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An Overview of the Banking Sector in Kenya

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TABLE OF CONTENTS . 2. 3. 4. 5. 6. 7. 8. 9. 0. . 2. 3. 4. 5. 6. 7. 8. 9. 20. 2. 22.

LIST OF CONTACTS PREFACE DISCLAIMER AND STATEMENTS DEFINITIONS AND INTERPRETATIONS CHAIRMAN’S STATEMENT TIME TABLE OF PRINCIPAL EVENTS EXECUTIVE SUMMARY TRANSACTION OVERVIEW KEY INVESTMENT CONSIDERATIONS PROFILE OF THE ISSUER BRIEF HISTORY OF THE ISSUER THE KENYAN ECONOMY: AN OVERVIEW AN OVERVIEW OF THE BANKING SECTOR IN KENYA CORPORATE INFORMATION BOARD COMMENTARY ON ISSUER’S STRATEGIC PLAN RISK FACTORS REPORT OF INDEPENDENT VALUERS ACCOUNTANTS’ REPORT LEGAL OPINION GENERAL INFORMATION DOCUMENTS AVAILABLE FOR INSPECTION LIST OF STOCKBROKERS AND INVESTMENT BANKS ON THE NAIROBI STOCK EXCHANGE 3 4 5 7 8 9 4 5 8 23 32 35 37 46 48 5 54 87 89 95 97 Appendix I 23.

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CDS FORM   1. LIST OF CONTACTS ISSUER ISSUER : EQUITY BANK LIMITED Registered Head Office, NHIF Building 4th Floor, P. O. Box 7504-00200 NAIROBI Name / Title of Contact Persons Mr. James Njuguna Mwangi Chief Executive & Managing Director Mrs. Mary Wangari Wamae Company Secretary and Registrar Office Contact +254 20 273667 (tel) +254 20 2737276 (fax) james. [email protected] co. ke +254 20 273667 (tel) +254 20 2737276 (fax) mary. [email protected] co. ke

PROFESSIONAL ADVISORS FOR THE LISTING JOINT FINANCIAL ADVISORS AND SPONSORING STOCK BROKERS: 1. SUNTRA INVESTMENT BANK LIMITED 0th Floor, Nation Centre Kimathi Street P.

O. Box 7406-00200 NAIROBI Name / Title of Contact Persons Office Contact Mr. James Murigu +254 20 247530 (tel) Managing Director +254 20 224329 (fax) [email protected] co. ke 2. DYER & BLAIR INVESTMENT BANK LIMITED 0th Floor, Loita House Loita Street P. O. Box 45396-0000 NAIROBI Name / Title of Contact Persons Office Contact Mr. Mohammed Hassan +254 20 3240000 (tel) Executive Director +254 20 28633 (fax) [email protected] om REPORTING ACCOUNTANTS : ERNST & YOUNG Kenya Re Towers, Upper Hill Off Ragati Road P. O. Box 44286-0000 NAIROBI Name / Title of Contact Persons Office Contact Mr. Joseph Cheboror +254 20 275300 (tel) Partner +254 20 27627 (fax) joseph. k. [email protected] ey. com LEGAL ADVISORS : WALKER KONTOS ADVOCATES Hakika House Bishops Road P. O. Box 60680-00200 NAIROBI Name / Title of Contact Persons Office Contact Mr. Peter Mwangi +254 20 273023 (tel) Partner +254 20 278429 (fax) [email protected] com 2 2. PREFACE

A copy of this Information Memorandum having attached to it the document required by Section 43 of the Companies Act (Chapter 486 of the Laws of Kenya) has been delivered to the Registrar of Companies in Nairobi for registration. This Information Memorandum includes particulars given in compliance with the Companies Act and with the requirements of the Capital Markets Authority (established under The Capital Markets Act, Chapter 485A of the Laws of Kenya) (the “CMA”) and the rules and regulations of the Nairobi Stock Exchange Limited (the “NSE”).

The directors of Equity Bank Limited, whose names appear on pages 38 and 39 of this Information Memorandum under the Chapter on Corporate Governance, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Information Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information.

Equity Bank Limited (the “Issuer”“Equity” ”Equity Bank” or “Bank”), a public limited liability company incorporated , , in the Republic of Kenya with registration number C. 4/2005, and having a share capital of KShs. 500,000,000 divided into 00,000,000 ordinary shares of KShs. 5 each and all ranking pari passu inter se intends to list (by way of introduction) all of its 90, 564,550 issued and fully paid ordinary shares (the “Shares”) on the NSE on 7th August 2006 (the “ Listing Date”).

The Shares will be listed on the Main Investment Market Segment of the NSE but will not become available to the general public until after trading commences. At the moment, the Shares will only be listed at the NSE. The Register will be maintained by the Registrar. The CMA has approved the listing of the Shares on the NSE. As a matter of policy, the CMA assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Information Memorandum.

Approval of the listing by the CMA should not be taken as an indication of the merit of the Issuer or of the Shares. The Shares are unencumbered and are freely transferable subject however to the rules of the NSE and subject also to the restrictions set out in the Banking Act (Chapter 488 of the Laws of Kenya) as well as in the Capital Markets Act (Chapter 485A of the Laws of Kenya) and the regulations made there under. There are currently no other restrictions on the sale or transfer of shares at the NSE under Kenyan law. 3 3. DISCLAIMER AND STATEMENTS

The Directors of the Issuer, having made all reasonable inquiries, confirm that this Information Memorandum contains all information with respect to the Issuer and the Shares to be listed by it which is material in the context of the Shares, that the information contained in this Information Memorandum is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed in this Information Memorandum are honestly held and that there are no other facts the omission of which would make any of such information or the expression of any such opinions or intentions misleading.

The Directors of the Issuer accept responsibility accordingly. The professional advisers and other agents engaged by the Issuer to deal with the Listing have relied on information provided by the Issuer. None of the professional advisers has withdrawn their consent for any opinion given or statement made in this Information Memorandum. The professional advisers and other agents engaged by the Issuer have in each case consented to the inclusion in this Information Memorandum of their names and other details in the manner set out.

The Audited Accounts for the Issuer as well as its predecessor, EBS, have been set out in this Information Memorandum for the years ended 3 December 2000, 200, 2002, 2003, 2004 and 2005. Other details in respect of the Issuer and the Issuer’s business are prepared on the basis of details known to the Management and the Issuer’s Directors, statutory declarations, information provided to the NSE and particulars provided to the rating agencies.

Neither this Information Memorandum nor any other information supplied in connection with the Listing is intended to provide the complete basis of any credit or other evaluation, nor should it be considered as a recommendation by the professional advisers to the Listing that any recipient of this Information Memorandum or any other information supplied in connection with this Listing should purchase any Shares. Each investor contemplating purchasing Shares once they become available to the Public should make his own independent investigation of the financial condition and affairs, and his own appraisal of the creditworthiness of the Issuer.

