In 2009 Equity Bank ran one of the most successful campaigns that turned banking on its head, an ecstatic mimi ni member slogan that even featured a little girl of around 12 years old.
Today she would be around 22 years and if she could see a huge billboard the lender has put up along Ngong Road just outside Kenyatta Hospital, she would be familiar with the moniker member.
Equity, which became the first Kenyan bank to own more than Sh1 trillion in assets by buying financiers in East and Central Africa, had forgotten her, and this perhaps is a turning point.
In 2017 the lender’s boss James Mwangi announced the divorce stating the bank was moving away from small businesses for being too risky, to lend instead corporates and the risk-free government.
“We are moving away from unsecured lending. IFRS 9 (International Financial Reporting Standard) requires you to use historical ratio to make provisions at point of booking the loan. This is not sustainable with a margin of seven percent,” he said at the time.
Now Dr Mwangi who declared the brick and mortar branch is dead, is beating a hasty retreat and just announced the bank will open 60 branches across the country designed to return to the member as the bank re-discovers its roots.
The move will take the branch network to 249 across the country which the lender says will enable it to serve millions of its customers better while also bringing banking services and financial access closer to the community.
“We are a community bank and we understand why it is important to bring financial services closer to the community. This will help transform their lives and grow their businesses. The Equity Group has already approved to increase our outlets by 60," Dr Mwangi said in Maralal town while commissioning the of Wings To Fly Programme.
This is a complete turnaround from the decorated CEO who boasted that his bank was just two percent short of fully shifting all its transactions onto digital platforms.
Dr Mwangi has been hammering the point home that the group altered its strategy to adopt to the changing environment and executed a rapid business transformation that saw 98 percent of all transactions being digital in count, and 65 percent of volume by value.
This strategy meant the lender could let go of staff even as the bank grew in size. Equity Bank had 8,000 employees in 2013 serving 8.4 million customers which came all the way down to 6,580 serving 11.2 million customers in 2019.
The lender with a tagline going transforming lives one branch at a time had a footprint of 216 in 2013 which rose to 298 at the end of 2019.
Only acquisition of new banks saw a major shift in 2020 when the lender’s branches across the region jumped to 336 and staff number swung to 7,119.
It is not just Equity alone that has seen this shift, over the last five years. Banks have shed 6,574 clerical jobs from a high of 18,539 in 2014 as the move towards digital banking over mobile phones allowed lenders to employ technology to eliminate mundane tasks, managing costs and increasing efficiency.
Basic services such as account opening, over the counter transactions and sales are moving onto digital platforms, which not only provide money transfer but also credit and savings, payments for goods and services as well as e-commerce.
Equity Bank officials declined to reply to our email inquiring the rationale behind the change in approach making it difficult to understand the new strategy.
Digital streams may have thinned following the Central Bank of Kenya order forcing banks allow free transfer of funds from lenders accounts to mobile money.
But even this is a modest value as Equity Bank said scrapping of fees on transactions lost them only Sh1.08 billion while KCB bank lost Sh1.5 billion.
The lenders may also be targeting higher charges which are levied on over the counter (OTC) transactions compared to online and mobile transactions.
Financial Sector Deepening (FSD) cost of banking 2018 survey said banks were charging up to Sh1,056 for OTC withdrawals while RTGS transfers done at the branch were the most expensive and significantly higher than those done over the mobile banking app and through internet banking.
Another possible explanation for physical expansion was given by NCBA managing director, Mr John Gachora, who said going forward more branches will open but their focus to sales as opposed to service as most service are now available on digital platforms.
Hire new staff
The decision to open 60 more local branches will remarkably change Equity and will mean deployment of billions of shillings to set up locations and hire new staff to operate them.
Location is another key factor since most urban areas are almost saturated with more than half of Kenya’s bank branches- 794 branches or 53 percent Kenya’s 1, 502 banking outlets found within Nairobi, Mombasa and Kiambu.
This leaves space in counties such as Nakuru, Kakamega, Bungoma, Meru, Kilifi, Machako and Kisii which are more populous but yet reported fewer bank concentration than Mombasa alone.
However the cost implication of setting up in rural areas can be inhibiting and will pose a challenge if Equity Bank is targeting such areas.
Dr Mwangi said the bank will conduct a feasibility study in Samburu's most volatile region, Baragoi, to determine whether it will qualify to benefit from the 60 new branches.
Opening a branch is a complex matter especially in rural underserved areas, which do not have buildings with specifications to host banks.
Setting up means that the lender will either commission new buildings or rent existing ones and do extensive renovations to boost security and branding.
These has seen lenders avoid far flung areas with Kenya’s bottom 20 counties having less than 10 bank branches within their borders.
Security is another key issue with most remote areas having less government presence making banks especially vulnerable.
Equity Bank recently had to contend with this challenge shutting down their Matuu branch following a robbery incident last week.
The brazen daylight heist saw five armed robbers, who were armed with pistols raid the bank and made off with an unknown amount of money from the customers present and the tellers after a 10 minute heist.