Micro lending at Equity Bank ~ third world wisdom exists

It's dawn, and Philip Ndungu has already been to market. It's only the start of what will be a long day. Every morning Phillip prepares hard-boiled eggs, salsa and fried sausages. It's his micro-business - taking and selling a hot breakfast to his entire neighbourhood.



PHILLIP NDUNGU (Translation): Often I start my day at 6am. I sell to about 700 people a day before I go to school.



Phillip's patch is the suburb of Kawangware, one of the poorest in Nairobi. His small business has earned him respect in what can be a tough place. Paul Gando is one of his loyal customers.



PAUL GANDO (Translation): What do you have? Let me see.



PHILLIP NDUNGU (Translation): I have things for 15 shillings, some for ten… and sausages.



PAUL GANDO (Translation): You have smokies, I think this is a very good idea because many boys like that guy would not do such a job. They are scared the girls would look down on them or things like that. But I am impressed by that guy because he is really committed to the job he does instead of getting involved in drugs.



A year ago, Phillip had dropped out of school - he had no money to pay the fees and no way to get a loan.



PHILLIP NDUNGU (Translation): Yes, I had a problem paying my school fees because my job was bringing in less and less money.



Then a micro-lender called Equity Bank opened up in his neighbourhood.



PHILLIP NDUNGU (Translation): I went and spoke to the bank and they were able to help me out with money for my fees.



Phillip was granted a $100 loan to start his business. That was enough for Phillip to nurture his microenterprise, take on an assistant and return to finish his last year of school - paying his own way.





PHILLIP NDUNGU (Translation): My life is going well because I’m not having to argue with anyone about taking time off to go to school. Things are going well because I am self – reliant.



Micro-loans, sometimes for as little as $10, are Equity Bank's mainstay. Today, Dr James Mwangi, the bank's founder and CEO, is opening a new branch in a rural, low-income area that all the major banks have avoided.



DR JAMES MWANGI, EQUITY BANK CEO: We are happy to declare this branch of Equity Bank officially open.



Equity's business is booming, while the major international banks are being battered. Mwangi has a very clear view of what created the current financial crisis.



DR JAMES MWANGI: That was driven by greed as opposed to a need to serve. So it was not the basic tenets of banking, it was more about satisfying human greed.



Bringing Kenya's poorest entrepreneurs, people like Phillip, out from the underground economy and into the mainstream has been the secret of Equity's micro-banking success.



DR JAMES MWANGI: Equity has developed a model that has incorporated them, made banking inclusive. And also done very well in terms of performance. For the last 10 years, Equity has posted growth of 100%, year in and year out. Last year, despite the financial turmoil, Equity was still able to register 110% growth in profitability.



Equity's success has also been due to its efforts to bring women into Kenya's banking culture. Monica Weaver was working as an underpaid seamstress when an Equity employee came by to talk.



MONICA WEAVER: They were just marketing Equity, telling us how it can empower women. I got a chance to be one of the women who were empowered by the Equity Bank.



Monica opened her own account with Equity, and started saving for her own business. The bank charges nothing to open an account and encourages its clients to deposit as little as AU$1.



MONICA WEAVER: Even to open an account with another bank other than Equity was difficult



REPORTER: You tried?



MONICA WEAVER: I tried but it was difficult for me. Because maybe I had 2 shillings with me or 100 and to take them to that big bank, it was a shame. But with Equity, even if I only have 50, I’m very comfortable to go and save my 50 shillings.



Monica had very little to use as collateral but Equity accepted her small table and television as security. James Mwangi says the bank accepts all kinds of interesting items as loan guarantees.



DR JAMES MWANGI: I think that a common but strange collateral is the matrimonial bed. We see with married women just a commitment that they will sign off their matrimonial bed. If you look at the level, the volume, in terms of the size of the loans, you can’t go beyond what they have, that is the assets that they have, and that is what they value most.



Till now, the majority of micro-businesses in Kenya have stayed out of the banking system, using cash instead. For years, the major banks believed that these people were not to be trusted to repay even small loans. James Mwangi has proved that the truth is exactly the opposite - the most poor are, in fact, the most reliable. The default rate on Equity's micro-loans are the lowest in the banking industry - less than 6%. David Mataen is an investment adviser and he's been following Equity Bank's micro-finance initiatives.



DAVID MATAEN, INVESTMENT ADVISOR: If you get to look at the books of those that have micro-lendings, their rates of delinquencies is so minimal, is so unbelievable, and that's because of the financial and fiscal responsibility of the individuals who are running these organisations. Some of them have nothing else to turn to, that is the be-all and end-all of their economic wellbeing, they depend on it. They are so emotionally invested in it that they could not let it die.



