The story of James Mwangi- CEO Equity Bank

From humble beginnings to World Entrepreneur, the story of equity banker James Mwangi reveals the underlying truths of any successful business (large or small)
Salle des Etoiles, Monte Carlo, Monaco – playground of the world’s rich and glamorous. The tiny state of Monaco, tucked between the Alps and the Mediterranean, has the world’s largest collection of millionaires and billionaires per square foot. It is home to some of the best known film, music and sports stars, while the annual Monaco Grand Prix is considered the glittering apex of the motor racing calendar.
For the last 12 years, another annual event has sent pulses racing in this city state where the average per capita income is over 180,000 euros. The Ernst & Young World Entrepreneur of the Year Award is the world championship of entrepreneurial talent.
This year, 59 business champions, all winners of the Ernst & Young Entrepreneur of the Year Award in their own countries or regions, gathered at the fabulous Salle des Etoiles to witness the crowning of the champion of champions, the World Entrepreneur of the Year.
The stakes were high. Who would win the world’s most coveted business award? Names were bandied about. But as the envelope was opened, a pin-drop silence descended. “The winner is Dr James Mwangi of Equity Bank, Kenya!”
For a few seconds, the hush continued, then the assembly broke into loud cheering and James Mwangi was given a standing ovation as he went up to collect the most prestigious award for enterprise the globe has to offer.
This was an astounding victory, not only for Mwangi, or Kenya; not only for the banking sector, or Africa, but for all black entrepreneurs everywhere. It marked a first in every category.
It also marked the apex of an extraordinary journey that began 50 years ago in a small village on the slopes of the Aberdares in central Kenya – a universe away from the glitter, wealth and glamour of Monaco.
Foundations of success
The Aberdares and Mt Kenya – considered by many as the spiritual heart of Kenya – was also where Kenya’s pre-independence freedom fighters, the Mau Mau, were locked in battle with colonial armies.
“My father fell victim to the struggle,” James Mwangi told me when I interviewed him in London shortly after he had received his award. Mwangi is the sixth of seven children. “My widowed mother had to find ways and means to feed and raise us in a deeply rural setting.”
There was no time for childish games – everyone had to pitch in to keep the home fires burning. Mwangi, like the rest of his siblings, had to do his share of chores – tending to livestock, making charcoal, selling fruits and other produce for small margins.
Although the family was poor, “my mother ensured that we were disciplined and she laid out a set of values which became anchors in our lives,” Mwangi recalled. “There was one point on which she was not prepared to back down or compromise one iota – education. Her children, all her children, would be educated – no matter what it took.”
As Mwangi talked, a picture of his mother, Grace Wairimu, began to emerge. Here was a woman, well past the first flush of youth, who was straining every sinew and using all her ingenuity not only to feed and clothe her children, but adamant that they go to school, and learn.
When she insisted that her daughters also attend school, a shudder of apprehension went through the village of Kangema, their home.
“Girls who go to school ended up as prostitutes!” her neighbours warned. “Maybe so,” she quipped, “but they will be educated prostitutes and will be able to negotiate better terms.” People smiled at her sense of humour but there was a lot of shaking of heads. Her daughters went to school, and were among the first African-trained teachers from the region. Perhaps this inured the young Mwangi and allowed him to ignore a lot of head- shaking later in life when he was trying to reinvigorate a defunct organisation.
Despite enormous social and financial problems, Grace Wairimu ensured that all her children were educated. “Much later,” Mwangi recounted, “when I had my own four sons, their granny supervised their education and kept them away from harmful teenage activities going around. When they got their school reports, they went first to their granny, rather than me, their father. She passed on a wealth of wisdom through storytelling and, in many ways, moulded my family.”
Mwangi’s children have attended the famous Ivy League institutions in the US – Yale, Cornell and Brown – and Carnegie Mellon. “When she had placed the last one in university in the US,” he said, “she rested.”
Grace died last year at the age of 98. Given the enormous role she had played in his life, I glanced at Mwangi to look for signs of sadness. But I only saw pride for his late mother shining in his eyes. Somehow I knew that when he received his award, he had raised it in silent tribute to her.
James Mwangi attended Nyagatugu Primary School in Kangema village. But money was short and the family teamed up to supplement their income by engaging in ‘small business’. While this may have been humbling for the boy, he was nevertheless absorbing invaluable business lessons that would stand him in good stead for his future.
He was learning, without consciously doing so, the basics of business – what people needed, what they were prepared to pay, how to add value to mundane articles, how to negotiate, how to make a sale and turn a profit. With no role models to emulate, he and his family were, in effect, discovering the basics of business all by themselves, based on observation of what worked and what didn’t.
He obtained outstanding results at the end of his primary schooling and this led to a government scholarship at Ichagaki Secondary School. Here he was introduced, for the first time, to accountancy and commerce. “This was an important discovery,” he recollected. “I could see how the systems related to the small businesses we had been doing. We had been going about business in a haphazard way, but here was a systematic method of doing the same things with far better results. It was an eye-opener.”
