercantile Bank (AMBank)—another FCS-owned institution. FCS currently holds about 16 percent of NIC stock. A further 9 percent is owned through ICEA Lion’s direct investment in the bank.

The bank is expanding in East Africa as well. It currently owns a 51 percent controlling stake in NIC Bank Tanzania and operates a wholly owned subsidiary in Uganda. NIC Bank Group, through a second rights issue, is seeking to raise KES 2.07 billion to deepen its investments in the region. The first rights issue, in 2007, raised KES 1.7 billion and had an oversubscription of 49 percent. The bank’s pre-tax profit has grown at an average rate of 36 percent since then from KES 1.1 billion to a reported KES 3.6 billion in 2011.

It's pretty safe to say that a large chunk of NIC's success is due to good leadership, direction and yes, the connections of the Ndegwa family.