The delivery of this Information Memorandum does not at any time imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Listing is correct as of any time subsequent to the date indicated in the document containing the same. The Directors of the Issuer, whose names appear in this Information Memorandum (under the “Corporate Information” Section), accept responsibility for the information contained in this document.

To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Information Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. No person has been authorised to give any information or make any representation other than those contained in this Information Memorandum and if given or made, such information or representation should not be relied upon as having been authorised by or on behalf of the Issuer, the professional advisers or the other agents (if any) to the Listing.

The distribution of this Information Memorandum and the offer or sale of the Shares may be restricted by law to certain jurisdictions. Persons into whose possession this Information Memorandum or any Shares may come must first inform him or herself about and observe any such restrictions. CAUTION: Please consult your bank manager, stockbroker, lawyer, accountant or other professional adviser on the meaning and impact of the contents of this Information Memorandum, in order to decide what action to take. 4 4. DEFINITIONS AND INTERPRETATIONS

In this Information Memorandum, unless there is anything in the subject or context inconsistent therewith, the following expressions shall have the following meanings: “Assets” the aggregate at such time of any assets of the Issuer which would, in accordance with accounting principles generally accepted in the Republic of Kenya and applied on a consistent basis, be classified as assets; the report of the Issuers Auditors Ernst & Young contained in this Information Memorandum; the Audited Accounts of the Issuer referred to in the Accountants Report; a day (other than a Saturday or a Sunday or a day gazetted as a public holiday in Kenya) on which commercial banks are open for business in Nairobi, Kenya; the Central Bank of Kenya, a statutory body incorporated under the Central Bank of Kenya Act, Chapter 49 of the Laws of Kenya and includes any body replacing it or any of its functions; the Capital Markets Authority, a statutory body incorporated under section 5 of the Capital Markets Act, (Chapter 485A of the Laws of Kenya) and includes any body replacing it or any of its functions; the directors of the Issuer whose names are set out on pages 0, and 37-39 of this Information Memorandum; Equity Building Society a building society incorporated under the Building Societies Act (Chapter 489 of the Laws of Kenya) Registration Number BS 27 and being the entity which was converted into Equity Bank Limited; the Government of the Republic of Kenya; this Information Memorandum; Equity Bank Limited a public limited liability company having its registered office at NHIF Building, 4th Floor, P. O. Box 7504 – 00200 City Square Nairobi; “Accountants Report” “Audited Accounts” “Business Day” “CBK” “CMA” “Directors” or “Issuer’s Directors” “EBS” “Government” “Information Memorandum” “Issuer” or “Equity Bank” or “Equity” or “the Bank” or “Company” “K. Shs” or “Kenya Shillings” “Legal Advisers” denotes the lawful currency of the Republic of Kenya; Walker Kontos Advocates, Hakika House, Bishops Road, P. O. Box 60680-00200 Nairobi, Kenya; the listing of the Shares at the Nairobi Stock Exchange as envisaged in this Information Memorandum; “Listing” 5 “Financial Advisers” .

Suntra Investment Bank Limited, a limited liability company having its registered offices at Nation Centre, 0th Floor, and of Post Office Box Number 7406-00200 City Square, Nairobi; and 2. Dyer & Blair Investment Bank Limited a limited liability company having its registered offices at 0th Floor, Loita Street and of Post Office Box Number 453960000 GPO Nairobi. the Main Investment Market Segment of the NSE; the Share register which the Issuer will procure to be maintained by the Registrar at a designated office; the institution or person initially appointed as registrar by the Issuer in relation to the Shares and the term includes any successor to the office of Registrar.

The first Registrar shall be Mrs. Mary Wangari Wamae of P. O. Box Number 7504-00200 City Square Nairobi CPS Number 753; Ernst & Young, Certified Public Accountants (Kenya) having their registered offices at Kenya Re Towers, Upper Hill, 4th Floor, and of Post Office Box Number 442860000 GPO, Nairobi; the Nairobi Stock Exchange Limited; 90,564,550 issued and fully paid ordinary shares of the Issuer all ranking pari passu inter se which are available for the Listing; . Suntra Investment Bank Limited, a limited liability company having its registered offices at Nation Centre, 0th Floor, and of Post Office Box Number 7406-00200 City Square, Nairobi; and 2.

Dyer & Blair Investment Bank Limited a limited liability company having its registered offices at 0th Floor, Loita Street and of Post Office Box Number 45396-0000 GPO Nairobi; both being members of the NSE and duly licensed stockbrokers; the Banking Act, Chapter 488 of the Laws of Kenya and includes any Act replacing it; the Building Societies Act, Chapter 489 of the Laws of Kenya; the Capital Markets Act, Chapter 485A of the Laws of Kenya and includes any Act replacing it; the Companies Act, Chapter 486 of the Laws of Kenya and includes any Act replacing it; “MIMS” “Register” “Registrar” and “Share Registrar” “Reporting Accountants” “ NSE” “Shares” Sponsoring Stockbrokers” “The Banking Act” “The Building Societies Act” “The Capital Markets Act” “The Companies Act” 6 5. CHAIRMAN’S STATEMENT he public listing of Equity Bank is one of the greatest milestones in the short history of the Bank. I believe it is also a landmark event in our Nation. Equity Building Society (“EBS”), the predecessor of Equity Bank, was one of several institutions that experienced financial difficulties after the financial crisis of 986. In 993, EBS was declared technically insolvent. Through the determination, and hard work by many people, EBS rose from the ashes of insolvency, to national and international acclaim.

In the year 2004, EBS successfully transferred its business assets and liabilities to Equity Bank. The vision of the founders of EBS was to create an institution that would serve the ordinary Kenyan citizen-the farmer, the entrepreneur, the ordinary worker. We believe that we have gone quite some way in realizing this vision. Currently, Equity Bank enjoys a customer base of over 500,000 accounts spread across the Country. We consider this as the most important accolade of our many achievements. To mention a few of our recent achievements: • In the year 2004, we were delighted to be recognized by His Excellency the President of Kenya with a Head of State Commendation. We were also honoured with official visits by United Nations First Lady Nane Annan and Her Royal Highness Princess Maxima of the Netherlands. • Our Chief Executive Officer had the honour of addressing the United Nation’s General Assembly. • Last year, we were invited to address the G8 Summit in Gleaneagles, Scotland. Indeed, EBS and now Equity Bank has been the subject of several case studies, including citation in the World Development Report 2005. Allow me to highlight three values that I believe have enabled EBS and Equity Bank to make these achievements. The first is passion in what we do. We are passionate about it because we know that it makes a difference in the lives of people. Second is doing whatever we engage in very well.