Mwangi obtained outstanding O-Level results and went to Kagumo High School to study for A-Levels in economics, literature and geography. Whatever he was picking up in theory, he was mentally applying to real-life situations and his earlier, unformed brushes with commerce. He obtained a bachelor’s degree in commerce from the University of Nairobi, passed a Certified Public Accountancy course and was ready to face the daunting and mysterious world of work.
The Equity Saga
At the age of 28, although he didn’t know it himself, Mwangi was primed, in terms of character, values and down-to-earth business savvy for the major role he was about to play in the nation’s commercial life.
Kenya was going through an uncomfortable transition phase from the old colonial structures to the needs of a relatively new nation. Although there was a huge demand for banking and credit services, the industry remained more or less a closed shop. It was largely shut out of the financial system. The international banks turned their noses up at the prospect of catering to the masses. This led to the growth of numerous indigenous mutual societies.
Many of those who started these savings societies did so with the best will in the world, but lack of expertise meant they were trying to learn the ropes while on the run. The result was a series of crashes involving hard-earned money from depositors – many of them small-scale rural farmers – vanishing at an astonishing rate.
One of these mutual societies, which had remained standing but was severely battered, was the Equity Building Society.
In 1993, the chairman, Peter Munga, and the CEO, John Mwangi, turned to James Mwangi, who had established a reputation for honesty during a period when that commodity was in very short supply, to help wind up the business. It had already been declared technically insolvent.
“That was an understatement,” Mwangi told me. “To cut a long story short, the building society had been making losses of Ksh 5 million every year and was now facing a cumulative loss of Ksh 33 million, the staff had not been paid salaries, morale was at rock bottom and membership was dwindling by the hour.”
But rather than throw in the towel, Mwangi wondered if he could intervene and “reinvent the organisation, transform it completely.”
He became the strategy and finance director. At the time, Equity had 27 employees, 27,000 customers, five branches and stood at number 66 out of 66 in the financial sector rankings.
“I accepted the challenge because I could see clearly how important a properly functioning society was to the mass of the people. It was their only avenue out of poverty. I felt I had to do something – somehow square the circle.”
But he had no resources, no money, no way of raising capital. A banking licence, which might have provided some leeway, was not forthcoming. Public confidence in indigenous organisations was at rock bottom.
“How could I entice people to come to Equity? What could I provide that was needed but not available? I decided to look inside the organisation. If I could change the culture internally, I would have, in effect, succeeded in reinventing Equity.”
Mwangi set about retraining the staff. He introduced a concept which at the time was practically unknown – customer care. “Put the customer and his or her needs first – he is the most important person in the world. Treat people with dignity and respect. Serve to the best of your ability.”
He encouraged his staff to use their own networks – as he did his – to persuade people to join the society. “I told them, ‘trust me’. They believed me because I believed it myself. If you expect anyone else to follow you, you must have absolute confidence in yourself.”
What he felt most at this time was a heavy sense of responsibility. “I knew I could not let down the chairman and CEO and, above all, I could not let down the customers. When I said ‘trust me’, I meant to keep my word.”
The first sign of success, he said, was a complete change in the attitude of the staff. They were now motivated, they had a direction to follow and what they were doing was bearing fruit. “We were able to give them their first raise in eight years. I also persuaded them to use 25% of their salaries to buy shares in the company. Now they were involved. It was as much their company as anybody else’s. They knew that if they succeeded, they had a lot to gain.”
Slowly but surely, like a ship that was almost sunk, the company began to right itself. Customers, many of them peasant farmers, were given red carpet treatment. Accounts were kept meticulously. Confidence blossomed.
In Bangladesh, Muhammed Yunus had demonstrated that the Grameen system of microfinance was transform-ing the lives of millions who had been shunned by the mainstream banking industry. It was also helping the impoverished nation to lift its economy by its bootstraps. But elsewhere, micro finance was seen as something of a charity case – throwing away good money for bad.
Mwangi was convinced that microfinance could not only transform the lives of the masses, it could also turn a profit. Equity’s growing customer base and a healthier sheen to the company’s balance sheet was the proof he needed that the venture was on the right track. Despite the headshaking within the industry, he and his team ploughed on.
“By 1997, we were ready to expand. We invited customers to buy shares in the company and we started to pay them dividends. The word began to spread – Equity was different; Equity could be trusted.”
Mwangi had witnessed how computer technology was altering business out of all recognition. But it was commonly felt that such advanced technologies were expensive and that the masses were ‘too backward’ for such sophistication. He begged to differ. In 2000, he persuaded the European Union to support a computerisation programme. The impact was immediate.
“Transaction times dropped from 30 minutes to five; queues moved faster and customer service improved. The whole process, including signatures, was automated. Equity was now on a rapid, but solid, growth path.”
But expansion needed an injection of capital that was still very difficult to come by for indigenous companies. Approaches were made to Africap, a funding organisation set up by the International Finance Organisation (IFC) and other partners. Africap provided $1.6 million and acquired 16% of the whole enterprise. This led to a second wave of computerisation and further expansion. But in 2004 the company ran out of capital and invited private placements – $10 million was raised in two weeks. “On the last day of August, 2004, we made our biggest and boldest step. We became a bank,” Mwangi said. “We could now roll out a full range of products and services.”
