Equity model shows the poor have a lot to offer

Accessibility and affordability are terms that are expanding horizons of markets.

Systems that enhance access to financial and communication services have transformed the way low income populations are perceived in Africa.

The retail, beverage, mobile telephony and banking industries in Kenya are raking in billions of shillings in profits by turning their attention to the “bottom billion”.

In his book The Bottom Billion Paul Collier raises the alarm about countries and populations at the bottom of the global economic system that are likely to form a “ghetto of misery and discontent” thereby breeding instability. 

Trapped in conflict over natural resources, landlocked with bad neighbours and bad governance, Collier says the bottom billion, 70 per cent of whom are in Africa, are a potential threat to the secure world at the top of global economic system. It is a line that is shared widely by political and policy leaders.

Industry players have a different take on this – they see opportunity in the bottom billion.

One of Kenya’s leading indigenous banks has dived deep at the “bottom” and is raking in profits.  Equity Bank’s model that targets low income market, the unbanked and under-banked populations, demonstrate that the bottom billion are not always full of threats.

The bank opened up its retail and micro-loans of as little as Sh500 to a customer base that other banks were running away from. For the last 14 years its pre-tax profit has been growing at a rate of 65 per cent. The bank has grown to be among Kenya’s pioneering multinational companies with branches in Uganda, Tanzania, Rwanda and South Sudan.

Equity Bank’s model illustrates that the poor are not necessarily beggars. Access and affordability of financial services have upheld the dignity of the low income groups and propel them to be productive. Financial inclusivity model acts as a multiplier force that enables rural communities to increase their productivity and set up enterprises.

THIN SIM CARD

Equity Bank’s entry into mobile banking with a keen eye for low income earners reinforces the view that the bottom billion have a lot to offer innovators.

The thin Sim card technology that the bank is rolling out will scale up numbers that access financial services by riding on the existing mobile phone platforms.

Competition with Safaricom, an old player in the mobile money sector, is likely to benefit low income populations with falling prices of financial services and better customer service.

As innovators turn to the bottom billion for profits, government regulators must keep pace as well. Governments should not focus only on the tax that such innovations generate for the economy but ensure that citizens are not shortchanged through poor services.

With Equity Bank’s move to break Safaricom’s monopoly, the government’s role as a “referee” is going to be keenly scrutinised. Consumers expect the government to play its proper role to foster fair competition.

Equity Bank’s success story should encourage more Kenyans and by extension Africans to venture into business to serve the people.

The bank’s success story is not pegged only to its focus on low income groups, but also its strategy to partner with successful ventures to deliver quality services to its clients.

For Kenya and Africa to succeed, they too have to learn how to manage and navigate strategic partnerships as opposed to the attitude of shunning the rest of the world. The country’s challenges offer opportunities for innovators to step in and reap rewards.

The bottom billion are not a curse or a threat to society, they offer opportunities for innovators to make profits.

Equity Bank has demonstrated that innovations and technology can get rid of “poverty traps” that hold back low income people from connectivity to the global economic system. Instead of fearing the bottom billion, the world should reconfigure and open up restrictions that suffocate low income populations. Market horizons are not cast in stone so as not to be grown!

Mr Shikwati is the founder director, Inter Region Economic Network.