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Equity Bank PRESENTATION DURING 3RD AFRACA AGRIBANKS
FORUM
OCTOBER 16-19 2007 NAIROBI - KENYA
Equity Bank Overall Performance
Growth in Loan Portfolio
16,551
11,428
5,885
35 97 122 195 230 327 450 860 1,1891,734
3,099
Millions
Growth in Profit
KES 547
1,362
1,103
501
218
142111552518111297 35
94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 Aug'07
Millions
Total Assets
KES 547
32,996
20,024
11,456
3,9242,576
1,8811,260709487
6,707
98 99 2000 2001 2002 2003 2004 2005 2006 Aug'07
Millions
Share Holders Funds
KES 5473,110
2,201
1,594
1,271
478324227
6647232313
-19
195
Millions
STRATEGIC PARTNERSHIP FOR FINANCING
AGRICULTURE IN THE VALUE CHAIN
INTRODUCTION
• According to the 8th MDG, Development of global partnership is one of the key factors that will enhance sustainable growth. some of critical factors to be considered are:-.
– Establishing an open trading and financial system that is rule-based, predictable and non-discriminatory, commitment to good governance and poverty reduction globally.
– In cooperation with the private sector, make available the benefits of new technologies and develop decent and productive work for youth.[1]
The development of emerging markets in creating and linking players is the best vehicle to drive this MDG.
[1] http://www.un.org/millenniumgoals/
Cont…
• This assertion is not only true for the global market but it is very practical in our local market situation particularly in Africa where the development of the agriculture sector is hampered by a myriad of challenges.
• Strategic partnerships for financing become not
only a necessity but a crucial method to be adopted by players in the value chain.
EQUITY BANK BUSINESS APPROACH
Market-led & Customer focused Self
Actualization
Esteem
Belonging
Social & Security
Basic Needs
INTERVENTIONS IN AGRICULTURE
To facilitate the financing of agricultural activities, the bank has adopted a number of interventions that connect the Bank with the wide clientele today standing at well over 1.6million. These include:
• Participation in all agriculture shows and exhibitions.
• Attending all farmers field days along with other stakeholders.
• Introduction of award schemes for best farming practice to motivate farmers
• Organizing free financial literacy days.
• Introduction of mobile village banking • Introduction of a farmer friendly remittance account with features like no ledger fees
and no minimum balance
Village Mobile Banking
Taking banking services to the people Village mobile banks (rural focus)
WHY VALUE CHAIN FINANCING?
• Value chain financing is occasioned by the need to meet market demand for product and services at cost effective and efficient production and marketing processes.
• Strategic partnership becomes the game plan to facilitate the process of value chain financing to reach the bottom of the pyramid.
Value Chain Approach
Farmers and farmer groups
Input suppliers: Agro-dealers – Wholesalers &
retailers
Agro-processors
Input Manufacturer /Importers: Seeds,
Chemicals, fertilizers
Extension: Private sector
Development partners: Donors, NGOs, Research institutions,
Govt. extension
Buyers: Exporters, Institutions etc
1
2
3
45
6
7
8
9
10
11 12
13
REQUIREMENTS
• For effective value chain strategic partnership to work there must be clear need of financing that should be well spelt out.
• It is indeed a process with many steps as follows:-
Financial need analysis:
• This is a product of research and development which is carried out from time to time among the farmers in different geographical areas.
• The need is based on agricultural activities taking place in a particular locality. The product in question should have a specific market and a clear production cycle
Market assessment
• SWOT analysis to establish the strengths and weaknesses, threats and opportunities surrounding the market.
Identifying and selecting partners
• Factors to consider in selection of parties are issues such as:-
1. Credit worthiness of the players
2. Experience in the area of expertise
3. Compliance with regulations
4. Effect of competition
5. Management and governance etc
Structuring strategic alliances
• This entails identifying the roles and responsibilities of parties involved in the partnership.
• It further calls for specialization of areas of expertise of the players e.g.