In 2006, Equity Bank listed on the established Nairobi Stock Exchange (NSE). More capital – this time from the giant Helios fund, supported by IFC, CDC, George Soros and Opic, who bought 25% at $185 million – allowed the bank to become the most highly capitalised in East and Central Africa.
“Now, building on the IT platform, we launched an aggressive growth campaign. In seven years, we increased our branches from 36 to 200, with over 5000 agencies, and the customer base rose to eight million, nearly half of all bank accounts in Kenya,” Mwangi told me.
The figures are mind-boggling. From a loss of Ksh 5 million in 1993, the bank registered a profit of Ksh 12 billion in 2011. Equity now has the largest banking customer base in Africa. It is the biggest majority-African owned bank and the most profitable in East and Central Africa. Since listing on the NSE in 2006, shareholder value has grown 900%, turning a large slice of shareholders into millionaires.
Mwangi expects profits to rise to nearly Ksh 16 billion this year, making it the most profitable company in the region. The compounded annual growth rate over the past 10 years has been an incredible 78% and the bank has been growing ten-fold every five years for the last 20 years. From a staff level of 27, Equity today employs just under 8,000 people, it now has a presence in Uganda, Tanzania and Rwanda, and was among the first financial institutions to open a branch in South Sudan. Its balance sheet of Ksh 250 billion is equal to 20% of Kenya’s budget.
Innovations such as mobile banking – taking the bank to the people in remote areas – and agency banking, where customers can carry out transactions in shops, has made this once given-up-for-dead institution one of the most progressive on the continent.
Stranger than fiction
The story of James Mwangi and Equity Bank – from a young boy selling charcoal on the slopes of the Aberdares to becoming the most successful banker in modern Africa – is so incredible that it almost belongs in the realms of fiction. In this case, fact is far stranger than fiction – and a thousand times more inspiring. But Mwangi remains humble and cheerful, ready to make a joke at the first opportunity. He has never forgotten the struggles of his childhood days and has set up the Equity Group Foundation and sought partnerships to ensure that no deserving youth will miss out on education, nor will anyone forego opportunities through lack of financial knowledge. He spends half an hour every day running on the treadmill and is a voracious reader. “I am up at 3.00 am every day and I read – mostly business and management books and biographies,” he said.
His role models?
“Nelson Mandela. The way he has changed people’s lives inspires me every day. That is what drives me – the feeling that I am changing lives for the better, being an agent of social-economic transformation in Africa.”
Among his business gurus he counts Jack Welch, the former CEO of General Electric, Bill Gates (who he says showed him how to think more broadly about society), Bill and Melinda Gates for their contribution to the disadvantaged in Africa, and Steve Jobs for his technological genius. What makes him most happy?
“Whenever I can bring a smile to someone’s face, I am amply rewarded.”
James Mwangi’s top tips for business success
Be a dream maker. An entrepreneur is someone who identifies gaps in products or services and is willing to take risks to make the dream come true.
Do not go it alone. An entrepreneur is dependent on, and relies on, the skills and knowledge of others. But he must be the leader who can bring these people, their skills and their attributes together to create something new and useful.
Clothe yourself in values. Your values are what will attract all the other components you need – capital, expertise, partnerships – to help you make your vision come to life.
Ask yourself what you can do. “What can I do that will be most useful to most people? How can I change the situation so that what is needed is made available to those who need it most?” Make that your vision and goal and go for it.
Be dependable. If people trust you and you deliver time after time, then when you ask them to jump, they will not ask “why?” but “how high?”
Convince yourself. If you cannot convince yourself that your goal will come to pass, you won’t convince anyone else either. Convince yourself first, with good reason, and others will follow.
Be enthusiastic. Your enthusiasm will infect others and set off a chain reaction that makes even the impossible possible.
Be patient. Equity Bank is showing its best colours after 20 years of hard work.
Never stop learning. Learn something new every day and try to apply it to your life and business.
Be humble. Many factors, and many people, come together to make success of an enterprise.
Learning to fly
Under its Wings to Fly programme, Equity Bank has secured a Ksh 6 billion scholarship fund in partnership with The MasterCard Foundation and with financial support from UKAID, USAID and KFW to provide 10,000 academically gifted but financially disadvantaged children with comprehensive secondary scholarships.
The Equity Bank University Sponsorship and Leadership Programme extends a sponsorship to the best boy and best girl in the Kenya Certificate of Secondary Education (KCSE) from the districts where the bank operates.
So far, 1,290 students have benefited, with over 65 now pursuing higher education in some of the best universities in the world, including Ivy League schools in the US.
The Equity Group Foundation, in partnership with The MasterCard Foundation, has implemented a financial literacy programme in Kenya, aimed at training one million youth and women. Some 400,000 have already completed the course.
Under its Kilimo Biashara initiative, the Foundation has been deeply involved in the agricultural transformation of Kenya in partnership with AGRA, the government of Kenya and IFAD.