At Equity, we believe in market leadership and customer focus. To achieve this, we invest heavily in our people, reward them and care for them. The third is good corporate governance. This has earned us the confidence of our shareholders, and enabled us to attract support from strategic investors and development partners. The listing of Equity Bank is a journey that we embarked on five years ago. By 999, we felt that the turnaround strategy adopted in 993 had achieved its objectives. We set for ourselves the goal of becoming a market leader. We also felt that it was right to reward our loyal depositors. We invited our depositors to become shareholders. We then embarked on getting a strategic investor.

We were very fortunate to attract AfriCap Microfinance Fund, an investment fund established by international development finance institutions. In 2004, we decided to convert to a commercial bank, in order to provide our customers with a full range of banking services which we could not otherwise offer as a building society. To achieve this objective, it was necessary for us to raise more capital. This we did through a successful private placement of over KShs. 725 million. To date, Equity Bank has an issued share capital of 90,564,550 and over 2,400 shareholders. The proposed price per share is KShs. 70. The primary purpose of our listing is to offer our shareholders the benefits of the stock market, liquidity and price discovery.

The Listing will also provide an opportunity for our customers and other Kenyans to share in what we believe will continue to be a Kenyan success story. On behalf of the board, the management and the staff, I wish to thank most sincerely all those people who have supported us on this journey. I would particularly like to acknowledge the support of our shareholders, our partners, the Government, and above all our depositors and customers. As always, we are banking on you as we embark on the next phase of our vision to become a market leader in Africa. T PETER KAHARA MUNGA CHAIRMAN 3RD JULY 2006 7 6. TIMETABLE OF PRINCIPAL EVENTS EVENT Approval of Listing by the CMA Announcement through press of the approval to List.

Launch of the immobilisation campaign including holding meetings with Shareholders at various branches of the Bank to discuss requirements for trading Dispatch of Information Memorandum to shareholders of the Bank Listing of shares at the NSE and commencement of trading Immobilisation campaign continues Notes to the Timetable and the Process of Immobilization of Shares • An announcement will be made via the media (radio and at least two daily newspapers) informing the shareholders of the approval of the Listing. Meetings will be convened at various branches to inform shareholders of the approval of the Listing and the legal requirements to commence for trading at the NSE. The meetings will commence from the second day after the approval of the Listing and will continue at different dates or concurrently in all the branches of the Bank until trading commences. The choice of branches as focal points for the meetings is aimed at reaching the widest network of shareholders as most of them are customers of the Bank. One of the matters to be discussed with shareholders at the meetings will be the need to open Central Depository System (“CDS”) accounts and to immobilize their shares so as to enable shareholders who wish to trade at the NSE to do so. Immobilization of Equity Bank’s shares is the process of holding of shares from the paper certificates into the electronic form. This is done through the CDS which facilitates holding of shares in electronic accounts and also facilitates faster and easier processing of transactions. The CDS accounts are opened through Central Depository Agents (“CDA”)-who are the NSE’s licensed stockbrokers- and custodian Banks.

CDS account opening process requires the completion and signing of a Securities Opening & Maintenance form and the provision of two recent passport size photographs and a photocopy of the National Identity (ID) card or passport. Once the form is filled and the processing is done, you will receive a copy of the form for your records. Subsequently, you will fill the shares immobilization forms after which a shareholder will be required to surrender all the paper share certificates you hold since the shareholding will now be noted electronically. When purchasing shares you will only be required to place your order with your preferred broker after you have credited your account with the amount of money required for the purchase. Once the shares are bought, the CDS account is credited.

The procedure for immobilisation is therefore as follows:• • • • Prepare two passport size photographs and your ID/ Passport; Visit your nearest Central Depository Agent and apply for a CDS Account by filing in CDS Form No  ( for your convenience a CDS Form No  is enclosed herewith); Obtain your CDS account Number from the Central Depository agent and retain a copy for your records; Release your Share Certificate to the Central Depository Agent. DATE 3rd July 2006 7th July 2006 8th July 2006 24th July 2006 7th August 2006 8th August 2006 • • • 8 7. EXECUTIVE SUMMARY Equity Bank Limited is pleased to offer to its shareholders an opportunity to have their shares listed at the NSE and to all investors a chance to purchase its shares after they are listed and thereby be part of the Bank.

The shares being listed are 90,564,550 ordinary and fully paid up shares all ranking pari passu inter se. The following constitutes some key considerations regarding the Bank and the Listing but is by no means exhaustive: 7. 1 Incorporation and Status of the Issuer Equity Bank, a public limited liability company, was incorporated on 2 December 2004, as a private limited liability company. Vide a resolution passed on 24th December 2004 the Company was converted to a public limited liability company. It is registered under the Companies Act (Chapter 486 of the Laws of Kenya), and is also subject to the provisions of the Banking Act (Chapter 488 of the Laws of Kenya).

Its principal activity is provision of retail banking services and microfinance services. 7. 2 Shareholding The Bank has a nominal share capital of KShs. 500,000,000. 00 divided into 00,000,000 ordinary shares of KShs. 5. 00 each of which 90,564,550 are issued and fully paid. As at 3st December 2005 it had a total of 2,48 shareholders. Britak Investments Company Limited and AfriCap Microfinance Fund Limited are the largest institutional shareholders with 0. 93% and 5. 52% shareholding respectively. The staff of the Bank also hold 5. 52% of the shareholding through the Employee Share Ownership Plan. The rest of the shareholding is widely held. 7. Details of the Principal Shareholders As at the date of this Information Memorandum the following are the principal shareholders of the Issuer :Shareholders Number of shares Britak Investments Company Limited Nelson Muguku Njoroge James Njuguna Mwangi John Kagema Mwangi Equity Bank Employees Share Ownership Plan AfriCap Microfinance Fund Limited Andrew Mwangi Kimani Fortress Highlands Limited Peter Kahara Munga Simon Kagwanja Thuo Others (2,408 Shareholders) TOTAL 9,894,397 7,462,685 6,632,835 5,700,000 5,000,000 5,000,000 3,772,680 3,367,000 2,902,493 2,7,965 38,660,495 90,564,550 Nominal value (Kshs. ) 49,47,985 37,33,425 33,64,75 28,500,000 25,000,000 25,000,000 8,863,400 6,835,000 4,52,465 0,859,825 93,302,475 452,822,750 Percentage of shareholding 0. 93% 8. 34% 7. 32% 6. 29% 5. 52% 5. 52% 4. 7% 3. 72% 3. 20% 2. 40% 42. 69% 100. 00% 9 7. 4. Shareholding by Directors and Senior Management The details of the directors of the Issuer who have shares in the Issuer are as set out below:Name Peter Kahara Munga* James Njuguna Mwangi Benson Irungu Wairegi* Fredrick Muchoki Mwangi Gitahi Linus Wang’ombe Wanjiku Mugane Beatrice Sabana Julius Kipng’etich Ernest Nzovu TOTAL Title Chairman to the Board Chief Executive Officer Board Member Board Member Board Member Board Member Board Member Board Member Board Member Number of Shares 2,902,493 6,632,835 702,780 936,765 546,665 92,770 36,765 36,765 33,825 11,921,663 Percentage 3. 20% 7. 32% 0. 78% . 03% 0. 60% 0. 0% 0. 04% 0. 04% 0. 04% 13. 15% By virtue of their shareholding interest in Britak Investments Company Limited (“Britak”) which holds 0. 93% of the issued shares of the Issuer, Peter Kahara Munga (who has 5% shareholding in Britak) holds an additional beneficial interest of 0. 55% of the issued shares in the Issuer while Benson Irungu Wairegi (who has 3. 30% shareholding in Britak) holds an additional beneficial interest of 0. 36% in the issued shares of the Issuer. The details of shareholding by senior management of the Issuer are as follows:Name James Njuguna Mwangi Mary Wangari Wamae Winnie Kathurima Imanyara Allan Kabiru Mwangi Gerald Gachoka Warui Kenneth Mbaabu Muchiri Major Marcus Mutua Andrew Mwangi Kimani Peter Lengewa John K.

