Microfinance and Capital Markets - Council of Microfinance Equity ...

expenses increased rapidly as well to keep pace with expansion, at 77% on average peryear from 2003–2006; however, at 42.38%, operating expenses as a percentage of loanportfolio were high. Also, portfolio at risk stayed stubbornly high at 12.19%. 49 SeeTable 7 for a summary of Equity Bank’s microfinance operations.Equity Bank continued to reach down the scale throughout this period of explosivegrowth, indicated by an average loan balance of $444, or 65.64% of GNI per capita, andsavings on average of $165, or 36.73% of GNI per capita, as of 2006. 50Equity Bank Limited, just as the other institutions, faces a number of issues: 51• Risk management—Equity Bank’s portfolio at risk, risk management systemsand control over its very diverse portfolio of lending products remains the areathat most needs attention. CGAP is currently assisting Equity Bank with technicalassistance in this area. In addition, a major investment and effort by the Bank’smanagement to upgrade its MIS is designed to address these areas.• Competition—Equity Bank’s expansion has led it to bump up against the largecorporate banks in Kenya. Competition amongst these banks is really heating upand there is a question whether or not these banks will begin to reach down thescale with respect to loans and savings mobilization and compete with EquityBank directly;• Growth management—Equity Bank has high costs as a result of its expansionand has had to absorb a very large number of personnel in a short period of time.While the bank grows exponentially it is hard to also attack issues such asproductivity and efficiency, but that will become a necessity at some point intime;• Expansion opportunities—Equity Bank has ambitions to expand throughoutEast Africa. Interestingly, the bank is likely to bump against BRAC who has itsown ambitions to enter some 10 countries in Africa. BRAC is a formidablecompetitor and is already having significant success at an early stage in Uganda.Will Equity Bank go it alone in East Africa? Will it meet nationalistic andpolitical resistance? Does it have the management capacity to expandinternationally? These are but a few of the questions that will need to be answeredbefore the bank moves forward on an international strategy.49 Equity Bank Limited’s annual financial statements and the MIX Market.50 The MIX Market.51 Equity Bank, Information Memorandum, 48-50 (See “Risk Factors”).20