Ask Nairobians, they know everything and are experts in every field under the sun, no matter how technical.
when Equity Bank customers were having problems drawing funds from the
bank the "clever" Nairobians were at it on social media and everywhere. The rumours still persist. Where are they coming from and what would be the motive? Or are they actually true?;
told you guys not to put your money in Equity, now the bank is
collapsing with your money. You haven't heard? Equity is in trouble,
just as I predicted ages ago."
The truth is that they are mostly hilarious stuff when you
consider the cold facts. Today Equity is the largest bank in East and
Central Africa and beyond in terms of account holders. Out of every 5
accounts held in a bank in Kenya, a staggering 4 are with Equity. What
are the implications of this in simple language? Let me give you a
simple example easily understandable even if you are not a Finance and
banking person. Any time the over 3.6 million account holders make a
withdrawal the bank makes money. Try and multiply 3.6 million by a mere
Kshs 20!! And these days the vast majority of the "tellers" are not
costly unionized humans but machines (ATMS) that work 24/7 and 365 days a
year without pay.
The other big secret behind the Equity cash
machine is the fact that their loan portfolio is mostly small amounts of
cash loaned to low income earners who pay back within 3 months or so.
For those who do not have a head for figures what that means is that
when the other big banks loan out Kshs 1 million to be repaid over 5
years, Equity loans the same amount and it is repaid in 3 months.
meaning that the 1 million will go out 20 times at Equity when it goes
out only once at Barclays. And by the way low income earners are more
faithful in paying back loans than seasoned rich people some of whom
will consult their lawyer for technicalities to help them keep the money
for as long as possible.
Any bank can collapse but the truth is that your money today in Kenya will be safest with Equity Bank.
recent troubles at Equity Bank understandably caused a run on the bank.
Now a bank ONLY survives on the confidence of its' customers and there
is no bank that will not suffer serious cash flow problems and probably
even collapse if a huge chunk of their customers wake up one morning and
all decide to withdraw all their funds. But Equity has survived many
runs in their earlier leaner years courtesy of rumours from jealous managers at big
banks like (edited out) who have done their best to regularly
spread rumours that the bank is NOT stable and can go under at any time.
In one particular memorable case one of the big banks mentioned "paid" a popular gutter
press publication to carry a screaming headline that the bank was going
under. Equity did the only thing a bank can do in such a situation found
the cash to pay those who wished to close their accounts in a hurry.
They did this so well that the public realized that there was nothing to
the rumours and many promptly returned their money to the same bank.
are some folks who just hate Equity Bank for tribal reasons. They say
that it is owned by Kikuyus. Personally I admire innovation no matter
what tribe is responsible for it.
Sadly Kenyans have a very short memory. Let me tell you a short story to jog your memory.
upon a time banks in Kenya were rich and fat and sitting on their butts
asleep most of the time. Customers were treated like trash and a
nuisance to the bank. It was like the banks were doing people a favour
accepting their deposits. Then the Kenyan government got broke because
donor funding dried up in protest of human rights violations and the
then dictatorial one party system. The Moi government decided to borrow
huge amounts of money from the public by setting up Treasury Bills with
crazy interests rates. Now the banks found a new source of super
profits. Buy treasury bills and go on holiday. Come back and claim the
80 % interest, buy more treasury bills and go back to the beach. They
were sure that the honeymoon would last forever and so they started
closing accounts. They asked all customers who had less than Kshs 20,000
in their accounts (their biggest headache) to come and collect it and
put it under the mattress if they so wished. Those who delayed arrived
to find their accounts already closed and had to run around in circles
to get the paltry cash remaining after the bank had imposed heavy
Equity was a small struggling building society then.
It invited these customers to open accounts and made the whole
process so easy. From the rude treatment in the big banks the friendly
understanding atmosphere at Equity attracted many customers. Then the
bank got really innovative, it went down to the grassroots to look for
opportunities to lend cash on short term basis to ordinary low income
Kenyans. This was the niche which all the banks were sure was NOT
feasible and would easily cause a bank to shut down, or so they thought.
Indeed they laughed when they heard what Equity was doing. "kiosk"
bank, they dubbed them. But the innovative small bank soldiered on
making a killing from lending small amounts to desperate Kenyans looking
to buy tiny plots of land from land-buying companies that had
sub-divided them into tiny plots barely large enough to stand on.
rest as they say is story. Today a significant ownership of the bank is
held by foreign investors with deep pockets but the bank continues to do
what it does best serving the small man. Hilariously one of the big
banks tried to copy the Equity model of lending money with minimal
security to office workers in Nairobi and lost such a huge sum of cash
that that particular mess will never be sorted out and has been written
off in the books.
Oh and about kiosk banking, today all the banks
are on the streets with tents (another Equity innovation) and moving
door to door luring people to open accounts with them. For those who
lived when banks were arrogant this is still an unbelievable sight to
Now about the recent problems with withdrawals at the
bank my impeccable sources tell me it was incompetence on the part of a
worker in the IT department who missed a critical step in updating the
system and what followed was a chain of events that led to the crisis.
Sadly that single man has so dented the reputation of the bank and
caused its' many enemies to have a field day with their propaganda.
Equity story always fills me with plenty of pride. Give me such
homegrown innovation any day... I don't really give a damn whether it is
by a Kikuyu, Luo, Turkana or whatever.
P.S. Actually Equity
is no longer the largest bank in terms of account holders. I am reliably
informed that it has been overtaken by CBA (Commercial bank of Africa).
Yep that outfit owned by (edited out). That is when you
take into account M-Shwari accounts which are held in partnership with
Safaricom's Mpesa. But that is a story for another day.
(article courtesy of Kumekucha's Raw notes with sensitive parts edited out).
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