Thagana Hildah Wambui Mugo Alexander Peter Muhia TOTAL Title Chief Executive Officer Company Secretary General Manager – Business Growth Head of Finance General Manager -Customer Service Head of Credit Head of Security General Manager – Information Technology Services Head of Business Development Head of Treasury Head of Compliance Personal Assistant to the CEO Number of Shares 6,632,835 ,742,375 30,000 25,500 ,642,534 2,000 5,000 3,772,680 ,666 750 7,000 20,000 13,892,340 Percentage 7. 32% . 92% 0. 03% 0. 03% . 8% 0. 00% 0. 00% 4. 7% 0. 0% 0. 00% 0. 00% 0. 02% 15. 31% Save as is disclosed above, no director or senior manager has any indirect shareholdings in the Company. 7. 4. 2 Shareholding by Employees generally The Bank has established a trust to facilitate an employee’s share ownership scheme (“ESOP”) for the purpose of holding of shares in the Company.

The shares are vested in the ESOP which contains the following provisions: • Units are issued to eligible employees only • Employees are not allowed to transfer or sell these units • An employee is not allowed to mortgage , charge or otherwise encumber the units whether as a security for a loan for or otherwise • Employees who leave the Bank’s employment or who no longer wish to be shareholders have their units redeemed by the trust • The trustees determine the date and income to be distributed to the members in accordance with the trust deed. • The trustees keep a record of all the shareholding and the eligible members. As soon as the Bank is listed at the NSE the necessary application will be made at the CMA for registration of the ESOP. 0 7. 5.

Conversion from Equity Building Society to Equity Bank Limited The predecessor of Equity Bank was EBS, which was first established and registered on 0th October 984 under the Building Societies Act (Chapter 489 of the Laws of Kenya). Effective 3st December 2004, following the enabling statutory changes made in the Building Societies Act, EBS transferred its business, assets and liabilities to Equity Bank Limited. The said transfer had been duly approved by the members of EBS through a special resolution passed on th December 2004. As well, in an extra ordinary meeting of the Shareholders’ of EBS held on 24th December 2004, EBS’s shareholders and creditors approved this transfer. Approval for the transfer was also obtained from the Minister for Finance. 7. 6

Issue of shares by the Company in the 3 years preceding the date of this Information Memorandum a) On 22nd April 2003 Equity Building Society the predecessor of Equity Bank Limited allotted 2,000,000 ordinary shares of KShs. 5. 00 each to Africap Microfinance Fund Limited (“AfriCap” or “AfriCap Fund”) at a price of KShs. 60. 00 per share. The total consideration was KShs. 20,000,000. 00. b) On 2st December 2004 the Company allotted 5,4,886 new ordinary shares of KShs. 5. 00 each of Equity Bank Limited to 3 founder shareholders details whereof are set out elsewhere in this Information Memorandum at the price of KShs. 34 per share. The total consideration was KShs. KShs. 725,92,500. 00. c) On 3st December 2004 the Company allotted 2, 70,024 ordinary shares of KShs. 5. 0 each to all the existing shareholders of Equity Building Society in the ratio of  share for every share held. This was in consideration of the agreement to transfer all the business assets and liabilities of Equity Building Society to Equity Bank Limited. d) On 0th August 2005 the Company allotted (72,45,640) ordinary shares of KShs. 5. 00 each by way of a bonus issue to all shareholders in the ratio of 4 shares for every one held as at 30th June 2005. 7. 7 Corporate Governance 7. 7.  The Board of Directors of Equity Bank consists of ten members, drawn from different professions and with diverse skills and experiences. Only one director is executive.

The Board of Directors is responsible for fostering the long-term business of the Bank consistent with their fiduciary responsibilities to shareholders and depositors. The Board is committed to conducting the affairs of the Bank with openness, integrity and accountability and in accordance with the highest standards of corporate governance. Each of the directors has signed a code of corporate practice which sets out the duties and responsibilities of the directors and provides for the evaluation of the board members bi-annually. 7. 7. 2 There is no existing or proposed contract between any of the directors and the Company other than employment contracts for those directors who are employed in the ordinary course of business.

Vide a resolution passed on 20th May 2005 the Board of Directors passed a resolution barring any directors or their associated companies from trading with the Bank. 7. 7. 3 No options to purchase any securities of the Company have been granted or exercised by any director of the Company. 7. 7. 4 None of the directors of the Bank has or has had any direct or indirect beneficial interest in any property acquired by the Company during the two years proceeding the date of this Information Memorandum. 7. 7. 5 As at the date of this Information Memorandum none of the advisers to the Company has any beneficial interest in the shares of the company. 7. 7. As at the date of this Information Memorandum and for a period of at least two years prior to the date of this Information Memorandum, no director of the Company: a) has or has had any petition under bankruptcy laws pending or threatened against him; or b) has or has had any criminal proceedings in which he was convicted of fraud or any criminal offence, nor been named the subject of any pending criminal proceedings or any other offence or action either within or outside Kenya; or c) is or has been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or temporarily prohibits such director from acting as an investment adviser or as a director or employee of a stockbroker, dealer or financial services institution or engaging in any type of business practice or activity.  7. 7. 7 On 2st July 2005, The Board of Equity Bank Limited passed a resolution barring non-executive directors from obtaining loans, guarantees and other credit facilities from the Bank during their tenure of office.

