Equity Group Kenya Targets 10 Million Congo Bank Customers

  • Lender says DRC subsidiary could grow to rival Kenyan business
  • May make Ethiopian acquisition with Helios Investment

Equity Group Holdings Ltd., Kenya’s biggest lender by market value, expects earnings from a unit in the Democratic Republic of Congo acquired this year to rival the main business in its home market by 2025 as customer numbers climb to 10 million.

ProCredit Bank Congo SA should benefit from the local government’s efforts to spread financial services in Africa’s fourth-most populous nation and biggest copper producer, Equity Group Chief Executive Officer James Mwangi said Monday in an interview in the Kenyan capital, Nairobi.

An estimated 4 percent of the adults among Congo’s population of 75 million have bank accounts, according to the International Monetary Fund, while the central bank says the country has 20 lenders. Equity completed the $35 million purchase of a 79 percent stake in ProCredit in September and plans to invest the same amount expanding the business to win customers running small and medium enterprises and providing retail banking services to civil servants and other consumers, Mwangi said.

“The DRC can easily become the most profitable subsidiary of Equity group because of low cost of delivery,” Mwangi said. The use of agency banking and mobile platforms can cut the cost-to-income ratio at ProCredit to 45 percent from 85 percent over 10 years. “It’s that shift in efficiency combined with volumes that can make the DRC more profitable than Kenya in 10 years.”

Kenya's largest lender has dropped in Nairobi trading in the past year
Kenya's largest lender has dropped in Nairobi trading in the past year

ProCredit will seek to finance small enterprises as its niche business, Mwangi said. “That is where our competency, capability and risk appetite is.” The Kenyan bank is also targeting this market segment to build its operations in Uganda, Tanzania, Rwanda and South Sudan, he said.

The Congo unit is forecast to more than double profit to 1.5 billion Kenyan shillings ($15 million) in 2016, Mwangi said. Equity’s regional units are expected to boost group assets by 40 percent in the next two years and profit by about 30 percent, he said.

“In five years, they will be contributing 50 percent to profits and assets driven by our focus on SMEs,” he said. “In all those markets, there is nobody doing SMEs. It’s a huge opportunity.”

Equity intends to enter the Ethiopian market within the next two years and may form a partnership with London-based private equity firm and former shareholder Helios Investment Partners LLP to provide banking in Africa’s second-most populous country, Mwangi said.

Equity favors acquiring an existing bank in Ethiopia, rather than setting up a lender, Mwangi said. “It’s always good to take an existing infrastructure and then you enhance capacity, as opposed to greenfield.”

MAP: Democratic Republic of Congo and Ethiopia, markets where Equity Group is targeting growth.
MAP: Democratic Republic of Congo and Ethiopia, markets where Equity Group is targeting growth.

Equity Group shares have fallen 18 percent this year, underperforming the Nairobi Securities Exchange All Share Index, which has dropped 12 percent. The stock was unchanged at 41 shillings by 10:20 a.m. in Nairobi on Tuesday.

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