One of the reasons that banks are important is because they loan money to small companies and entrepreneurs to start business, which then pay taxes and help the overall economy of the country. More banks mean more opportunities in financing, more employment opportunities, and, over time, a developing nation can transition from an informal to a formal economy. “We (Banks) are, in one way or another, empowering every citizen on the African continent to make a contribution economically to aid the transformation of the continent,” Mwangi remarks.
The major issues facing the banking industry in Africa are access, convenience, and education. The development of technology is playing a key role in giving more people access to banking, primarily through advancements such as mobile and agent banking. Not only do these advancements give more people access to banking, but it also lowers the costs associated with operating a bank.
One of the programs that earned Kenya Equity Bank an award from Africa investor is for education. Mwangi explains that, “What Equity has done is launched a financial literacy (program) targeting one- million people. It involves training the targeted people for 15 weeks, so that they become financially literate and they are able to use the financial products in a way that is impactful either in their businesses or in their lives.”
Another way that Kenya Equity Bank is expanding the banking system and winning over the support of locals, especially rural villages, is by appointing local shops as bank branches. Shopkeepers, who are traditionally trusted individuals in the community, run small bank branches from their shops: they receive deposits, make withdrawals, open accounts, and originate credit. Because shop keepers have been working with credit and performing similar services for decades, people are very comfortable with them and this system. “They (shopkeepers) speak their own language, and they have a lot of information about the people that they have been studying for a long time,” explains Mwangi. “We are leveraging on that to make financial services much more accessible.”
Operating this way, as well as other banking innovations, turns out to be a winning scenario for everyone involved. The bank doesn’t have to invest all of the money needed to open banks in rural areas, the shopkeepers get a new line of business, and the customers don’t need to spend upwards of a day to travel to and from a bank. The bank is now where the client is.
Featured image is James Mwangi, CEO of Kenya Equity Bank. Image provided by Initiative for Global Development.