As at 3st December 2005 no loan/credit facilities were outstanding from any non-executive director. As at 3st December 2005 the total loans granted and outstanding to senior managers of the Bank in the ordinary course of business was the sum of KShs. 97,306,000. 00. 7. 7. 8 The Bank’s Chief Executive Officer has signed a contract of employment with the issuer which is available for inspection at the Head Office of the Issuer. In addition to the salary payable to the Chief Executive as per his contract, a total of KShs. ,594,000 in directors fees is estimated as being payable to the directors during the current financial year. 7. 8 The Listing and Proposed Price 7. 8. The Bank is listing at the NSE MIMS all its 90,564,550 issued and fully paid ordinary Shares. The Shares rank pari passu inter se and are freely transferable. The Listing is by way of an introduction and will be at the MIMS of the NSE. At the moment, the Bank will only be listed at the NSE. Listing and trading is expected to commence on 7th August 2006. No new shares are being offered but following the listing members of the public will be free to acquire shares on the NSE, subject to compliance with applicable laws, regulations and procedures in Kenya. 7. 8. 2 The fair market price for the listing was developed using the valuation metric set out in summary in the valuation report contained in part 7 of this Information Memorandum.

It also took into consideration the following factors: • The Bank’s robust over the counter market price • The earning potential of the Bank • The country’s Macro-economic outlook • Capital market indicators in Kenya • Market sentiments • Earning multiples at which the shares of comparable banks listed at the Nairobi Stock Exchange were trading at prior to listing. The anticipated fair market value per share price for the Bank should be KShs. 70 7. 9 Reasons for Listing The primary purpose of the Listing is to offer Equity’s shareholders and the Bank the benefits of the stock market, liquidity and price discovery. The Listing will also provide: • • • • • An opportunity for customers of the Bank, Kenyans and other investors generally, to share in what the Bank believes will continue to be a Kenyan success story. An objective valuation of the shares of the Bank and an enhancement of the Bank’s price discovery mechanism. A mechanism of exchange of shares for the shareholders of the Bank.

An opportunity for the Bank to enhance corporate governance structures, corporate image and disclosure standards. An avenue for the Bank to raise additional capital at a later stage. 2 7. 10 Continuity As a sign of commitment to the growth of the Bank and confidence, nine of the key shareholders (whose names appear in Clause 7. 3 of this Information Memorandum) have indicated to the CMA that they will not offload their shareholding for the first twenty-four months after the Listing. In addition, no changes in the senior management (including the Chief executive Mr. James Mwangi) are planned or expected during the next two years. 7. 11 No benefits, discounts, commissions and contracts paid. ) Except as is disclosed in this Information Memorandum in the past two years, there has been no material reclassifications, mergers, consolidations of the share capital of the Issuer and there has been no acquisition or dispositions of any material amount of assets otherwise than in the ordinary course of business. b) No amount or benefit has been paid or given within the two years preceding the date of this Information Memorandum or is intended to be paid or given to any promoter. c) As disclosed in this Information Memorandum, no commissions, discounts, brokerages or other special terms have been granted by the Issuer, within the two years preceding the date of this Information Memorandum in connection with the issue or sale of any share or loan capital of the Issuer. 7. 2 Subsidiaries As at the date of this Information Memorandum, the Issuer had no subsidiaries. 7. 13 Capital Gains Any gains or losses which accrue on the disposal of shares will not constitute loss under the current Kenyan Law. 7. 14 Stamp Duty So long as the shares are listed on the Nairobi Stock Exchange, no stamp duty will be payable in Kenya in connection with the transfer of the shares in accordance with current legislation. 3 8. TRANSACTION OVERVIEW Thefollowingsummarydoesnotpurporttobecompleteandistakenfrom,andisqualifiedinitsentiretybytheremainder ofthisInformationMemorandum. Issuer Financial Advisors Compliance Equity Bank Limited. Suntra Investment Bank Limited and Dyer & Blair Investment Bank Limited.

The listing of the Shares will comply with the Memorandum and Articles of Association of the Issuer, applicable laws, guidelines, CMA and NSE’s Rules and Regulations. Suntra Investment Bank Limited and Dyer & Blair Investment Bank Limited Sponsoring Stockbrokers Listing and Trading Permission has been granted by the CMA to offer the Shares to the public and to list the Shares on the MIMS of the NSE. The Shares are freely transferable ordinary shares that rank pari passu inter se and which are freely transferable and available for listing. The listing of the Shares will be construed in accordance with, and governed by Kenyan law. The cost of the Listing will be borne by the Issuer.

The key components of the cost of the Listing are as follows: Financial Advisors and Sponsoring Stockbrokers Reporting Accountants Legal Advisors CMA Approval Fees NSE Listing Fees Printing Costs & Postage Advertising Miscellaneous Costs TOTAL KShs. ,000,000. 00 KShs. ,400,000. 00 KShs. 500,000. 00 KShs. 8,8,704. 00 KShs. ,500,000. 00 KShs. ,500,000. 00 KShs. 3,000,000. 00 KShs. ,000,000. 00 KShs. 28,018,704. 00 Status of Shares Governing Law Cost of Listing Based on the issued shares of 90,564,550 the cost of the Listing per share will be Kshs. 3. 20/= 4 9. KEY INVESTMENT CONSIDERATIONS Key investment considerations include the following: 9. Proven Track Record Equity has in the past achieved positive results in its key performance indicators. In the period 2000 – 2005 information on some selected parameters is as follows: Parameter 2000 (in KShs. ) 2005 (in KShs. ) Average compounded growth rate (% per annum) 53 57 44 45 35 Total operating income Pre-tax profits Total assets Customer deposits Loan and advances 9. 2 Growth in Niche Market 4,000,000 33,000,000 ,260,000,000 977,000,000 502,000,000 ,803,000,000 50,000,000 ,457,000,000 9,048,000,000 5,885,000,000 Equity has focused on customizing the traditional banking model of intermediation to make it relevant to micro, small and medium market segment of the Kenyan population.

Through research and product innovation, Equity has developed products and services that identify the needs cycle and financial resources of this market segment thus carving out a niche market. The Bank’s target market which includes individuals, micro, small and medium enterprises is largely un-banked. The Bank’s planned expansion targets this unexploited market. It is expected that providing financial services to this target market will result in continued growth in terms of business volumes and profitability. 9. 3 Board of Directors and Management Team Equity‘s Board of Directors is drawn from different professions and with a diverse set of skills and experiences that have and will continue to contribute to the growth and development of the Bank.

The Bank’s senior management team has extensive experience and proven track record within the public and private sectors. To ensure that the Bank continues to be governed properly, it has put in place very stringent corporate governance structures. 9. 4 Risk Management Strategies The Bank has established a comprehensive risk management framework. It has identified a range of possible risks which have been mapped, indicating risk drivers, frequency, impact, risk levels, trends, risk owners and the respective mitigating strategies. All risks associated with banking institutions and those that are specific to Equity Bank, are actively managed by the respective business units and monitored by the Bank’s Risk Management Department.

