A good case study on building a brand from local to internatonal( Relating to b2b marketing)
A Case Study on Equity Bank
A Case Study on Equity Bank
Taking a walk down the memory lane, one realizes that all nations that managed to build global entities had to stretch their reach beyond their geographical borders to achieve that (Ngai, 2015). Public information available on the internet reveals that past empires were built following “colonial conquests” (Ngai, 2015). However, after World War II, the trend changed to one that follows trade and investments (Ngai, 2015). After this period, bank customers gained more access to funds than they had before. Banks shifted from their previous “supply-led” nature to their current “demand-led” view to respond to these “socioeconomic changes.” (Abishua, 2010). The Banking industry in Kenya went through a similar phenomenon following the country’s economic and political liberalizations in the 1990s (Abishua, 2010). The bank managers in the Kenyan banking sector today face a dynamic and complex environment. This situation is exemplified by intensely competitive moves between competitors to try and gain advantages over other competitors as well as wipe out any advantages they have over them. Equity bank, like few other local banks, has stepped up the competition to a level that international banks such as Ecobank and Barclays find themselves hawking their services in Kenya. The paper herein talks about the path that Equity Bank followed right from its startup days to date and the various tricks they had to employ to get to where they are today.
Equity Bank was founded in 1984 in a small town called Murang’a in Kenya (Abishua, 2010). The bank was originally a building society that focused mainly on the mortgage industry (Ngai, 2015). It slowly expanded and transformed into a bank by December 2004 (Ngai, 2015). The bank’s initial target market was the tea zones of Murang’a (Ngai, 2015). This move is because the region lacked strong cooperative societies to provide them with proper financial services. This startup market might be the reason the bank is seen to focus a lot on promoting agribusiness and related projects. By 2009, The Equity Bank group had one hundred and six branches and over 3 million customers across the country (Ngai, 2015). Two years later, in 2011, the bank already had 7.15 million customers; nearly 50% of all the bank clients in Kenya (Kamau, 2012).
Apart from the Kenyan market, the bank has also substantially expanded across the “Great Lakes Region” where it is slowly but surely replicating its model in Kenya. A few years back, Equity Bank announced its intention to buy a 23% stake in the government-owned National Bank (Ngai, 2015). If the group succeeds in that acquisition, Kenya Commercial Bank would be the only bank that would have numbers and assets close to that of Equity Bank in Kenya. The Equity group has won the “best retail bank award” in Kenya severally (Ngai, 2015). This achievement is no mean fete considering Kenya is the biggest economy in East Africa, and the industry has several banks including international and government owned banks. Smart management is one of the reasons responsible for the bank’s enormous success. Equity group has received a lot of international awards and accolades as other developing nations in Asia, and Africa searches for ways to match their “high-volume,” “low-margin” model (“Transforming Lives through inclusive financial access,” n.d.). A monthly publication of international monetary affairs, The Banker, included Equity Bank in the list of the World’s “top 1000 banks” (“Transforming Lives through inclusive financial access,” n.d.). In the same publication, the bank was termed to have the highest “return on assets” in Africa; it generates about 6.9% on assets invested (“Transforming Lives through inclusive financial access,” n.d.).
Equity Bank has used a mixture of “strategic capitalization” to achieve its rapid growth over the years. In 2007, the bank received 180 million dollars from “Helios Investment Partners LLP” (Sacerdoti, 2007).These funds assisted the company in expanding its “loan portfolio” and attracting more low-income clients from other East African countries through their creative low-income products (“Kenya’s Equity Bank,” 2008). These products cut across sectors like agriculture and “small and medium size enterprises” (SMEs). In 2011, the segments mentioned above generated more than $1.45 billion through approximately 1.04 million loans (Kithuka, 2012). These loans enabled close to 551,000 people to pay for better healthcare, education, and other life enhancing services (“Transforming Lives through inclusive financial access,” n.d.). That same year, the bank provided loans of more than 730 million dollars to 294,000 SMEs to assist entrepreneurs hire more employees and grow their ventures (“Transforming Lives through inclusive financial access,” n.d.). These activities enable the bank to develop and maintain a loyal and stable customer base.
