Oloo Winnie

Equity has registered a 51% growth of funding enabled loans to customers grow by 30% to Kshs 478 billion up from Kshs 366 billion. Cash and cash equivalents grew by 186% to Kshs 247 billion up from Kshs 86 billion. Investment in Government securities grew by 26% to Kshs 217 billion up from Kshs 172 billion.

The Group has weathered the COVID-19 disruption to register a 51% growth in its balance sheet with total assets growing to Kshs 1.015 billion (One trillion and fifteen billion shillings) up from Kshs 674 billion the previous year. The growth delivered through both organic and merger & acquisition strategies saw the group become the first financial institution to cross the trillion shillings rubicon in East and Central Africa. The growth has been driven by a 53% increase in customer deposits which grew to Kshs 741 billion up from Kshs 483 billion, while long-term debt financing grew by 71% to Kshs 97 billion from Kshs 57 billion with shareholders’ funds growing by 24% to Kshs 139 billion up from Kshs 112 billion.

Net interest income grew by 23% to Kshs 55 billion up from Kshs 45 billion driven by a 30% growth on customer loan book and 26% growth in investment in Government securities. Non-funded income grew at 27% to reach Kshs 38 billion up from Kshs 30 billion to contribute 41% of the total income. Forex trading income grew by 77% to stand at Kshs 6.2 billion up from Kshs 3.5 billion. Diaspora remittances commissions grew by 76% to Kshs 1.5 billion up from Kshs 0.9 billion. Volume of Forex trading increased by 51% to Kshs 863 billion up from Kshs 571 billion with Diaspora remittance contributing 32% of the volume of forex traded.

Total operating costs grew by 67% to Kshs 71 billion up from Kshs 42.5 billion driven by a 496% growth in gross loan provision of Kshs 26.6 billion up from Kshs 5.3 billion in the prior year, increasing the cost of risk to 6.1% up from 1.3% the previous year. The higher loan loss provisions enhanced NPL coverage to 89%.

As part of the Group’s commitment to support lives and livelihoods, keep the lights of the economies on by avoiding massive disruption of economic activities, the Group accommodated Kshs 171 billion of loans for customers whose repayment capacity was adversely impacted by Covid-19. This represents 32% of the entire gross loan book of Kshs 530 billion. As at 31^st December Kshs 40 billion of the restructured loans had resumed repayments and normalized. A deep dive review of the entire Kshs 171 billion accommodated loans revealed doubts on the future viability and quality on Kshs 9 billion of loans promoting the downgrade of the said doubtful loans to NPL (IFRS 9 Stage 3) increasing the NPL portfolio to 11% up from 10.4% as at 30^th September 2020, and 9% as at the end of the previous year and closing the year with 23% accommodated loan book equivalent to 11% of the balance sheet.

The Group’s cost income ratio improved to 48.5% from 51.1% the previous year driven by improvement in cost of funds from 2.9% to 2.8% and enhancement of yields on government securities from 10.1% to 10.7% despite realization of capital gains on the securities trading of Kshs 3 billion up from Kshs1.1billion the previous year and 117% growth of mark to market gains to Kshs 7.4 billion up from Kshs 3.4billion.

Yields on loans declined from 12.6% to 12.4% due to increased suspended interest on increased NPL book and change of loan book mix of local currency to US$ currency to 57%:43% from 64%:36% ratio in favour of the local currency as a result of acquisition and merger of BCDC in DRC and increase of 186% on cash and cash equivalent. The profit after tax contribution from the business outside Kenya grew to 28% from 18%.

The Group continued to transform itself into a low-cost operating business model, by enabling self-service capabilities for customers and transforming the banking experience from the place you go, to something you do on devices. Digitization has enabled 98% of all Group transactions to happen outside the branches with 85% of the transactions being on self-service mobile and Internet banking and 12% of the transactions happening on Agency and Merchant banking third party variable cost infrastructure. Only 3% of transactions happened on fixed cost brick and mortar branch and ATM infrastructure. 97% of the loan transactions are conducted on the mobile channel delivering unparalleled convenience to borrowers, round the clock banking that compresses geography and time to allow whatever time, wherever location banking experience.

For the first time ever, branches handled less than half of transaction value, accounting for only 37.4% of such value with the 62.6% of the value of transactions taking place outside the branch. Adoption of digital payments was accelerated with the number of transactions processed over the Pay with Equity solutions growing by 31% and the value of the transactions growing by 58% to reach Kshs 2 trillion up from Kshs 1.3 trillion. The Group intensified its social impact investments for shared prosperity with communities. Cumulative spend on shared prosperity programmes reached Kshs. 51 billion equivalent of US$ 464,515,524. The Group’s flagship secondary school scholarship programmes, Wings to Fly and Elimu, delivered in partnership with Mastercard Foundation, KfW and Government of Kenya reached 26,304 beneficiaries. Pre-university paid internship beneficiaries reached 6,713 while scholars who had attended universities reached 13,775 with633 scholars attending or alumni of global universities.