The Bank’s risk limits are assessed regularly to ensure their appropriateness in line with the Bank’s objectives and strategies and current market conditions. 5 9. 5 Credit Ratings The Bank was recently rated by two international rating agencies, MicroRate of United States of America and Global Credit Ratings of South Africa. Based on the Bank’s solid performance and credit portfolio ratios, Global Credit Ratings of South Africa awarded short-term and long-term ratings of A and A respectively. MicroRate of United States of America awarded the Bank a++ rating which indicate consistently exhibiting a clear, rational and balanced relationship among financial, operational and strategic considerations of sound microfinance practice as compared to an international set of similar companies.

In 200, Planet Finance of France had ranked EBS as a “high global performer, professionally advanced, technically self sufficient and a low risk investment” . 9. 6 Infrastructure In 2005, Equity invested over KShs. 565 million on Information Technology infrastructure with Infosys, the world’s leading core banking solution, which will support the Bank’s expansion strategy. The Information Technology infrastructure includes a new generation core banking system, state of the art data centre and an enhanced Automated Teller Machines network. In 2006, Equity plans to commission 50 Automated Teller Machines, point of sales terminals, mobile banking and short message service alerts across its existing and future branch network.

The amount expended for the expansion exercise and the infrastructure is from the Bank’s own funds. A detailed breakdown of the infrastructure is in the general information section of this Information Memorandum. 9. 7 Branch Network In keeping with the Bank’s commitment to offer its services to its customers countrywide, the Bank plans to increase its branch network, from 3 branches in 2005 to about 60 in 2009. The new branches will be spread across the country but clustered in various regions. The new branches are on leased premises and are financed from own funds. Details of the leases are available for inspection at the Head Office of the Bank. 9. 8

Continuity Although the Bank’s shares will be listed at the NSE and will be freely transferable, nine of the key shareholders listed in 7. 3 above namely Britak Investment Company Limited, AfriCap Microfinance Fund Limited, James Njuguna Mwangi, Nelson Muguku Njoroge, Peter Kahara Munga, Andrew Mwangi Kimani, Fortress Highlands Limited Simon Kagwanja Thuo and John Kagema Mwangi have given an undertaking to the CMA that they shall not dispose of their shares in the Bank for a period of twenty-four months from the date of Listing. In addition the shares held by Equity Bank Employees Share Ownership Plan are not immediately available for trading. 9. 9 Dividend Policy Equity has had a consistent dividend policy of up to 40% of par-value.

The Bank’s Board of Directors intend to maintain a consistent annual dividend policy to the shareholders of an amount that can be sustained taking into account the variations in earnings and which is commensurate with the capital expenditure of the Bank. 9. 10 Growth Potential Kenya’s active labour force is estimated at 5 million people spread as follows: close to half (48% percent) are engaged in smallholder agriculture and pastoralism; another 40 percent are engaged in the informal sector, and; 2 percent are in formal sector wage employment . The Bank’s primary target market is microfinance customers. Microfinance customers comprise of formal wage earners employed in the lower income brackets, and entrepreneurs and workers in the mostly informal small and microenterprises (MSEs) and smallholder farmers. This market offers very significant scope for growth.

The penetration of banking services in this market is very low. The total number of bank accounts held in Kenya is presently less than 3 million, which is quite low relative to the labour force as set out above. In effect, the majority of the Kenyan population is “unbanked” The . Bank’s planned expansion targets this unexploited market. 1 CGAP“CaseStudyNo4onAgriculturalMicrofinance”PlanetFinanceofFrance,June2001 6 9. 11 Increased Demand for Bank’s Products and Services With the current growth in population, Gross Domestic Product (“GDP”) and increased sensitisation of the benefits of banking services, there is an ever increasing demand for the Bank’s products.

The Bank is continuously developing new products which are customer driven. The ability of the Bank to identify and satisfy this demand will drive its continued growth and profitability. 9. 12 Equity Bank Valuation Equity Bank has been valued by independent valuers’ and their report is contained in Chapter 7 of this Information Memorandum. The approach taken in valuing Equity Bank applied four models, namely, Dividend Discount model, Discounted Cash flow, Price-Earnings approach, and Price-to-Book Value approach. The basic application in the use of these methods is to assess the implied value for the Equity Bank with regard to the prevailing fundamentals and market sentiments.

The approaches are what the valuers’ believe are the most reliable in estimating the Bank’s value given the firm’s historical performance and future prospects. Valuation Method . Discounted FCF method 2. PBV -Average Approach PBV -Regression Approach 3. PE Ratio 4. DDM method Valuation Average Price DLOM Value OTC Market Value & Price (Mar-06) Value (Kshs. M) 6,440 5,524 5,796 5,742 8,278 6,3399 Value Per Share (Kshs. M) 67. 80 6. 00 64. 00 63. 40 9. 40 Kshs 70. 00 Kshs 59. 50 66. 00 5,977 Based on the average valuation of the four approaches, which ranges between Kshs 5. 5 and 8. 4 Billion, Equity Bank is valued at Kshs. 6. 3 Billion, placing it at a price of Kshs 70.

The valuers applied a 5% Discounting Lack of Marketability value (DLOM) based on the fact that Equity Bank has a robust Over-the-Counter market. In the past one year and two months date, the Bank moved 7. 6 million shares. Therefore, at a DLOM of 5%, the anticipated fair market value per share price for Equity Bank should be Kshs. 59. 50. However, it is important to note that a fair market valuation such as this may change in time contingent upon various factors. Above all, every shareholder and or investor is requested to take note of the provisions of Chapter 3 above on disclaimers and to consult their professional advisers for any investment advice regarding their Shares or otherwise howsoever. . 13 Taxation Investors and shareholders attention is drawn to the provisions of the Income Tax Act (Chapter 470 of the Laws of Kenya) with regard to Withholding Tax on dividends payable to both local and foreign shareholders. Equity is a liaison of the Kenya Revenue Authority with regard to Withholding Tax and shall deduct the applicable tax (currently at the rate of 5% on residents and 0% on non-residents) whenever applicable. Non –residents may be entitled to a tax credit in their country of residence where their country has entered into a double taxation treaty with Kenya. Non-residents are advised to obtain tax advice on this issue. 9. 4 Foreign Investors For the purposes of the Capital Markets (Foreign Investors) Regulations 2002 (“the Regulations”) a foreign investor means any person who is not a local investor or an East African investor (as more particularly defined in the Regulations). The attention of foreign investors is drawn to the Regulations in so far as they apply to holding of shares in a listed company. 2EstimatesarecalculatedfromCentralBureauofStatisticssources (NationalLabourForceSurvey1998/99andEconomicSurvey2005) 7 10. PROFILE OF THE ISSUER 10. 1 Status of Issuer Equity Bank Limited is a public limited liability company duly incorporated in Kenya under the Companies Act under Certificate of Incorporation Number C. 4/2005. The Company was granted a banking licence on 28th December 2004 (Licence Number BK/80).