The Wings to Fly program is another ambitious project that has seen the bank’s fan base increase rapidly in the recent past (Kithuka, 2012). The bank, following the philanthropic support of “The MasterCard Foundation” started this program in 2011 (Kithuka, 2012). At its commencement, the project’s aim was to provide at least 10,000 comprehensive high school scholarships and provide “leadership training” to students (Kithuka, 2012). The project specifically targeted the bright but needy students, especially from the marginalized communities in the country. The bank has to do thorough scrutiny every year to select which among the thousands of bright needy students get the loans. In 2015, more than 20,000 students met the threshold, yet the program had allocated only 2,000 scholarships for that year (Ngai, 2015). The selection process has raised a lot of issues as the displeased factions argue that there are elements of ethnic favoritism towards certain applicants. All in all, the project has won the bank thousands of loyal customers who feel obliged to invest in the bank as a way of improving their society.
Attaining Higher Productivity and Efficiency in Operations via the “Value Chain.”
Equity group, like any other successful brand around the world, invests substantially in the development of its employees’ skills to improve its productivity and “operational efficiency.” The over 7,000 employees are trained at a cost of $6.57 billion dollars regularly; an enormous amount for a private company in a third world country (Kithuka, 2012). What differentiates the training given to Equity Group’s staff and the staff of any other successful brand around the world is the emphasis on the agricultural segment. The bank values its agricultural market and ensures that the people working in that section are trained and work within the organization for at least four years before they get any managerial post in the agricultural sector. This focus has helped the bank capture more than 60% of the nation’s small business holders who believe that they have the best services for people of their kind (Kithuka, 2012).
To ensure that financial services cover the longest miles possible within the country, Equity Bank started mobile banking and agency banking (“Mobile Banking,” 2012). The group partnered with “M-Pesa,” a mobile money transfer service started and owned by a telecommunications firm in Kenya called Safaricom. Through this service, anyone with a Safaricom line could open a mobile banking account through their phone, deposit money at any M-Pesa agent around the country and send it to their Equity Bank account (Mas & Radcliffe, 2010). Apart from the small initial capital, starting an M-Pesa shop just requires a mobile network necessary to enable the most basic mobile handset to operate (Mas & Radcliffe, 2010). After identifying how convenient the M-Pesa service was. The bank came up with a similar service to back the mobile banking podium. Just like M-Pesa, the bank enabled interested entrepreneurs to start small shops with a tiny gadget that could read ATM cards and allow one to deposit and withdraw cash without visiting an ATM or a banking hall (Kamau, 2012). The agent banking is only three years and some months old, yet it already exists in almost every shopping center and market around the country (Kamau, 2012). These kinds of pioneering services always put the bank ahead of its competitors in Kenya and have allowed it to expand to all the countries of the Eastern African region (Kamau, 2012). The bank is fast moving to other sections of the continent. The latest market they have entered is the Democratic Republic of Congo (DRC), where they recently purchased 79% of the Congolese Pro Credit Bank (Ngai, 2015). The Congolese bank was a subsidiary of a multinational bank, based in Germany but operating in DRC (Ngai, 2015).
Challenges that the Group has had to overcome over the Years
Any pioneer service provider is bound to experience new challenges in the field they decide to enter. Equity bank, being a trendsetter in the Kenyan banking scene, was no exception. The bank had to overcome all the bureaucracies that the government created to limit the entry of private sector players in vital areas like finance. These barriers were not easy to get through; nevertheless, the group found a way around them. The group’s founder and Chief Executive Officer (CEO), DR. James Mwangi, being a serious businessperson, went to all the offices he could and deployed all his entrepreneurial wits to ensure his company succeeded. Ethnicity is still a major issue in Kenya. Elements of it had to play out in the group’s success story. Dr. Mwangi comes from the Central region of Kenya; the same region where the current, as well as the remaining 2 out of the past three presidents, come from (Ngai, 2015). Many private sector players from other regions who had been trying their hand at the sector and failing claimed that Dr. Mwangi was receiving special favors from his tribesmen. Many still claim that the government is unfairly protecting the group from the competition by creating ridiculous thresholds for anyone trying to get into the sector today. These claims hit the company’s reputation hard, making it difficult for it to expand to other regions of the country; especially the Western region which has been in the opposition for decades.
The Wings to Fly program is yet another project that has raised a lot of controversies in the group’s operations. Every year, the bank sets aside a certain number of scholarships to benefit needy students. Certain conditions have to be met for an applicant to succeed in acquiring a scholarship. Last year, for instance, 2,000 scholarships were set aside (Ngai, 2015). Tens of thousands of students applied for the scholarships, and 20,000 met the initial threshold (Ngai, 2015). This number had to be trimmed down to 2,000 (Ngai, 2015). Those who were cut off, especially from families who have been trying every year were disgruntled, and claims of corruption and ethnic favoritism marred the program. These kinds of complaints are never right for the success of any organization.