Young Africa Works programme’s aim to create 5 million jobs in 5 years in partnership with Mastercard Foundation saw 121,478 Micro Small and Medium Enterprises, MSMEs trained in entrepreneurship with 141,106 of them accessing Kshs 57.5 billion in loan facilities. 2,182,615 women and youth have been trained in financial education through Equity Group Foundation’s Financial Knowledge for Africa (FiKA) initiative. Over 2 million farmers have been impacted with 39,589 medium sized farmers being supported to transit into agribusiness

The Group Board of Directors has not recommended a dividend for the year ended 31^st December 2020, opting to prudently devote internally generated funds to the Group’s successful offensive and defensive strategy that has seen the balance sheet expand by 51% with deposits growth of 53% and loan grow

President Uhuru Kenyatta has declared a cessation of movement in five counties. The capital city of Kenya, Nairobi,and its environs Kajiado, Machakos,  Kiambu and Nakuru counties reported the most cases of Covid infections.

“Nairobi county accounts for nearly 60% of all recorded cases. This means that out of 5 people, 3 are more likely to positive for COVID-19 disease,” he said.

“If you test 100 Kenyans for Covid-19, 20 will test positive. Rate of infection up 10 times.”

Uhuru said Kenya’s Covid positivity rate has jumped tenfold from 2.6% in January to 22% in March.

This means that if you test 100 people, 20 will test positive. Worse in Nairobi, where six out of ten test positive. Uhuru said the third wave is expected to peak in the next 30 days.

As the climate debate rages on with no signs of the associated risks abating, 85.7 per cent of banks in Kenya have reported that their credit policies ensure responsible and sustainable lending practices, according to the 2020 State of Sustainable Finance in Kenya’s Banking Industry Report.

The report indicates that 71.4 per cent of banks have developed policies that promote optimal management of financial resources and natural capital (water use, clean air and pollution control). Meanwhile, about 85.7 per cent of banks revealed that they monitored macroeconomic impact on firm’s performance, including future impacts.

State Department of Housing and Urban Development, Principal Secretary, Charles Hinga (CBS), commended the strides made by the banking industry in as far as re-orienting their business goals to encompass sustainable development. He also lauded KBA for championing the Sustainable Finance Initiative across the industry.

“I wish to applaud KBA for actively bolstering meaningful progress in the banking industry by encouraging financers to integrate in their decision-making processes a forward-looking orientation while financing commercial activities,” he said during an event held to release the report. However, the 2020 State of Sustainable Finance in Kenya’s Banking Industry report disclosed that there is a need to issue comprehensive sustainability reports that are not integrated in financial reporting. Only 57.1 per cent of banks do so.

KBA Chief Executive Officer, Dr. Habil Olaka noted that the Association had taken on a transformative deliberate journey by building capacity of bank staff to enable them to make more inclusive decisions that factor in economic, environmental, and social impacts while also balancing their firm’s financial returns.

“Today, more than 33 thousand bank employees have been empowered through the SFI e-Learning platform to make more inclusive decisions that factor in economic, environmental, and social impacts while also balancing their firm’s financial returns,” he said.

KBA received funding support from WWF-Kenya to develop the study which also revealed that 52.4 percent of banks were on course in implementing the KBA Sustainable Finance Guiding Principles, while 47.6 percent of banks were actively implementing the Principles in their day-to-day operations.

“Economies across the globe are grappling with the Coronavirus (COVID-19) pandemic, which has disrupted and burdened several economic sectors. This is possibly our greatest reminder that social inclusion and participatory development is critical if we are to go back to our normal lives. Encouraging though is the fact that technology embedded innovations might be some of the greatest winners in the post-COVID-19 era. We are proud that by supporting the KBA technology-rich platform and the report, we are already shaping the future story of the Finance sector in Kenya – a critical hub for East Africa and Africa at large.” Mohamed Awer, CEO WWF-Kenya stated during the virtual launch of the report.

Separately, during the launch, KBA unveiled the revamped SFI e-Learning platform. The platform was converted into a modern, dynamic and disability friendly site by Farwell Innovations, a software development company. This is in line with the Association’s ambition to advance inclusivity for underserved segments of society.

In her remarks during the launch ceremony, KBA Director of Public Affairs Nuru Mugambi said, “Over the years, the Kenya Sustainable Finance journey has intertwined with other like-minded countries through industry associations and regulators, all of whom have been on a path towards ensuring a more resilient, responsive and responsible financial sector. From Mongolia to Peru, Morocco to UAE, and Nigeria and Ghana to South Africa, the Kenya Bankers Association (KBA) has engaged in a process of industry development that has largely been shaped by the market and underpinned by key partnerships, including government, development finance institutions and environmental organizations.”

She added that, “We especially appreciate all bank employees who have taken the time to learn about the Sustainable Finance Principles and understand how they can help shape a more sustainable economy through their roles.”

