Equity Bank Case Study

Case: Equity bank of Kenya

• Question 4:

What risks are associated with operating in Zimbabwe?

Equity bank will faces political, economic and financial risks associated with setting up operations and thereafter when operating in Zimbabwe. Whichever strategy Equity Bank selects for expanding into Zimbabwe, either by building operations from scratch for acquiring existing lenders (which should be the preferred method), they face heightened political and economic risks. These risks will hinder them from fulfilling their objectives of expanding the operations and they may not be able to satisfy their shareholder expectations of profit maximizations. There are few other specific challenges and risks are explained below.

Apart from the reduced

Equity bank planned to bring future employees to work in its branch in Nairobi before working at new branches. This may be a challenge, as many employees may not be willing to come to Nairobi branch to work for long time periods. They may be fine for short periods for training. Equity bank needs to think of an employee friendly strategy in this case. Other banks may have entered into Zimbabwe with a similar business model that Equity bank was planning which will increase competition and could take away potential customers from Equity bank. Inflation fears and government’s budget, laws and regulations, approval from the associated authority to open the microfinance business model amidst political corruption, etc. also stand as challenges in front of them. Before entering they need to find out the appropriate medium-tier bank to

They need to force and lobby the concerned influential people in the Zimbabwean legislature to highlight the fact that their vision is to grow as the champion of socio-economic prosperity of the people of Africa and empower clients and other stakeholders and they need governmental support to achieve that. All the discussed risks and challenges will make them to think about acquiring one of the existing lenders in Zimbabwe, which is easier than setting up from scratch. But the Minister of Indigenization is forced to have banks turn over least 51% of ownership to local ownership or to the government. Hence, Equity bank need to look for a bank that satisfies all these rules and still will be able to operate as Equity bank. They should be ready to fully comply with the changing laws in Zimbabwe. The rule on mandating 51% of ownership to local ownership or to the government seems challenging as more control lies with government. As equity bank acquires a bank in Zimbabwe that already follows all the government stipulated rule, then they will avoid the issues related to government mandated ownership rules. As there are significant risks associated with in starting and operating banking business in Zimbabwe they need to use extra caution in selecting the local lender for acquisition. There are many other countries where this local ownweship rules prevails, and banks are