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MICROCAPITAL STORY: Equity Bank of Kenya to Expand Microfinance Services to Uganda, Tanzania and Rwanda Backed by Investment from Helios EB

equity bank microfinance

James Mwangi, CEO of Kenya-based Equity Bank. recently announced that the bank will use the proceeds from the sale of 25 percent ownership (valued at KES 11 billion or USD 175.7 million) of the bank to investment group Helios EB to expand its operations to other countries in East Africa. The bank plans to open subsidiaries in Uganda, Tanzania and Rwanda by August 2008. The bank believes this expansion will allow it to compete against the dominant players in the region: multinationals such as Barclays and Standard Chartered. as well as local Kenya Commercial Bank. Mr. Mwangi stated that he is confident that the expansion will allow the bank to double its customer base over the next five years.

Helios EB is a limited partnership managed by Helios Investors, LP and advised by Helios Investment Partners, LLP. Helios Investment Partners is an investment firm making private equity investments in sub-Saharan Africa. Its primary focus is in West Africa, with a secondary focus on Central and Southern Africa. It specializes in large buyout or growth investments, as well as new business formations where there is clear potential for achieving meaningful scale in the medium term.

A fund such as Helios EB is set up to invest in a number of companies on behalf of its partners for a limited period of time – typically 10 years. Upon the termination of this period the fund is harvested and the money shared among the investors. Among the notable investors in Helios EB are investment firms

owned by the US government – including the Overseas Private Investment Corporation, the UK government – including the CDC Group, the World Bank – International Finance Corporation, as well as funds owned by American billionaire George Soros.

Equity Bank was originally founded in 1984 in central Kenya primarily to serve small scale tea and coffee farmers. Originally a building society, Equity Bank formally became a bank only very recently in 2004. The bank has a current customer base of 1.8 million and, as of December 2006, USD 287.5 million in total assets. Last year, the bank earned significant credibility when it announced that it had earned KES 1 billion (USD 16 million). In addition to its own capital, Equity is also disbursing a KES 7 billion (USD 112 million) UN fund to advance women entrepreneurs in Kenya.

Mr. Mwangi attributes the bank’s recent success to its departure from traditional banking practices in Kenya. Whereas most financial institutions would deem ordinary Kenyans too big a credit risk to serve, Equity Bank has built a reputation serving precisely these populations. The bank’s practices have earned it international acclaim. including an award of excellence at the recent G8 summit and favorable rankings on the United Nations Development Fund list: third-best microfinance institution in the world and best microfinance bank in Africa. Mr. Mwangi stated that this recognition by international leaders, as well as the popularity of the bank among Kenyans, are the primary factors that led the bank to its decision to expand regionally.

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