Lilian Macharia built this small hotel and pub with Equity money but a large part of it burned down recently. Never having been able to afford insurance, Lilian went back to the bank, and without even additional collateral, they gave her a second loan to help rebuild.



LILLIAN MACHARIA (Translation): I have noticed that Equity Bank, help people who can’t help themselves. You just have to make an effort to pay them back. When you pay it back they will give you another loan…I’ve seen how Equity Bank has helped me and I thank God because, if not for them, someone like me would not be able to do anything else.



Mwangi says that this isn't charity, it's good business. He claims that clients like Lilian are the safest bet in banking.



DR JAMES MWANGI: They are very responsible people who have been responsible for their lives. It is only that they have never been understood. They have been measured through others’ lenses and standards. That’s why they fall short. It is a very parochial perception that is upheld. But if you have to do a lot of groundwork on those types of people, you realise they are very reliable, trustworthy and committed.



James Mwangi still criss-crosses all of Kenya, pushing his Equity Bank into remote areas. When he arrives in the rural town of Thala, he's greeted by a crowd of thousands.



DR JAMES MWANGI: This bank is a product of the sweat of the Kenyan people, owned by Kenyans, managed by Kenyans and committed through financial services to transform the lives of our people.



Equity has shown that, without a doubt, the farmers, the weavers, and the hawkers in this rural crowd have something to teach the bigger players.



REPORTER: What do you think that a small businessman in Kenya has to teach a Wall Street banker?



DAVID MATAEN: If nothing else, honesty.



PHILLIP NDUNGU (Translation): In the next five years I would like to continue doing business and hopefully to study business. Study business so that my business can grow so that I can help the rest of my family.



GEORGE NEGUS: Wonderful stuff, but offering the matrimonial bed as collateral, does that include the person in it? Just wondering. Aaron Lewis reporting from Nairobi. And if you thought those Grameen Bank-type micro-loans are just small business, think again. One market analyst told Aaron that micro-credit businesses had the potential to add 2% to Kenya's GDP. In the current climate - definitely not to be sniffed at.






eporter/Camera

AARON LEWIS



Fixer

VICTOR MUNIAFU


Editor

WAYNE LOVE



Producer

ASHLEY SMITH



Translations / Subtitling

JUDY NYAMATO

MICHELLE ROGER

http://www.sbs.com.au/dateline/story/transcript/id/600038/n/The-Mini-Moguls-Begorra

Mad as Hell ~ Dateline SBS

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CROWD: What do we want? Free choice! When do we want it? Now! We say fight back! Are we ready to fight? Yes! Are we ready to win? Yes! Are we ready for change? Yes! Do we want it now? Now!

WOMAN: Why do we have to stand out here in this country, the Land of the Free, and beg for something that we deserve?

Earlier this week, members of America's fastest growing trade union, the SEIU, gathered outside the Bank of America's New York headquarters to protest against the huge bonuses its executives paid themselves using government bailout money - a situation these struggling workers label as obscene.

WOMAN: We deserve to be able to live comfortable like everybody else. You take the taxpayers' money and make sure your house is paid for, but here we are losing our homes.

What especially irks this group - and many others like it in the US - is the way in which America's largest financial groups are being rewarded with government help for their bad business judgments - while tens of thousands of Americans are losing their homes.

ANDY STERN, PRESIDENT – SEIU (SERVICE EMPLOYEES INTERNATIONAL UNION): Our country - and unfortunately we spread it to the rest of the world - followed this market worshipping, privatising, deregulating, trickle-down economic philosophy, and it failed.

As head of the SEIU, Andy Stern has become the most outspoken union leader in America and he's leading a charge to reclaim and remodel the country's financial system before it spirals out of control.

ANDY STERN: The only way we're going to make change is by being in the streets, raising our voices, fighting for change, because people don't give up power without a struggle and we intend to get it back and build a new American and global financial system that takes care of everyone - not just the people at the top.

In the heart of New York's financial district — the epicentre of the global crisis - tourists still line up eagerly to have their photo taken with that iconic emblem of American economic clout - the Wall Street bull. But amongst these onlookers there's at least one who's started to question the faith Americans have in their financial system.

JOSE GONZALEZ, FORMER HEDGE FUND MANAGER: There was no question that things were going to slow down - they couldn't continue at the pace that they were.

Jose Gonzalez is a former hedge fund manager who has learned some hard lessons from the excesses of America's casino-style capitalism. For several years he was coasting on a high but with his fund leveraged way beyond it's capacity to repay, the global credit crunch soon made its mark, and by January he was out of a job.

