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Equity freezes regional expansion plans to boost existing markets

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Equity group chief executive James Mwangi. PHOTO | FILE

Equity group chief executive James Mwangi. PHOTO | FILE 

By GEORGE NGIGI, [email protected]

Posted  Thursday, March 10   2016 at  09:00

In Summary

  • Equity Bank had raised $197 million from shareholders for the plan which saw it enter the Democratic Republic of Congo and also targeted entry into Burundi and Ethiopia by end of this year.
  • The lender disclosed it had set aside $100 million (Ksh10 billion) to enter the Ethiopian market but said it would only do so as a fully licensed lender and not through a representative office.
  • Equity invested an additional $20 million (Ksh2 billion) in Tanzania and $13 million (Ksh1.3 billion) in Rwanda.

Equity Bank has shelved its regional expansion plans announced last year with the management saying it was instead reinvesting in existing markets.

Kenya's largest bank by customers had raised $197 million (Ksh20 billion) from shareholders for the plan which saw it enter the Democratic Republic of Congo and also targeted entry into Burundi and Ethiopia by end of this year.

“This year we are not going to any new market but instead we want to mine existing subsidiaries to contribute at least 30 per cent of assets and hopefully 15 per cent of profits,” said the group chief executive James Mwangi.

Equity disclosed it had set aside $100 million (Ksh10 billion) to enter the Ethiopian market but said it would only do so as a fully licensed lender and not through a representative office.

Ethiopia’s legal framework locks out foreign-owned banks from its market with international lenders opting to enter the economy through representative offices.

“We believe Ethiopia will open next year—we don’t want a representative or liaison office; we have been given those two but have declined because we want a full license because that’s the way we feel we can have the desired impact,” said Mr Mwangi.

Two Kenyan lenders — KCB, which is the country’s largest bank by asset base, and CFC Stanbic — opened representative offices in Ethiopia last year.

Mr Mwangi disclosed the lender pumped additional capital in its regional subsidiaries to boost their performance.

He said the bank will inject $20 million (Ksh2 billion) in its Uganda operations and an additional $25 million (Ksh2.5 billion) in the Democratic Republic of Congo.

Equity invested an additional $20 million (Ksh2 billion) in Tanzania and $13 million (Ksh1.3 billion) in Rwanda.

“Increasing capital in the region means we can create more wealth with the increase in Tanzania than going to Botswana,” said Mr Mwangi.
Equity has operations in Uganda, Rwanda, Tanzania, South Sudan and the Democratic Republic of Congo.

It entered through the acquisition of ProCredit Bank in a venture that cost it $34.5 million (Ksh3.5 billion) inclusive of share swaps.

Since the entry it has expanded its branch network with 9 new outlets last year and plans to open 11 new ones this year.

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