I recently came across an article in The Hindu that details the growth of Equity Bank in Kenya, which just crossed the 3 million customer mark and now has 50% of Kenya's market share. Like microfinance institutions in India, Equity targets unbanked low-income segments.
I never had read about Equity before, and was surprised by the range of savings and credit products the bank offers. On the savings side, there are no minimum balances or fees, and the typical savings account balance is about US$150. On the credit side, not only are loan sizes and repayment lengths flexible, but also the social collateral clients offer to receive loans can take several forms.
As Xan Rice, the article’s author, explains:
“Loans can be for less than $8, repayable in just a few months. Since many of individual customers work in the informal sector and have few assets of value, the loans are often backed by what the bank calls 'social collateral.'
This can include accountholders grouping together to guarantee an individual’s debt. Women can offer up their matrimonial beds as security; the theory being that no wife is going to want to tell her husband that their bed is gone."
That Equity Bank was able to grow from 256,000 customers in 2003 to 3 million today, while also offering flexible credit and savings options to its customers, makes me think about the relatively inflexible nature of microfinance in India. Loans typically come in relatively standard sizes (Rs. 5,000 – Rs. 15,000), and are typically paid back in 1-year loan cycles. Due to regulatory barriers, microfinance institutions (MFIs) cannot offer savings products.
Is there a way for India’s (micro)finance industry to flexibly serve the poor? Equity Bank's range of offerings did not stop it from growing at a staggering rate, is there room for a couple of the larger MFIs to offer more flexible loan products? Could such a strategy actually help some MFIs better serve (and gain more) customers?
5 comments:
It would be great to learn more about them and about their underwriting, loan origination and risk and cost management processes. I wonder if anybody knows them well enough to get us an introduction.
I am also impressed by the bank's development and the way they have revolutionalised banking in Kenya. I am a naturalised Dutch citizen born and raised in Kenya. I maintain a bank account with Equity and even though I do not know them very well, but i am sure they would would be willing to help. I have a contact in my branch whom I think would be willing to help.
Let me know if you are interested.
credit products the bank offers. On the savings side, there are no minimum balances or fees, and the typical savings account balance is about US$150. On the credit side, not only are loan sizes and repayment lengths flexible, but also the social collateral clients offer to receive loans can take several forms.
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margret
equity loans
I work in the bank, at the heart of the technology running the bank.
I can offer any information provided it does not seek to violate the privacy of the bank.
I dont think Equity is that good. I have had a nasty experience with the bank when my ATM card was stolen and the thief withdrew money from my account while only I who knew the PIN number. I think there is a lot internal actors who are not keeping customers secret. Its just a matter of time before this bank will lose its credibility since its managers assumes this issue. The manager I met looked so indifferent and assumed that I withdrew the money or sent somebody to withdraw the money for me. On the contrary, this is something that has been going on inside the bank where customers PIN numbers are leaked to fraudsters who use it to withdraw money.
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