This enables the Company to carry out banking business in Kenya in accordance with the Banking Act (Chapter 488 of the Laws of Kenya). Municipal Council licences are also issued to each of the branches in accordance with applicable laws and regulations. 10. 2 Registered Office The registered office of the Issuer is at Land Reference Number 209/248, NHIF Building, Haile Selassie Avenue, 4th Floor, P. O. Box Number 7504-00200 Nairobi, Kenya. 10. 3 Company Secretary The Company Secretary of the Issuer is Mrs. Mary Wangari Wamae of P. O. Box Number 7504-00200 City Square Nairobi and a Certified Company Secretary duly registered as Number 753. 10. Auditors The Auditors of the Issuer are Ernst & Young, Kenya Re Towers, Upper Hill, Off Ragati Road, P. O. Box 44286 – 0000 GPO Nairobi since 2004. M/S Mungai & Associates were the auditors of Equity Building Society upto and including 2003 before the conversion to a commercial bank. Messrs. Mungai and Associates were the auditors of Equity Building Society for the period up to 3st December 2003. Following the conversion from a Building Society to a Commercial Bank Messrs. Ernst & Young of P. O Box 44286 – 0000 were appointed as auditors of the company for the year ended 3st December 2004. Central Bank of Kenya duly approved the said appointment as required under section 24 (i) of the Banking Act. 10. Share Registrar The first Share Registrar shall be Mrs. Mary Wangari Wamae of P. O. Box Number 7504-00200 GPO Nairobi. Should need arise the Bank may outsource this service after the Listing. 10. 6 Lawyers The Lawyers of the Issuer are various. A complete list of the Lawyers on the Issuer’s panel is available at the registered office of the Bank but they include the following: a. b. c. d. e. Walker Kontos Advocates Hamilton Harrison & Mathews Advocates. Kimani & Michuki Advocates. Muriu Mungai & Co. Advocates. Waweru Gatonye & Company Advocates. 10. 7 Principal Objective Equity’s principal objective is to carry on the business of banking and micro finance.

It has been issued with a banking licence (Number BK/80) to carry on banking business in Kenya. 8 10. 8 Vision The Issuer’s Vision is: “To be the preferred microfinance service provider contributing to the economic prosperity of Africa” 10. 9 Mission The Issuer’s Mission is: “We mobilize resources and offer credit to maximize value and economically empower the microfinance clients and other stakeholders by offering customer–focused quality financial services” . 10. 10 Core Values The Issuer’s core values are “professionalism, integrity, creativity and innovation, teamwork, unity of purpose, respect and dedication to customer care and effective corporate governance. ” 10. 1 Network Associations and Development Partners Equity is member to an array of network associations and has partnered with several development organisations which include: Organisation • Association of Micro Finance Institutions (AMFI) • Kenya Bankers Association (KBA) • Africa Rural Agricultural Credit Association (AFRACA) • Women’s World Banking (WWB) Nature of Association with Issuer • Equity Bank is a member and contributes as a Microfinance service provider by offering services/advise to the small, medium and micro entrepreneurs in Kenya. • Equity Bank is a member of the association by virtue of its status as a commercial bank. KBA provides updates on the banking/financial industry and monitors compliance by its members with the Banking Act. • Equity participates by promoting rural credit financing in Kenya. Global Network for Banking Innovation (GNBI) • Microfinance Network • The association is based in the United States of America and its role in Kenya (and the basis of Equity’s association with it) is in the contribution it makes to the microfinance sector in Kenya. They provide information on trends and the growth of the microfinance service providers in this part of Africa. • The organisation aims at networking member banks (including Equity) in Information Technology and innovations. • The organisation aims at sharing transparent and reliable information about Microfinance institution members (including Equity) operations and financial standards. • Line of credit on SME French Development Agency(AFD) • International Finance • Line of credit on solar energy. IFC is one of the investors in AfriCap, a shareholder in Equity. Corporation (IFC) • German Development • Line of credit – Irrigation – small scale. Bank (KfW) • Institutional Development • Financial Services Deepening Fund (FSD) • An organisation involved in Market Research, Product Development, Product Refinement and Costing which it shares with Equity • The organisation promotes Total Quality Management, Systems, Processes • Swiss Foundation for Mapping and Procedures and Policy Manuals. All these areas are of interest to Technical Cooperation Equity. (SwissContact) • Micro Save Africa 9 10. 2 Shareholding The Bank’s shareholding is as follows: Shareholder name Number of Shares 9,894,397 7,462,685 6,632,835 5,700,000 5,000,000 5,000,000 3,772,680 3,367,000 2,902,493 2,7,965 38,660,495 90,564,550 Nominal Value (Kshs. ) 49,47,985 37,33,425 33,64,75 28,500,000 25,000,000 25,000,000 8,863,400 6,835,000 4,52,465 0,859,825 93,302,475 452,822,750 Percentage of shareholding 0. 93% 8. 34% 7. 32% 6. 29% 5. 52% 5. 52% 4. 7% 3. 72% 3. 20% 2. 40% 42. 69% 100. 00% Britak Investments Company Limited Nelson Muguku Njoroge James Njuguna Mwangi John Kagema Mwangi Equity Bank Employees Share Ownership Plan Africap Microfinance Fund Limited Andrew Mwangi Kimani Fortress Highlands Limited Peter Kahara Munga Simon Kagwanja Thuo Others (2,408 Shareholders) TOTAL

There are no formal or informal agreements between the shareholders and the directors or senior management to act in concert with regard to their shares. 10. 13 Board of Directors The Board of Directors of Equity Bank Limited consists of ten members, drawn from different professions and with diverse skills and experiences. Only one Director is executive. The Directors are elected by the shareholders upon recommendation by the Board. The candidates are identified and short listed by the Board Nominations, Governance and Staff Remuneration Committee prior to presentation to the Board. The Board of Directors is expected to assume a primary duty of fostering the long-term business of the Bank consistent with their fiduciary responsibilities to shareholders and depositors.

The Board is committed to conducting the affairs of the Bank with openness, integrity and accountability and in accordance with the highest standards of corporate governance. Each of the Directors has signed the code of corporate practice which sets out the duties and responsibilities of the Directors and provides for the evaluation of the Board members bi-annually. 10. 14 Material Contracts The following contracts have been entered into by the Company otherwise than in the ordinary course of business during the two years prior to the date of this Information Memorandum: a) Agreement dated 9th April 2003 between Africap Microfinance Fund Limited of L & P. Financial services T.

