Dr. James Mwangi, CEO and Managing Director of Kenya’s Equity Bank Limited was named the Ernst & Young World Entrepreneur Of The Year 2012 at an awards ceremony held in Monte Carlo on 9 June.

Equity Bank is the largest bank by customer base in East and Central Africa and the largest African majority owned company in the region. The bank has more than seven million accounts representing over half of all bank accounts in Kenya.

We asked Dr. Mwangi his thoughts on his journey to success.

Q: What was your vision, and what did you see as your opportunity?

A: I wanted to create a more equitable society through the creation of a financial services provider. I hoped to empower the majority to realize their social and economic dreams, as well as bring financial inclusion and opportunities.

94% of the population had no banking services. The existing banks were all niche players reaching only 6% of the population.

Q: What have been the highlights of building a business from 2,000 customers to over eight million?

• Inspiring staff back in 1997 to 2000 to accept 25% of their salaries in form of shares. Those staff members are now some of the biggest shareholders in the bank.
• Converting from a microfinance building society into a fully regulated microfinance commercial bank in 2004.
• Becoming the first investee of the first dedicated microfinance fund (AfriCap) for Africa in 2002. Investment of US$1.6 million for 16% stake.
• Private placement to customer in 2004 for US$10 million. A first in East African region.
• Creating a data centre with IT capability to hold 35 million customers, 72 million cards and a processing capability of 300,000 transactions per minute.
• Listing in the Nairobi Stock Exchange in 2006 through an introduction, the first for the Nairobi Stock Exchange.
• Strategic selling of 25% of the bank to an anchor shareholder in 2007 at a price of US$185 million, making Equity Bank the most capitalized bank in East and Central Africa at that time.
• Expanding into Kenya, Uganda, South Sudan, Rwanda and Tanzania in 2008.
• Endowing our Equity Group Foundation. We have since offered 1,300 university scholarships to develop the best students in Kenya into transformational leaders, with 65 of them going to Ivy League universities. We also provided 10,000 scholarships for gifted but needy children for a comprehensive secondary education that covers school fees, uniforms, shopping and two weeks of annual mentoring and coaching in partnership with The MasterCard Foundation and support of UKaid and USAID.

Q: What have been the challenges?

• Maintaining quality and integrating new employees into our organization’s culture.
• Developing human capital to cope with the pace of business growth.
• Competing as we moved into the number one position out of 43 banks in Kenya.
• Keeping regulators satisfied as we grew and became home to more than 50% of all accounts in Kenya.
• Respecting differences in culture and regulation among countries as we expanded.
• Keeping stakeholders well informed through effective communication as the bank became more complex.

Q: What is your background and how did that lead you into banking?

• I belong to an independent generation that is looked upon to provide transition from pre- to post-Independence leadership.
• I come from a rural background that gave me a good understanding of society and community.
• I received the best university education in the country and had extensive training through executive programs from universities around the world.
• I am a Certified Public Accountant.

Q: Did you always have the entrepreneurial spirit? Were you inspired by anyone?

A: Looking back, I was probably inspired by need. As I grew up, I had to sell fruits; burn and sell charcoal; and trade in milk at village restaurants and kiosks to help support my widowed mother.

I always had the desire to be an entrepreneur. That is why in secondary school my best subjects were accounting and commerce. In high school, I focused on economics and then went on to a Bachelor of Commerce degree at the university level.

Q: What are the challenges in the banking sector?

• The high capital requirements are a barrier to entry.
• The sector is highly regulated.
• The banking sector is conservative and stringent regulations stifle innovation and creativity.
• The global harmonization of Basel II, which does not take into account the level of development and local environment in different countries.
• Dependence on a system that values size, i.e, payment networks and dependence on technology – which both act as barriers to entry.

Q: Has the global economic climate impacted banking in Africa and your business specifically?

A: The global economic climate has not directly impacted our bank because we do not hold any toxic assets. However, the recessionary environment has slowed down growth and made global borrowing more challenging and expensive while global risks are on the rise.

Q: What is your biggest worry about the perception of banking resulting from the financial crisis?

A: The biggest worry is reactive and responsive regulation that might be imposed for the long term. The second is adoption of appeasement and public populist strategies. The third is the reputational damage on the banks that might take too long to recover and the slowing down of global intermediation. Fourth, the impact of the penalties being imposed on banks not from a cost perspective, but from a public confidence perspective.

Q: What are your priorities and expansion plans for the business?

