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Monday, August 20, 2007

What Are The Weaknesses Of Equity Bank?

I did find the inevitable warts in this star player of a bank.

Top on the list of its' weaknesses emerges from the style of management. The tight-control-one-man show that built the institution from nothing (actually Equity missed being put under receivership by a whisker—but I'll explain that story in a minute) to what it is today is still very much in place.

This is not the place where staff can share ideas and suggest things. Everybody knows that doing so is way too dangerous. That is how such talented members of staff like Kariuki Nguru and more recently, Joyce Sang lost their jobs. The way to keep your job at Equity is to do exactly as you are told and to oil the right egos frequently enough. This is more than a little dangerous for an institution that has reached the size that Equity Bank has.

It is instructive that this was the same problem that Uchumi Supermarkets had. The dukawalla management style of former CEO Suresh Shah was good for raking in the profits but skills were hardly passed on down to lower cadre workers. Interestingly this is something that Nakumatt Supermarkets have managed to do rather successfully and it augurs well for their future.

Increasingly other banks like Barclays and Standard Chartered have started showing immense interest in Equity Bank staff and are more willing to offer better pay packages and working conditions which a number of Equity employees have already quickly accepted. The question is what will be the long term impact of this on the performance of the bank? One thing is for sure, they will not come out of it unscathed.

Indeed it is a little surprising that CEO James Mwangi who is said to have learnt a lot from Alnoor Kassam's TradeBank did not learn Kassam's human resources motivational secrets, or rather decided to ignore them. Many Kenyans think of TradeBank as the failed bank but the truth is that only a huge loan that a prominent politician refused to pay brought down this very innovative bank. Employee of the month programs where ordinary low cadre employees would win huge cash prizes was just one of the things Kassam put into place to build a staff team that helped him churn profits at a dizzying rate.

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One sign that Equity's Mwangi has very different views about human resources is the story behind the low interest loans given to staff to purchase Equity Bank shares. It is said that the move was mainly done to technically disqualify staff members from joining any workers' union you don't want to join a union against a company where you are a shareholder do you? Of course the deal also had the usual stringent requirements, in the case of Equity, the staff members cannot sell off the shares for 5 years.

This attitude deep within Equity Bank management is not unusual in a country where there is such a huge unemployment problem as in Kenya today, mainly because it is very easy to replace disgruntled and non-performing employees. However it is the sort of thing that inevitably comes back to haunt an organization sooner or later.

The anti-Equity emails mention the banks involvement with government. With the recent history where banks that have gotten too close with government have ended up in trouble, this statement on its' own has no doubt made many Kenyans nervous. The list of casualties is way too long and includes TradeBank and Trust Bank to name two prominent examples.

It has even been suggested that this is more of a tribal thing than anything. What those who have been spreading these rumours have conveniently forgotten to mention is the bank's close association with dozens of NGO's and United Nations bodies who admire its' amazing business model and the fact that it is the largest lender in the region to low income individuals and small often informal enterprises. Naturally many of these organizations have found Equity, with its' mission statement of being a micr0 financier, the best partner to work with. Even Bill Gates is working with the bank on a number of his projects.

With this kind of attention, the government would have to pay attention to the bank and would also be easily convinced to channel funds for programmes through the organization irrespective of the tribes that most of the top management belong to.

I am convinced this is a very sad case of where politics has reared its' ugly head on such a successful and genuinely well run financial institution.

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4 comments:

MainaT said...

The other thing is that the govt by working with Equity (among other banks including Family bank) on disbursing the woemn fund, is because Equity has recognised lower non-performing loans per every loan it holds.

NJERI said...

It seems as though this blog has gone on a spree to sambaza the good news for Equity Bank. Even where you have found a crack you have chosen to paint over it like "Peter Marangi" wouldn't. If it is so well run why are there issues of tribalism, poor management (as mentioned by you) and greasing government palms evident??

I truly believe in buy Kenya, build Kenya, esp. where my brothers and sisters benefit without being assessed rubbishly for "economic viability", but with Equity, I have chosen to keep a distance. It's tribal culture is all too well known, we don't need letters and emails to reflect what we can already see. I belong to the tribe in question but in principle I will not support bias from my own relative and condemn Indians for doing the same. Too hypocritical a serving.

And for those of us too well mislead that we think that the government's interest is as a result of Equity's working model.. for the mwananchi, we should ask ourselves why the government chose to channel the Women's Fund monies through a private organisation and not through it's own Banks (KCB and NBK)? Unfortunately, governments don't just make choices. They are not privy to such rights, that's why they tender and scrutinize....then decide. There was no clear cut process to this choice. It was just made. Because the Bank is so steadfast in it's cause to serve Kenyans... I highly doubt it. For a blog that purports to see though opaque deals, hapa mmechongwa..