JOSE GONZALEZ: The markets were moving much quicker than people could react, and that's what happened, that's when you see these huge gaps down in prices and in the markets. And people start to get scared, and then when they can sell, they try to sell, but then it's not at the price that they were thinking and then they have to try and push everything out the door, and only so many things can go out, and the downward spiral just happens when everybody goes rushing for the door.

Now, with plenty of time on his hands to reflect on the crash that cut short his highly paid career, Jose is the first to admit that the crisis was brought about by a simple and collective human flaw - greed.

JOSE GONZALEZ: Greed on every level. People will tell you that the whole thing started with the housing. The housing issues that happened in the states and the easy loans, and packaging of these loans, and restructuring and reselling and this, that and the other - I mean it's greed on every level.

I think most people live outside their means and the difference is if somebody lives outside their means and they're making $30,000 a year and feeding a family, or $30 million a year.



Jose Gonzalez now meets every week with other New Yorkers who've suddenly found themselves out of work. They call themselves the 405 Club, in reference to the weekly US dole payment of $405.

GARRETT, 405 CLUB MEMBER: I was a recession casualty as of mid December, so it's been over four months now and I was supposed to have an interview today which was cancelled a couple of days ago.

Its members say the 405 Club is the fastest growing alliance in America - formed to provide the country's unemployed with a support network and an outlet to vent their anger at a financial system that let them down.



WOMAN, 405 CLUB MEMBER: I think it's absurd when a company can publish a loss and be giving bonuses. There shouldn't be rewards for "Oh, the damage was only reciprocal "and we had to lay off 100 people to pay your bonus."



JAMES MACKLIN, BOWERY MISSION: We're all guilty of this financial crisis. All of us. Your country, my country - all of us wanted something for nothing, and now we're paying the piper.



Not far from the big end of town, James Macklin is also feeling the pinch of the financial crisis. As a director of the Bowery Mission, one of the oldest soup kitchens in New York, he's now catering for the city's rapidly growing number of homeless and destitute residents.



JAMES MACKLIN: We, the people, made some bad mistakes too, OK. You don't read fine print on your credit card - they send you plastic and you swipe it, OK. Then later on you find out you're over your head. So we all are to blame, not just the government - we all are to blame for wanting something for nothing.



As the effects of the crisis deepen, the demographics of New York's homeless are also beginning to change - with increasing numbers of families seeking help from charities like the Bowery. But not everyone here shares the idea of collective responsibility. Some, like the mission's chaplain, are furious that while those at the bottom rung of society continue to be sidelined, the financial institutions that sparked the crisis have been pulled out of the mess with multibillion-dollar rescue packages.



PASTOR REGGIE STUZMAN, BOWERY MISSION: I think it's outrageous. I think even our government being a part of so many bailout situations to white-collar people. I mean there are so many issues on this side of the spectrum - with mental health, homelessness, addictions, housing. Obviously if you steal, you connive, if you take stock from holders and all this, society still seems to play a role that we will help you - even though you've done bad.



While the US Government may have had little choice but to prop up its ailing banking system, many Americans are bitter that billions of their tax dollars are being handed over to the very institutions they hold responsible for the crisis.



ANDY STERN: We can not trust people at the top to be looking after our best interest. We can not trust CEOs to not be greedy and enrich themselves at the expense of their shareholders or their communities. We can not count on the people at the top to be loyal to their country as opposed to their company and we should also appreciate that people at the top aren't as smart as they think they are.



Union boss Andy Stern is hoping that President Obama can eventually bring America's banking system to heel. In the meantime, he and thousands of his union members are continuing to exert pressure on those they hold responsible.



ANDY STERN: We'd like you to deliver this to the Bank of America, to tell them that consumers, taxpayers, Americans need them to change how they handle credit cards, need them to have new leadership, need them to stop foreclosure - it's time for change to make this an economy that works for everyone. Thank you very much for taking this on behalf of all of us.



ANDY STERN: In a global economy, we are not going to build it by rewarding CEOs and having the gap between the rich and the rest of the population grow so wide and so fast. And so we had an economy built around tricks, around people not being responsible to their communities and to shareholders and just shoving as much money in their pocket as they possibly can - and here we are.



With tent cities reminiscent of the Great Depression starting to appear across the country, and queues of the poor and hungry growing fast, there's a growing chorus calling for a reassessment of the American dream - and the desire and greed that drives it.



REPORTER: What do you think other countries can learn from this experience, and learn from America?



JAMES MACKLIN: That we're going to have to tighten our belt, and spend what we really can afford and not become too extravagant in what we do. We have to go back to the old landmark - start anew. We can't turn it around bickering and fussing about mistakes. We gotta throw our mistakes in the river, and say "OK, let's regroup, let's rebuild this thing."