Lagos is very different from Nairobi, in the same way Uganda isn’t Spain. People take parties and events in Lagos seriously. I turned up for a dinner on Tuesday evening in a shirt, carrying all the day’s sweat and bustle and a heavy rucksack, carrying my 10 Kg past generation laptop. In Lagos, people turn up for social functions in designer labels without sweat.
James Mwangi, Equity Bank’s CEO, turned up for one such event in Lagos, the Forbes Africa Person of the Year award ceremony. Invitees arrived in top of the range cars, and some even came by boat. The CEO of Kenya’s second largest bank by assets arrived in a cab.
In addition, Mwangi, who had been nominated for the awards, had slim chances of winning. After all, he was against Joyce Banda, a celebrated African head of state, and Aliko Dangote, Africa’s richest man and owner of the Dangote Group. Mwangi says the net worth of the Dangote group can run Kenya for four years.
Nevertheless, Mwangi did emerge the winner. He got 60 percent of the people’s votes, where 160,000 votes were cast. The popular vote contributed 25 percent towards winning the inaugural Forbes Africa Person of the Year.
Mwangi says he was pleasantly surprised by the win, which he attributes to the more than 5,000 Kenyan students sponsored annually through the Equity/MasterCard Wings To Fly Program. The Program’s beneficiaries, who study in universities and high schools across the country, either voted for him directly, or influenced others, including teachers, to vote for him online.
The CEO says that he has missed escorting his children during the beginning of the first semester at their University every year. The August opening dates for the United States University happens to coincide with an annual forum which he has with Wings to Fly beneficiaries held at Kenyatta University. Apparently, the students there hang on to him to the point of tearing his suit and despite all this, Mwangi is happy to see them.
He, however, admitted that Equity Bank was his idea, and that he built the bank on other people’s money.
In 1994, 32 year old Mwangi approached Peter Munga, founder of Equity Building Society with an idea. Munga had started EQBS in 1984 with only KES 5 since he did not have any money to start a bank. By 1994, EQBS still hadn’t garnered enough money to become a bank and only had KES 3 million in deposits versus KES 33 million in loans. EQBS was technically insolvent.
The Economist reports that the Central Bank allowed EQBS to turn its depositors into shareholders in 1994. Mwangi, however, convinced the shareholders and employees to soldier on with employees being paid 25 percent of their salary in shares. In 2002, Mwangi felt the need to turn EQBS into a bank. Mwangi then approached the International Finance Corporation with his idea and got USD 1.6 million (KES 120 million at the time) from the IFC. Equity Building Society then became Equity Bank.
The bank saw a period of heightened growth between 2002 and 2004 as many were drawn to the its model. In 2004, the bank had run out of the KES 160 million, and needed new capital.
Mwangi decided to approach Nelson Muguku, the wealthy proprietor of Muguku Poultry Farms, and asked for a KES 100,000 capital injection. He spent two hours that night trying to convince Muguku, only to get the answer that Muguku would “sleep over it” and give him a response the next day. He got KES 200,000 the following day. He eventually managed to raise a total of KES 8 million, which lasted until 2007.
In 2007, Mwangi couldn’t approach Kenyans for more money as the situation on the ground was quite hostile. Rumours circulating widely claimed that the bank was a bubble and it was only a matter of time before it burst. Mwangi approached many international donors with his idea, looking for money.
Meanwhile, the G8, a group comprising of the World’s eight largest economies (surprisingly excludes Brazil), were having their annual get together and were also looking for a great impact idea to fund. Someone in Switzerland who had heard of Mwangi’s plans also happened to hear about the G8’s quest for an idea. He quickly informed Mwangi who then went to pitch his idea to the G8.
Mwangi says he worked very hard to convince the G8 with his pitch and for the first time, someone understood his proposal. It was so complex that he still believes that a huge majority of Kenyan’s wouldn’t have understood it.
The G8 were convinced and Equity Bank got KES 11 billion in funding. Mwangi says that the bank immediately became the country’s most capitalised bank and launched into broad experimentation. “We saw risks differently as we could write off any risk,” he said.
Today, with 8 million bank accounts under its roof, Equity boasts about half of all bank accounts held in Kenya’s 43 banks. Its 2012 Investor Presentation lists the bank as having 135 branches in Kenya. The bank sparked an expansion race as competitors struggled to reopen branches they had earlier closed after having declaring them unprofitable. They did all this in a bid to match Equity’s expansion.
Equity Bank is also credited with the total removal of reduction in monthly banking charges in favour of just transaction charges, thus making banking more affordable. The Bank was also the first major bank in Kenya to require no opening balance or minimum operating balance, a measure that has since been copied by the bank’s competitors.
Equity Bank’s model has 18 Ivy League case studies.
So far, Mwangi has been working on the base, with his eyes now set on mass financial services. Clearly, he isn’t done yet, not by a long shot.