• Increase regional coverage to 10 countries in the next five years while deepening penetration in our current countries.
• Focus on innovation for delivery channels with greater adoption of electronic and mobile channels while scaling agency model.
• Use the massive banking infrastructure for the good of society by availing our branch networks, ICT platforms and data bases for corporate social responsibility partnerships.

Q: What regulatory and cultural challenges does investing and operating across borders in Africa bring?

A: Different regulatory regimes and cultural differences increase the cost of compliance with regulators and adaptation to culture difference. The differences restrict mobility of labor and increase the cost of re-training or training for smooth transition.

The second challenge is adopting processes, procedures and systems to comply and adapt to different environments. The cost of these might be significant. They may even be a barrier to using our existing capacity.

Q: What are your company values and how critical are they to success?

A: For ease of internalization, Equity Bank values have been organized under the acronym PICTURE:

Professionalism (the business we are in)
Integrity (personality and character of individual)
Creativity and Innovation (doing things differently)
Teamwork (the how, compassion and bank inter relations)
Unity of Purpose (objective/purpose bigger than the individual)
Respect & Humility (compassion for people)
Effective Corporate Governance (positioning)

These core values are the basis of the organization’s culture and define what the bank can do and what it can’t do, and who can work or not work with us. The bank’s culture is the single most important unifier and performance driver we have.

Q: How critical is corporate responsibility to your company?

A: Our mission and purpose is to be the champion of social economic transformation in Africa. The bank’s major areas of corporate social responsibility are grouped in seven thematic areas:

1. Financial inclusion and access.
2. Financial empowerment through financial literacy and entrepreneurship.
3. Agriculture: providing skills, credit and access to markets that enhance earnings for small shareholders. Over 500,000 peasant farmers have been converted into small-scale commercial farmers and agribusiness.
4. Health: creating quality and affordable preventative health solutions.
5. Innovation: developing and promoting innovative solutions to more efficiently meet society’s needs.
6. Scholarships for higher learning and leadership development.
7. Conservation and environmental protection: fostering environmental protection initiatives to ensure sustainable economic development.

Q: What impact do you think winning World Entrepreneur Of The Year will have on the African entrepreneurs of the future? How vital is it for them to be recognized on a global scale?

A: My winning and being both a sub-Sahara African and a black person will have enormous impact in raising the confidence, pride and esteem of the African entrepreneur. And I am the first one in 26 years of your program!

The win broke a psychological barrier of possibilities. When Ghana won independence in 1957 it provided inspiration to other African countries and nearly the whole of Africa had independence within the next 10 years. When Kenyan long-distance runner Kipchoge won the first gold in 1965 it did the same thing. Since then, Kenya has become the global champion in long-distance races. This award will inspire Africa’s entrepreneurs and hopefully break their psychological barrier to global entrepreneurship competition.

It is vital for African entrepreneurs to be recognized on a global scale to help change the perception of Africa. Perception and reality about Africa are too far apart. Bridging the gap will be healthy for the world.

Some facts:

• Africa is currently home to seven of the worlds 10 fastest growing economies, but we continue to attract the least amount of global foreign direct investments.
• Africa is home to 60% of unutilized arable land, yet the world is going hungry.
• Africa is home to 60% of the world mineral resources, but paradoxically this wealth sits side by side with abject poverty.

Entrepreneurship can create wealth in Africa. We are the last frontier for investment with both an emerging young population and a middle class. Recognition will result in a focus on Africa and help the world see what role Africa can play in a new global economy.

Q: What advice would you give to young entrepreneurs today as they begin their careers and hope to create the next great company in Africa?

1. Focus on a business model appropriate for Africa. Don’t copy and paste. Circumstances and environment are different.
2. Look at the innovation agenda.
3. Leap frog on technology, use technology as an enabler.
4. There is fortune at the bottom of the pyramid. The needs of the poor and the rich might be the same. How do you make the transaction, volume, value and price appropriate for the poor to unlock the fortune at the base of the pyramid?
5. It's a global world. Barriers and limitations have their solutions somewhere. I was funded as an entrepreneur by global and not local capital.
6. Harness the power of staff and people. Be market led and not supply driven.
7. Have compassion for society. Connect and relate with society for it gives the license for continued success.

Q: Finally, in your view, what role do entrepreneurs play globally, in growth and job creation?

1. Entrepreneurs contribute significantly in creating the wealth of the world from which taxes are levied to create social investments.
2. Entrepreneurs create enterprises which offer employment as a means of livelihood for those who are not entrepreneurs.
3. Enterprises that fund research and innovation are needed to create the changes we see in the world either in products, services and lifestyles.

All the above contribute to world growth and create jobs. Our world, then, is more inclusive, more equitable and a more peaceful place.