The African Development Bank and Equity Group Holdings (EGH) have signed a $100 million (Kshs 11 Billion) loan facility to support the commercial bank’s expansion across Eastern and Central Africa, enhancing its ability to serve small and medium enterprises as it grows.

The loan, a tier two facility with a seven-year maturity, is expected to promote EGH’s ability to offer bespoke products to MSMEs, strengthen its balance sheet and optimize its capital structure across the continent with a special focus on women and youth entrepreneurs.

Dr. James Mwangi, Managing Director and CEO of Equity Group Holdings said, “together with the African Development Bank Group, Equity Group will be strongly positioned to support MSMEs to keep their lights on during the prevailing COVID-19 pandemic that has slowed down the economy impacting on the cashflow of enterprises. We have seen the impact of pumping oxygen  to our MSMEs during this period. They have emerged more resilient thereby protecting jobs and creating more job opportunities through venturing into more innovative initiatives such as manufacturing of internationally certified quality PPEs,” he said

“Access to finance represents a significant barrier to SMEs in many African markets, one that has sharpened as a result of the ongoing pandemic,” said Stefan Nalletamby, the African Development Bank’s Director for financial sector development. The timing of the facility could not have been more appropriate especially as businesses seek to remain operational in the midst of a COVID-19 pandemic that is causing financial havoc.”

He also noted that the loan is aligned with a number of the Bank’s High-5 strategic objectives, including improve the quality of life for the people of Africa, Feed Africa, Light up and Power Africa, and Industrialize Africa.

On March 18 and 24, 2020, the Central Bank of Kenya (CBK) announced emergency measures to mitigate the adverse economic effects on bank borrowers from the coronavirus (COVID-19) pandemic. Among these measures was restructuring by banks, for a period of up to one year of loans that were performing as at March 2, 2020, and the provision of regulatory flexibility to banks by CBK. The measures expired on March 2, 2021.

CBK assesses that these measures were highly effective. Borrowers were provided with various restructuring options including extension of repayment period, moratorium on principal or interest and waivers on interest or fees. The measures have provided space to borrowers to ride through the pandemic, mitigate job losses and pivot their business models to the new normal. For banks, the measures provided time to build additional capital and liquidity buffers to take them through the pandemic period and beyond.
Cumulatively, since March 2020, loans amounting to Ksh.1.7 trillion were restructured by end February 2021 accounting for 57 percent of the banking sector’s gross loans. Following the resumption of repayments and some pay-offs, the outstanding restructured loans as at end February amounted to Ksh.569.3 billion, or 19 percent of the total gross loans. Over 95 percent of the outstanding restructured loans are being repaid in accordance with the restructured terms.

The one-year period for the emergency measures on extension and restructuring of loans ended on March 2, 2021, following which the standard procedures for loan classification and provisioning would apply. Specifically, banks will from March 3, 2021, assess the performance of all restructured loans that were performing before March 2, 2020. The period for determining the performance of all the restructured loans will begin on March 3, 2021. These includes the restructured loans that were performing as at March 2, 2020 but went into arrears after that date. Consequently, in accordance with standard procedures, borrowers whose loans were performing before March 2, 2020 but were restructured and subsequently went into arrears, will have three months (up to June 3, 2021) to regularize their loans.
CBK will continue to closely monitor the unwinding of the outstanding restructured loans to ensure the continued stability of the banking sector.

Tanzania’s Vice President Samia Suluhu Hassan has been sworn in as the sixth president of the East African country following the death of John Magufuli.

The swearing-in ceremony has taken place at State House in Dar es Salaam.

Ms Suluhu makes history by becoming the first female president in Tanzania.

Under the constitution, Suluhu, 61, will serve the remainder of Magufuli’s second five-year term, until 2025.

She became Tanzania’s first female vice-president following the 2015 general election, after being elected on the CCM ticket, along with President Magufuli. Suluhu and Magufuli were reelected to a second term in 2020. Before her tenure as vice-president she served as the Member of Parliament for Makunduchi constituency from 2010 to 2015, and was also the Minister of State in the Vice-President’s Office for Union Affairs from 2010 to 2015.

Prior to this, she served as a minister in the semi-autonomous region of Zanzibar, during the administration of President Amani Karume. In 2014, she was elected as the Vice Chairperson of the Constituent Assembly tasked with the drafting of the country’s new constitution

President Uhuru Kenyatta has directed that Kenya will observe a seven-day period of national mourning in honour of the late Tanzania President John Magufuli.

Addressing the nation from State House on Thursday, Uhuru said the flags of the East African Community and Kenya’s national flag be flown at half-mast throughout Kenya and all diplomatic missions abroad from today until the sunset on the day of Magufuli’s funeral.

“Magufuli was a champion of Pan-Africanism. I have lost a friend and  an ally. Africa  and the world has lost a leader who steered the EAC and the continent,” he said.

“On behalf of the government and people of Kenya I convey our sincere condolences to the First Lady of Tanzania, Janet Magufuli.”