MICROCAPITAL.ORG STORY: Daily Monitor of Uganda Reports on Progress of Equity Bank Uganda, Bank Formed After Acquisition by Equity Bank of Kenya

The Daily Monitor Online of Uganda has reported on the progress of Equity Bank Uganda, a microfinance bank that was formed when Equity Bank, a major bank in Kenya, acquired 100 percent of Uganda Microfinance Limited [1,2]. The acquisition, valued at 1.66 billion Kenyan shillings, the equivalent at the time of over USD 26.9 million, was reported by Microcapital in April of 2008 [3].

Since then, Equity Bank Uganda has added current accounts, foreign exchange, and ATMs to its services, and will soon add e-banking [1]. Over 40 ATMs have been installed so far [1]. It has also increased its branch network from 30 branches to 44, making it the third biggest branch network in Uganda [1]. Fifty percent of these branches are rurally based [1]. According to the MIX Market, Equity Bank Uganda had a gross loan portfolio of USD 24 million as of the beginning of 2008 [4]. The acquisition took place four months later, and as of October 2009, the bank’s loan portfolio is worth 90 billion Ugandan shillings, the equivalent of over USD 46.9 million, according to the Daily Monitor article [1]. Additionally, since the acquisition, there has been growth in deposits from 30 billion Ugandan shillings, the equivalent of over USD 15.6 million, to 64 billion Ugandan shillings, the equivalent of over USD 33.4 million [1].

The parent company, Equity Bank of Kenya, was founded in 1984 [2]. It accounts for 52 percent of bank accounts in Kenya with over 4.1 million accounts [2]. According the MIX Market, the bank has a gross loan portfolio of over USD 535.8 million [5]. As of December 31, 2008, the bank has a return on assets of 5.91 percent, a return on equity of 22.16 percent, and a debt to equity ratio of 2.92 [5]. According to the most recent financial data from the bank, profits of 2.7 billion Kenyan shillings, the equivalent of over USD 35.8 million, were reaped in the first half of 2009 [6]. This is a 14.7 percent decrease from the same period last year [6]. Additionally, its expansion into Uganda and Southern Sudan led to the opening of an additional 62 branches in the first half of the year [6]. As of August 15, 2009, the number of bank customers increased by over 1.5 million [6].

The Economist Intelligence Unit (EIU), the research arm of the Economist magazine, ranked Uganda the ninth best country in the world for microfinance in its 2009 Microscope index [7,8]. Microcapital reported on this publication [9]. Uganda’s strongest performance was in regulatory framework where it was tied for seventh [8]. This performance was built on freedom in setting interest rates and a reasonable capital requirement [8]. The country also takes regulatory measures through the use of specially trained supervisors [8]. Lastly, the main criticism of microfinance in the country is that there is not much competition between MFIs [8].

By Christopher Maggio, Research Assistant

Bibliography

[1] Daily Monitor article entitled: ‘Manifestation of a proper buy-out deal’: http://www.monitor.co.ug/artman/publish/business_power/Manifestation_of_a_proper_buy-out_deal_92829.shtml
[2] Equity Bank: http://www.equitybank.co.ke/about.php?subcat=124
[3] MICROCAPITAL STORY: Equity Bank of Kenya to Acquire Microfinance Institution (MFI) Uganda Microfinance in $26.9m Deal: https://www.microcapital.org/microcapital-story-equity-bank-of-kenya-to-a…
[4] Equity Bank Uganda on the MIX Market: http://mixmarket.org/mfi/uml
[5] Equity Bank on the MIX Market: http://mixmarket.org/mfi/equity-bank/data
[6] Equity Bank Financial Results: http://www.equitybank.co.ke/about.php?subcat=5
[7] Economist Intelligence Unit: http://www.eiu.com/site_info.asp?info_name=about_eiu&entry1=about_eiuNav…
[8] Economist Intelligence Unit Global microscope on the microfinance business environment: http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=2189221
[9] MICROCAPITAL.ORG STORY: Peru Ranks First in 2009 Microscope Microfinance Index, A Global Index on Business Environment for Microfinance Developed by the Economist Intelligence Unit (EIU), Released by the Inter-American Development Bank (IDB), the Corporación Andina de Fomento (CAF), the International Finance Corporation (IFC), and the EIU: http://www.mb.com.ph/articles/224050/p500billion-bank-loans-exposed-defa…

Conversions performed using Bloomberg Currency Converter: http://www.bloomberg.com/invest/calculators/currency.html

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