Equity receives Sh850m dividends from the fintech unit

Equity Bank CEO James Mwangi. PHOTO | CYRIL NDEGEYA | NMG

Equity Group received a dividend of Sh850 million from the fintech unit last year, which became the second highest paying subsidiary of the parent company after Equity Bank Kenya.

Finserve Africa Limited, which was operationalized in 2014 after several years of hibernation, had not previously paid dividends to the parent company.

The lender’s annual report for 2021 shows that the dividend payment represents a large return on investment on the platform, where the bank has made a cumulative capital investment of Sh1 billion since 2013.

Equity Group operates all its digital and technological functions under the Finserve arm, including Equitel, the group’s Mobile Virtual Network Operator (MVNO) and digital banking under the Eazzy Banking platform.

The unit also handles global digital payment channels for the bank, which include partnerships with fintechs Alipay and WeChat, and transfer service providers such as Wave, PayPal, Western Union and Money Gram.

Finserve became operational in 2014 when Equity began offering its MVNO services, and in 2018 was elevated to an autonomous commercial business that offers services to other parties outside the Equity Group.

In total, Equity’s dividend income from subsidiaries increased more than 10 times last year to 8.7 billion shs from 607 million shs in 2020, following the resumption of payments from the Kenyan banking unit.

Equity Bank Kenya, the group’s largest subsidiary in terms of revenue, paid the parent company Sh7 billion in dividends last year, while the bank insurance arm gave Sh400 million in dividends, an amount equivalent to the 2020 contribution.

Others were Equity Bank South Sudan, which paid Sh303 million in dividends up from Sh107 million in 2020, and Equity Investment Bank (EIB) which transferred dividends of Sh150 million (2020: Sh100 million).

Banks have built their digital arms to offer shared services across their growing regional and local subsidiaries, with high revenues from Finserve reflecting the potential of these digital platforms to become key revenues for lenders.

These platforms, such as Finserve, Co-operative Banks’ M-coop Cash, also have a relatively low capital footprint, as do other digital companies around the world. They have also helped banks cut costs elsewhere by forcing transactions out of branches.

Most digital banking services are expected to become more profitable when Kenya’s central bank allows institutions to reintroduce fees for bank-to-mobile transactions.

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