Anonymous said...

I strongly differ with Njeri comments about women fund,Kindly read from what the women fund is about;July 2, 2007
NATIONAL WOMEN’S CONFERENCE; EQUITY BANK AND UNDP
PARTNERSHIP
FREQUENTLY ASKED QUESTIONS
1. What is the new partnership between Equity Bank and UNDP all about?
The new partnership is about promoting women in Business and Investment. The
overall objective is to equip women in business and investment with skills to
make their businesses globally competitive. The following are the expected
benefits from this program:
• Increased women-owned and managed business ventures and global
networks that contribute to women’s full participation in policy and
economic development
• Enhanced capacity of women entrepreneurs to participate in global trade
and investment
• Increased financing and investment in women’s entrepreneurial initiatives
• Opening of larger markets and business networks.
2. What is the role of UNDP in this partnership?
UNDP will provide technical support through training, and providing linkages to
markets for women in business and investment. This will be organized with close
collaboration with Equity Bank, in order to reach out to the women already
banking with us as well as potential clients
3. Is the Ksh 5 billion set aside by Equity Bank a grant to women?
This is not a grant. It is money that the Bank has set aside, from normal savings,
to lend to women. It is money that Equity would lend through ordinary loans. It
has no relation with the newly launched Fund of 2 billion from the government. It
is important to note that other banks have also started launching women funds.
This means, that Equity Bank has, once again, become a trend setter in the
banking industry.
4. What is the role of Equity Bank in this program?
Equity Bank will provide loans to women in businesses. Besides, the Bank has
also trained 22 staff as trainers to support women through entrepreneurial skills
training. To start with, the newly trained staff, who received their training
certificates from His Excellency the President, will train other 500 staff members,
in order to develop an adequate pool of trainers to support this program.
5. Who can access this fund?
Any woman who opens an account with Equity, and who meets the necessary
requirements for applying for a loan, qualifies to access this fund, through our
normal loan products.
6. I have my account in another bank. Can I still benefit from this fund?
This fund will be administered as part of our normal banking services. For that
reason, only customers will benefit from this fund. However, new customers will
be considered, upon fulfilling the bank requirements as will be spelt out by branch
staff.
7. Has Equity Bank opened women-only branches, as reported in the media?
Equity has not opened any new branches for women. What we are doing, is to
deploy the trained staff in 3 branches in Nairobi; Moi Avenue, Community
Corporate and the planned branch in our upcoming Head Office in Capital Hill.
The staff will focus on providing women clients with training, advice and
mentorship, how to best manage their business. As we train more and more staff,
this business support service will eventually be available in all branches. We will
not have any specific bank for “women only” Remember women work with men,
and men work with women, so we will always have a mixed client base.
8. I understand that Equity is offering free training for women. Is it true?
Equity Bank will be giving business support to women in business. This is very
similar to what is happening with our youth lending program, where credit
officers visit youth groups to give them business support skills. In the women
program, we shall be giving them advice, and especially those who apply for the
loans, to ensure that they understand the importance of managing their businesses
well in order to repay their loans, and also to grow their businesses. In addition,
we will make available two of our business management books to further support
them.
9. There were some books that were on sale at the Equity exhibition stand
during the conference. How can I get a copy?
The 22 members of staff who were trained on entrepreneurship have also revised
two existing Equity books. One is on How to Start a Business, and the other one is
on How to Manage a Business. These are very practical books that every
customer in business should familiarize themselves with. They will be availed to
all the branches, to sell to customers for Ksh. 200 (Two hundred only) per book
on request.
10. I heard that you have formed a new club for women. Please tell me how I can
join, and what I expect from this club.
The Bank is creating a progression path for all our women customers. There are those
who have made tremendous progress in their businesses and they have been asking
for new products to suit their demands. This has been a common request, especially
for women doing international businesses. Some of the products they have been
asking for include debit cards, credit cards, overdraft facilities, and information about
international markets, and opportunities to network with other business women in
other countries, trainings on how to manage big businesses among others. In order to
respond to their needs, we are now developing a suite of products. As soon as the new
products are ready, you will receive the necessary information, in order to help you
share it out with customers.
Equity Pearl Club
In order to promote Women in Business and Investment, the need for a forum
where they can network, was voiced by women during many forums organized by
the Bank. In response, the Bank is spearheading the formation of the Equity Pearl
Club. We are now working on the structure and registration of the club. Some of
the activities and services of this club will, among other things focus on lobbying
the government and other regulatory bodies, on creating a conducive environment
for women to do business. The club will also organize training sessions, seminars,
and motivational talks for members.

Anonymous said...

how is your general feeling on the responsiveness of customers by the bank"s staff and their customer service in general?

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