Friday, April 18, 2008

April 18: Mostly Equity Links

KCB goes payday: with a salary advance product, that mimics one popular, silent, product of Equity Bank – the salary advance loan. KCB’s is up to 100,000 shillings ($1,600) or 50% of salary with no hidden charges - read more on pay day loans

Equity niches: Equity has cut a niche for discovering new products – basically they see a gap and Kenyans with needs and they step forward and finance that need. Where there was no one there, now one can do pretty much anything. e.g Farmers crying about fertilizer costs, next thing, there are equity fertilizer loans for them!

Equity goes regional with the acquisition of Uganda Microfinance Limited: good luck creating a cross-border seamless bank that will enable account holders to transact regardless of countries. Even multi-nationals have hiccups with that.

KPLC extends credit : The KPLC (Kenya Power & Lighting Company) is looking for a bank/MFI to advance 400 million shillings (4 million euros) Electricity Connection Revolving Fund to allow their potential subscribers to pay electricity connection (setup costs) over several months. What are the odds that Equity will win the contract that requires that specifies that the award will go to a MFI/bank that is 10 years old with more than 30,000 active customers, a turnover of 100 million shillings, with 90% repayments and that has been rated by a recognized rating agency in the field of micro-financing/banking?


Poor child said...

great! thanks very much for sharing!

Mashatall said...

What Equity does so well is adopt the microfinace model to mainstream commercial banking, where they understand that the market they serve is in the majority, while all the other banks try to court the minority.Local solutions need homegrown solutions, period. Its time the other players put their thinking caps on, and try and play catchup with Equity, otherwise they will soon be controlling 60% of the market by end of year.

just what? said...

remarkable info on equity there. what of the stock price? it has gone up to about 200 since the cabinet was named. is it over-valued? or do the fundamentals support it, given the expected growth (both organic and the ugandan acquisition).

Nairobian Perspective said...

Equity is the mwananchi's bank and will definately do well in the Ugandan market with their wide affordable product range.

toiyoi said...

In America (at least) pay day loans are run by "money sharks". Most people who use pay day loans (at least in the US) are forever dependant on them (spending more than they bring in), and end up paying close to 200% (some study, will find the link) on interest.

A Bank such as KCB should not do this type of "sharking"

coldtusker said...

toiyoi: Kenyan banks are limited as to how much they can charge... Kenyan moneylenders charge 10-20% per month...

Equity has cut into the moneylenders market. I hope KCB does so too... It's not about 'sharking' but satisfying a need. The competition is good for all...

toiyoi said...

Would you take a loan that charges you 20% per month and you had to do this several times a month or every month? What is that per annum? Even riskier (unsecured) credit cards charge an average 20% per annum.

As i said, a study shows that payday loans use is never a 1/2/5 times event, but it creates a dependency on the borrower.

coldtusker said...

toiyoi: You live in the US (si?)...

Kenyans banks will be forced to report loans on an APR basis. Equity's loans can be over 30% APR.

Note that I would rather support a 20-30% APR from banks vs a 20% per month from moneylenders.

Credit cards in Kenya are 20-36% APR.

Regarding dependency. I feel your pain but its what it is. If the banks cant enter the market, the borrowers will use the moneylenders at 300% APR.

inspectordanger said...

Talking about Equity's growth, why haven't any bank, KCB, Equity, NBK, Co-op etc ventured in remote areas where farmers and business individual are yearning for banking services. These areas are Sunenka in Kisii, and Kendu Bay. I am sure there are other areas. The profits these banks make now can be even more. The CEO's are you tuned to Bankelele?

toiyoi said...


You wrote "but satisfying a need. The competition is good for all..."

200%-1000% APR is not good business practice, it is feeding on the weakness of the weak, which a bank such as KCB ( i do not know about Equity ) should not engage in.

In the US, they are legally required not to lend over $300 per week, but as you may expect, they have found ways to circumvent this.

toiyoi said...

Here is a link worth musing over:

toiyoi said...

Again, some quick informational link is: Payday Loan TrapPayday Loan Trap

bankelele said...

Poor child: you’re welcome

Mashatall: microfinance is a useful product but if you translate it to mainstream it can be expensive for users, who be being less risky, should also pay less charges and interest

Just what?: stock price has gone up almost 1/3 since announcement of the Uganda deal. (See the Kenya capital investment group for more insight)

Nairobian Perspective: We’ll see how Ug takes to Equity in a few months.

Toiyoi: It’s a bit strange to see a bank advertising a controversial service. If used one time, it may be ok, but as you point out consumers get into a vicious expensive circle with payday loans

Coldtusker: there’s no limit to how much a bank can charge here
- I’d like to see APR adopted in future marketing & comparison studies (such as the one by

Inspectordanger: banks are in rural areas, but mostly to mobilize deposits, but find that their rural loan products are a bit limited


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