A letter to the Editor
India's un-banked millions and its top few Oligarchs unwilling to yield
While smaller nations, like Sri Lanka and Kenya are flexible and not authoritarian in management of their economy to 'let people go', India's Banker/Prime Minister is full-time hankering to take care of ONLY its billionaires and millionaires, while 500 million Indians are un-banked. Neither its nationalised banking able or willing to try to offer banking services to the 'lesser children of God', the elitist Reserve Bank and the super-Elitist Minister of Finance, incidentally both Brahmins, are in cahoots in not giving in to public demands for more banking facilities. India's 200 million Muslims are clamoring for the introduction of no-interest Islamic Banking, for now 2 decades and more; but the ruling elites in ruling Congress hide behind the excuse of communal backlash to deprive Muslims of even small credit facilities on non-interest terms as per their religious sanctions. While IMF and World Bank are now offering billions to the US and others on ZERO interest rates, the laggards in the great movement of Cult of Equity in India, are like blindfolded bullocks that go round and round tethered --- to press oil seeds or draw water from village wells, to irrigate their fields in a timeless journey to the their sorry end.
Prime Minister should have the courage to rise to the challenge and make history by working towards earliest possible introduction of laws, in the rubber stamp Parliament, to introduce non-interest Islamic Banking in India.
Ghulam Muhammed, Mumbai
<ghulammuhammed3@gmail.com>
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http://www.economist.com/news/
IN 1994 Kenya’s Equity Building Society was technically insolvent. It looked like the end of the road for a family business that had grown out of a cheque-cashing venture for farmers into a mortgage lender for Kenya’s poor. Its logo—a modest house with a brown roof—spoke to its mission to help low-income Kenyans make small gains towards a better life. But an economic downturn and some poor management meant more than half its loan book had gone bad and its accumulated losses were ten times its capital.
At the eleventh hour Equity’s board turned to James Mwangi, an accountant and banker with roots in the part of central Kenya where the society had started in 1984. The central bank gave Equity time to convert its depositors into shareholders. After a stint as finance director Mr Mwangi became the chief executive and helped to transform Equity into the success story of East African retail banking. He quickly shifted the organisation’s focus from the competitive mortgage market to small loans. The backbone of the new strategy was to offer Kenya’s vast unbanked underclass micro-loans from as little as 500 Kenyan shillings ($5.81); the average loan amount was 16,000 shillings.
from the print edition | Finance and economics
Copyright © The Economist Newspaper Limited 2012. All rights reserved.
India's un-banked millions and its top few Oligarchs unwilling to yield
While smaller nations, like Sri Lanka and Kenya are flexible and not authoritarian in management of their economy to 'let people go', India's Banker/Prime Minister is full-time hankering to take care of ONLY its billionaires and millionaires, while 500 million Indians are un-banked. Neither its nationalised banking able or willing to try to offer banking services to the 'lesser children of God', the elitist Reserve Bank and the super-Elitist Minister of Finance, incidentally both Brahmins, are in cahoots in not giving in to public demands for more banking facilities. India's 200 million Muslims are clamoring for the introduction of no-interest Islamic Banking, for now 2 decades and more; but the ruling elites in ruling Congress hide behind the excuse of communal backlash to deprive Muslims of even small credit facilities on non-interest terms as per their religious sanctions. While IMF and World Bank are now offering billions to the US and others on ZERO interest rates, the laggards in the great movement of Cult of Equity in India, are like blindfolded bullocks that go round and round tethered --- to press oil seeds or draw water from village wells, to irrigate their fields in a timeless journey to the their sorry end.
Prime Minister should have the courage to rise to the challenge and make history by working towards earliest possible introduction of laws, in the rubber stamp Parliament, to introduce non-interest Islamic Banking in India.
Ghulam Muhammed, Mumbai
<ghulammuhammed3@gmail.com>
------------------------------
http://www.economist.com/news/
Kenya’s biggest bank
The cult of Equity
A huge success at home has been less dazzling abroad
Dec 8th 2012 | Nairobi | from the print edition
Thriving in its main market
IN 1994 Kenya’s Equity Building Society was technically insolvent. It looked like the end of the road for a family business that had grown out of a cheque-cashing venture for farmers into a mortgage lender for Kenya’s poor. Its logo—a modest house with a brown roof—spoke to its mission to help low-income Kenyans make small gains towards a better life. But an economic downturn and some poor management meant more than half its loan book had gone bad and its accumulated losses were ten times its capital.