– In a horticulture exporting business, matters of transport and handling becomes an area of expertise for the exporting company while paying out growers is the field of financial service provider
Implementation
• Each party must effectively execute its role within the specified time frame.
• Evaluation of impact
– Against the basis of win-win situation each player should get quantifiable benefits from the partnership example; farmers need working capital to pay casual workers.
Value chain concept allows integration of the various
players in agriculture production, processing and
marketing.
It defines the various roles of players while at the same
time, scope and purpose of partnerships that can be
established.
VALUE CHAIN CONCEPT
BENEFIT• Reduces operation costs for small scale producers
• Achieve economies of scale
• Enhance specialization in areas of strength
• Allow the parties to take advantage of technological development
• Allow growth and expansion
• Spread risks among the parties
• Ensure cash flow for the producers and processors/buyers
• Generate opportunities for other BDS players e.g. sprayers of chemicals
CHALLENGES• Is based on willingness of parties some of who drop along the way
• It takes a long time for players to come together and agree to work in partnership
• Calculation of benefits against cost-benefit analysis is a lengthy process
• Introducing and enforcing contracts to farmers
• Mobilization of groups is an uphill task
• Changes in prices after contracts are signed
• Competition and diversion- farmers are multi banked and difficult to follow
• Lack of insurance cover for most produce frustrate the parties
PARTNERSHIP CASE STUDY OF OSHO
CHEMICALS• Equity bank and Osho chemicals identified opportunities
in partnering through an MOU
• Objective: – To facilitate financial intermediation to the distribution network of
Osho Chemicals
• Gaps: – a) the distributors could not buy enough stock due to financial
constrains. – b) farmers could not buy from stockists enough chemicals for
their crops and livestock
TARGET
• Small scale horticulture and livestock farmers
• Major distributors of agro and veterinary chemicals
• Osho chemical stockists / entrepreneurs
RATIONALE
Both organizations have;
• Wide distribution network
• Wide customer base
• Target of the bottom of the pyramid
• Strong in IT
PRODUCTS
• Farmer friendly remittance account-allow customers to save, no ledger charges
• Farmers flexible and affordable loans
• Stockists Biashara Imara loans
• Distributors business loans and overdrafts at favourable rates
• Other products such as asset financing, payroll solution, trade finance etc
VALUE PROPOSITION FOR
REMITANCE PRODUCTS
• Affordable - Minimum Operating balance - Nil
- No ledger fee/No maintenance fee• Accessible
- Account opening balance-Nil- No restrictions on amounts and frequency of withdrawals - No appointment on seeing the managers- 65 Branches, 44 Village Mobile Branches & 200 ATMs
Our Loan Products
Social Loans• Medical • Education• Emergency
Working Nation Loans• Salary Advance• Equiloan – check off loans
Agricultural Loans – Backbone of Economy• Farm Input • Crop Advance• Commercial Farm Loans
Supporting Commerce, Trade and Industry• Micro Loans (Biashara Imara)• Vijana Biashara Loans• Fanikisha Women Loans• Overdraft • Working Capital• Business Development Loans
Growing Together In Trust!
VALUE PROPOSITION FOR LOAN PRODUCTS
• Available to all account holders
• Tailored to the individual needs
• As low as Kshs.500-1,000/-
• Appraisal ability to pay based vis-a-vis collateral based
• No appointments to see bank management
• Flexible Securities/collateral
• Prompt disbursement
Alternate Delivery Channels
Eazzy Banking/Mobile SMS BankingThe mobile phone as a delivery channel is a revolutionary way of branchless banking making basic financial services more accessible to millions of Kenyans across the country:
• Airtime top-up• Balance enquiry• Transfers to nominated accounts (within Equity Bank)• Bill payments• Internet Banking• Supermarkets Cash back services• Points of sale• Retail Outlets agency network• Equity MoneyLine – Money transfer
Our Inspiration
• That when years turn our vision dim and gray, we shall still be seeing beauty in the tired wrinkles of our faces and shall take comfort out of the fact and knowledge that when we were given the opportunity we did all we could to empower our people to exploit opportunities and realise their full potential on the road to economic prosperity.
