Case Study of an African Bank Comes to Life at Stanford GSB
James Mwangi, the head of Equity Bank of Kenya, is the central figure in a major microfinance success case.
Among the many CEOs who have been invited to speak at the Stanford Graduate School of Business, one thing made James Mwangi different: The students, or at least most first-year MBAs, were expected to be familiar with his story.
Mwangi, who is the head of Equity Bank of Kenya, is the central figure in a major microfinance success case — one that the new MBA students have been studying and discussing in the classroom.
Mwangi’s relationship with the Stanford Business School began in March, when Professor Garth Saloner led a student trip to Nairobi to study small nongovernmental organizations and microfinance institutions. The team had not heard of Mwangi or Equity Bank. “Equity Bank wasn’t even on our screen,” Saloner said, but “people kept mentioning Equity Bank.” With the help of a Business School alumnus, Saloner’s team arranged a meeting. “It was immediately clear to us that this was an extraordinary organization,” Saloner said. “This was a tremendous organization with tremendous scale … I immediately recognized that this was an interesting case in microfinance and also strategy.”
Mwangi agreed to have his company’s experience incorporated into a case study, and the school sent casewriter Bethany Coates to Nairobi to do the research. In a conversation with students on Oct. 2, Mwangi said his organization’s strong commitment to the bank’s mission was a key to the company’s success. “Focus on your vision,” he advised. “Most of us get distracted and make our core business reacting to competitors. Focus on the customers. Ultimately, the competition is about the customers. It is not about the technology.”
Under Mwangi’s leadership, Equity Bank evolved from “a small, insolvent mortgage lending company to a fast-growing, internationally recognized financial services bank,” according to details laid out in the case study. “Throughout the organization’s evolution, it had focused exclusively on Kenya’s economically marginalized citizens, the so-called ‘unbanked’ population.” Equity Bank was founded in 1984 as a provider of mortgage financing to low-income Kenyans. After going through a crisis period in the 1990s, its board began recruiting new senior managers in a bid to turn the company around. One of them was Mwangi, who in 2004 became CEO and who shifted the bank’s focus to microloans.
Mwangi spearheaded the creation of a new culture and brand that, Coates wrote, focused on “modesty, accessibility, and passion for customer service.” “Equity’s transformation into a rapidly growing retail bank was widely considered to be an inspirational success story,” Coates wrote. Equity Bank now serves more than 1 million customers, over 31 percent of all Kenyan bank accounts. The bank’s main goal is “to be the preferred microfinance service provider contributing to the economic prosperity of Africa.”
Saloner said Equity Bank became successful because it was able to scale and Mwangi’s team was able to create an effective corporate culture and image that inspired confidence among poor Kenyans to do business with the financial institution. “If you are going to be a bank to the poor, you have to be a trusted partner of the very poor who have little experience with financial institutions,” Saloner said. “The key [for Equity Bank] was their ability to put together a culture that embraced the mission of the company to serve the very poor and do so in a way that is cost effective but appealing to the clientele.”
Underscoring this point during his visit, Mwangi said his biggest challenge as CEO was to rally his troops around a common goal. “The single biggest challenge is to get everybody on board, to internalize the mission of the organization,” he said. “You feel part of this movement that is transforming people’s lives. You feel good. The whole society is about it. You are a hero when you are working for Equity.”
Saloner said Mwangi’s visit gave MBA students who hadn’t been involved in the study trip to Kenya a unique opportunity to deepen their understanding of a case that’s being discussed in the classroom. “It’s pretty extraordinary to have the CEO of a Kenyan company to fly in to talk about a case that all 362 first-year students have just discussed. If you talk about globalizing the curriculum, this is the kind of thing that fits into that.”
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