At the eleventh hour Equity’s board turned to James Mwangi, an accountant and banker with roots in the part of central Kenya where the society had started in 1984. The central bank gave Equity time to convert its depositors into shareholders. After a stint as finance director Mr Mwangi became the chief executive and helped to transform Equity into the success story of East African retail banking. He quickly shifted the organisation’s focus from the competitive mortgage market to small loans. The backbone of the new strategy was to offer Kenya’s vast unbanked underclass micro-loans from as little as 500 Kenyan shillings ($5.81); the average loan amount was 16,000 shillings.
Equity bucked the trend of branch closures around the country. It
waived property-ownership requirements and allowed anyone with a
national identity number to open an account. It was flexible about forms
of collateral, accepting marriage beds or personal belongings. Some
customers repaid loans with cow’s milk. Where there were too few
customers for it to build branches Equity sent mobile ones, armoured
trucks with a satellite dish on top and a bank manager inside.
New standards of service created a huge and loyal customer base. Insiders recall a small farmer in his 80s travelling for days by bus over the country’s crumbling roads to thank Mr Mwangi personally in Nairobi. Sceptics who thought providing financial services to the poor would entail a load of non-performing loans were confounded: such loans were 1.3% of the whole book in 2011.
Since 2000 the bank’s pre-tax profit has grown at an annual average rate of 65%. Today roughly half of all bank accounts in Kenya are with Equity. A gross profit of 33.6m shillings in 2000 has risen to 11.8 billion shillings for the first nine months of this year.
The only blip has been Equity’s failure, so far, to replicate its Kenyan success abroad. Equity has launched operations across the region, with a presence in Uganda, Tanzania, Rwanda and South Sudan. It is looking at Nigeria, Ghana, South Africa and the Congo “among other countries”, according to Mr Mwangi. A capital raising has been scheduled for next year to finance growth.
But some investors are wondering whether Equity’s model based on banking the unbankable is as exportable as they were told. In the past four years Equity has lost $359,000 on the $96m it has invested to build its East African platform. Return on equity in Uganda has been only 18%, compared with 34% in Kenya in 2011.
Concerns that the bank may be overstretched have been worsened by the recent departures of two senior executives.
John Staley, who heads Equity’s Mobile Banking and Payment Innovations division, says that too much was expected too soon. It took 25 years to build the grassroots relationships that brought success in Kenya. He also believes that the branch model of old is going to be replaced by agents, who act as cheaper cash-in and cash-out points for customers. Agents are used by the mobile-money operations pioneered by telecoms firms, but persuading bank regulators to allow them is tougher. Kenya lets banks have agents but regulators in Uganda have blocked Equity’s attempts to recruit an agent network there. “If we have access to the agent model, then our regional expansion will fly,” says Mr Staley. Otherwise Equity will carry on soaring at home but remain grounded abroad.
New standards of service created a huge and loyal customer base. Insiders recall a small farmer in his 80s travelling for days by bus over the country’s crumbling roads to thank Mr Mwangi personally in Nairobi. Sceptics who thought providing financial services to the poor would entail a load of non-performing loans were confounded: such loans were 1.3% of the whole book in 2011.
Since 2000 the bank’s pre-tax profit has grown at an annual average rate of 65%. Today roughly half of all bank accounts in Kenya are with Equity. A gross profit of 33.6m shillings in 2000 has risen to 11.8 billion shillings for the first nine months of this year.
The only blip has been Equity’s failure, so far, to replicate its Kenyan success abroad. Equity has launched operations across the region, with a presence in Uganda, Tanzania, Rwanda and South Sudan. It is looking at Nigeria, Ghana, South Africa and the Congo “among other countries”, according to Mr Mwangi. A capital raising has been scheduled for next year to finance growth.
But some investors are wondering whether Equity’s model based on banking the unbankable is as exportable as they were told. In the past four years Equity has lost $359,000 on the $96m it has invested to build its East African platform. Return on equity in Uganda has been only 18%, compared with 34% in Kenya in 2011.
Concerns that the bank may be overstretched have been worsened by the recent departures of two senior executives.
John Staley, who heads Equity’s Mobile Banking and Payment Innovations division, says that too much was expected too soon. It took 25 years to build the grassroots relationships that brought success in Kenya. He also believes that the branch model of old is going to be replaced by agents, who act as cheaper cash-in and cash-out points for customers. Agents are used by the mobile-money operations pioneered by telecoms firms, but persuading bank regulators to allow them is tougher. Kenya lets banks have agents but regulators in Uganda have blocked Equity’s attempts to recruit an agent network there. “If we have access to the agent model, then our regional expansion will fly,” says Mr Staley. Otherwise Equity will carry on soaring at home but remain grounded abroad.
from the print edition | Finance and economics
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