Equity Bank group is now 12 years old in the Kenyan banking sector. Within this short time, as one can see in figure 1 below, it has managed to muscle out competitors like the National Bank who have been in operation since independence. The success story is one that can be traced down to the collective efforts of the talented management, specifically the Wits of the group CEO. Dr. James Mwangi. Dr. Mwangi has been recognized on various platforms for his hand in the growing equity bank from a small building society to the international bank it is today. In 2010 and 2011, he received awards for the African banker of the year (“James Mwangi,” 2012). In 2012, he was named the “World Entrepreneur of the year” at a ceremony held in Monte Carlo (“James Mwangi,” 2012). The bank, under his able leadership, is surely taking over the banking industry in both Eastern and Central Africa.
Figure 1: Bank Ranking at the end of 2013 (Ngai, 2015)
Bank After tax revenue
($ Billion) Total Assets
Equity 0.143 3.21
Kenya Commercial Bank 0.105 2.65
National Bank 0.0126 1.07
What are some of the advantages that played out for Equity group to get it to its current position in the African market?
Lack of proper financial services in the tea zones of Murang’a
Loyal customer base built on projects like “Wings to Fly” and specialized services in the agricultural sector.
With reference to Equity Bank Group, explain some of the challenges and opportunities involved in creating a successful brand in a new market?
Gaining public trust
Getting through the government’s bureaucratic systems
Obtaining adequate capital to expand
Existing gaps in the market as was the case in the Murang’a tea zones.
Being on good terms with the President and high-ranking state officials.
Looking at the current market situation around the world, would you prefer to grow a building society or transform to a bank like Equity Bank if you had the chance today? Explain your reasons.
The answer to this question requires more research.
Explain four things that the Wings to Fly project say about Equity Bank and the people of Kenya.
They are grateful; those who benefit from the bank’s projects feel obliged to invest in the bank “as a way of giving back” to the bank and the society.
They are caring; The Kenyans working at Equity bank had to be caring to think of such programs that improve other citizens’ welfare.
They are very demanding; it is practically impossible to provide scholarships to every needy and bright student in the country. However, every Kenyan still expects to benefit, and those who do not benefit lament bitterly.
They are ethnically stratified; factions believe that the reason they fail to get the scholarships is because of their tribe.
With additional information from further research, explain the reasons why Kenyans linked the success of Equity Bank and its products to ethnicity.
Past regimes have openly displayed favoritism towards their tribesmen.
Many executives and high-ranking state officials currently come from the president’s ethnic community.
Abishua, D. (2010). “Strategic Responses used by Equity Bank to Compete in the Kenyan Banking Industry.” SSRN Electronic Journal SSRN Journal.
EQUITY BANK // TRANSFORMING LIVES THROUGH INCLUSIVE FINANCIAL ACCESS. (n.d.). Retrieved January 3, 2016, from http://www.igdleaders.org/wp-content/uploads/EquityBank_Impact-Measurement_Case-Study.pdfJames Mwangi of Kenya’s Equity Bank named EY World Entrepreneur of the Year 2012. (2012, June 10). Retrieved January 3, 2016, from http://www.ey.com/GL/en/Newsroom/News-releases/Press-release_WEOY_2012_WinnerKamau, J. N. (2012). “The relationship between agency banking and financial performance of commercial banks in Kenya (Doctoral dissertation).”
Kenya’s Equity Bank to buy Uganda Microfinance. (2008, April 18). Global Banking News.
Kithuka, B. K. (2012). “Factors influencing growth of agency banking in Kenya: the case of Equity Bank, Kwale County, Kenya (Doctoral dissertation, University of Nairobi, Kenya).”
Mas, I., & Radcliffe, D. (2010). Mobile payments go Viral: M-PESA in Kenya. “Mobile Banking in Africa – How it all began. (2012, March 28). African Banker.”
Ngai, M. (2015, June 20). “Equity Bank is a classic case study of how an empire is built. “Retrieved January 3, 2016, from http://www.standardmedia.co.ke/business/article/2000166342/equity-bank-is-a-classic-case-study-of-how-an-empire-is-built?articleID=2000166342&story_title=equity-bank-is-a-classic-case-study-of-how-an-empire-is-built&pageNo=1Sacerdoti, E. (2007). “Access to bank credit in sub-Saharan Africa: key issues and reform strategies.”
“Transforming lives through inclusive financial access” is a shortened form of a title to an article in the reference page. “n.d.” stands for no date.
The answers I have provided are brief and might require more explanations.