M Building 5th Floor, Pope Hennessy Street, Port Louis Mauritius and EBS the predecessor of Equity Bank Limited for the subscription and sale of 2,000,000 ordinary shares of KShs. 5 each for a consideration of KShs. 20,000,000. The subscription price for each share was KShs. 60. b) Agreement dated 7th February 2005 between Britak Investments Company Limited of P. O Box 30375 Nairobi and EBS the predecessor of Equity Bank Limited for the subscription of ,492,537 ordinary shares of KShs. 5. 00 each of Equity Bank Limited at a consideration of KShs. 99,999,958. The cost per share was KShs. 34. 20 c) Agreement dated 28th December 2004 between Equity Building Society (EBS) and the Bank both of P. O Box 7504 – 00200 Nairobi for the sale and transfer of the business, assets and liabilities of EBS to EBL.

Consequent to this Agreement EBL took over the liabilities and obligations of EBS in respect of the business, the assets the loan accounts, credit accounts, the contracts and the leases. The Agreement also bound EBL to issue to each investing member of EBS shares equivalent to the number held in EBS. In accordance to this Agreement, EBL was also to offer employment to all employees of EBS and was liable to pay all salary, wages accrued leave severance pay and other terminal benefits accrued in respect of such employees. The take over date of this Agreement was 3st December 2004. d) Deed of Assignment and Transfer dated 3st December 2004 between Equity Building Society (EBS) (assignor) and Equity Bank Limited as assignee pursuant to which Agreement EBS assigned bsolutely EBS’s business, assets, loan accounts and securities in respect thereof, credit accounts, contracts and leases as defined in the Agreement for sale mentioned in ( c ) above and all claims of the assignor against third parties. e) Agreement for Sale and Assignment of Debts and Securities dated 8th March 2005 between Industrial Development Bank (IDB) and Equity Bank Limited for:i. The sale of IDB’s short-term loans, overdraft facilities, portfolio and the securities relating thereto for a consideration of KShs. 43,002,792. 35. ii. Sale of IDB’s furniture, fixtures and equipment from its commercial Banking operations at Bima House on L. R Number 209/657 Nairobi at a consideration of KShs. ,255,950. iii. Assignment of IDB interest in the lease at Bima House L. R Number 209/657 Nairobi. iv. Transfer and or rehiring of IDB’s 0 employees at Bima House Branch at such terms as Equity Bank and the said employees would agree. f ) Supplemental Agreement for Sale and Assignment of Debts and Securities dated 22nd April 2005 between IDB and Equity Bank Limited supplemental to the Agreement for the sale and assignment to debt and securities dated 8th March 2005 above for the sale and assignment of additional short-term loans, overdraft facilities portfolio and the securities relating thereto for a consideration of KShs. 2,063,393. 93. ) Assignment of Lease dated 8th March 2005 between IDB and Equity Bank Limited whereby IDB agreed to assign, transfer and deliver all its rights under a lease Agreement dated 23rd June 998 made between IDB and the Official Receivers of Kenya National Assurance Company Limited (In Receivership) over the premises situated on the ground and mezzanine floors of L. R 209/657 (Bima House) Nairobi. The date of delivery of possession of the premises to the assignor was 4th March 2005. The Ministry of Finance duly granted consent to the said assignment. h) A User Agreement executed on st March 2005 signed between the Bank and Kenya Commerce Exchange Service Bureau Limited of P.

O Box 4482, 4th Floor Tausi Court off Muthithi Road Westlands Nairobi for the utilization of swift services at a cost of US Dollars 5,900 exclusive of VAT. i) An Agreement dated 9th May 2005 made between Infosys Technologies Limited of Electronics city Hosur Road Bangalore 56000 INDIA and Equity Bank Limited for the licensing of Finacle banking software as per the specifications contained in the annexure to the said Agreement for a license fee of US Dollars ,25,000. The contract includes a term for annual maintenance and technical support for annual fee of US Dollars 68,750 exclusive of taxes. The Agreement contains a warranty that for a period of 90 days from the date of Finacle Go live that the software shall function in accordance with the function list contained in the Agreement.

The Agreement also contains provision for technical support required by the Bank in respect to the use of the software and also upgrades and maintenance releases of the software. 2 j) Agreement made on 5th July 2005 between Equity Bank Limited and Computech Limited of P. O Box 59789 – 00200 Nairobi for the supply of Data Centre Enterprise wide systems and storage and related software at a consideration of US Dollars 2,95,982 exclusive of VAT. The contract contains a warranty that all the articles delivered shall be free from defect of materials or workmanship as per the manufacture warranty statement specified in the schedules to the agreement. ) Agreement dated 27th July 2004 between General Motors East Africa Limited and Equity Building Society for financing of vehicles. l) An Agreement made between PesaPoint Limited of P. O. Box 2694-0000 Nairobi and Equity Bank and executed in December 2005 to allow customers of the Bank to use PesaPoint ATMs network on terms and conditions set out in the said agreement. m) Agreement to provide Agency Services in the Clearing House between Credit Bank Limited and Equity Bank; The Bank was admitted to Clearing House in December 2005 hence the agreement is no longer in force. All the agreements referred to herein are available for inspection at the registered office of the Company.

The Software Contracts are non-exclusive and the Vendors are not precluded from carrying on business in competition with the Bank. There are however appropriate confidentiality clauses in the usual format of such documents. 22 11. BRIEF HISTORY OF THE ISSUER 11. 1 Background 1984 to 1993 – Genesis Period EBS was registered on 0th October 984 under the Building Societies Act (Chapter 489 of the Laws of Kenya). The original founders of EBS were inspired by the desire to create a financial service provider which would reach the majority of the Kenyan population. This desire was out of the realisation that the low and medium income earners had no access to formal banking and neither could they afford banking services (the “unbanked” population).

Due to the high share capital requirements and legal framework under the Banking Act, EBS was registered under the Building Societies Act to provide mortgage financing to its members. Between 984 and 993, the banking sector underwent a turbulent period resulting in a crisis in banking sector. The result was a lack of public confidence in the banking sector and closure of indigenous banks with most of them being placed under statutory management. Due to its small size and rural outlook, EBS’s deposits book and loan base remained stagnant and thus continued to post losses during this period. In 993, the Central Bank of Kenya declared EBS technically insolvent: management was rated poor, with liquidity ratios of 5. 8% compared to the minimum legal requirement of 20%.

The board of directors presented to the Central of Bank of Kenya, a turnaround strategy that involved capital injection by shareholders, change of business strategy and the strengthening of management to help revive the institution. 1994 to 1999 – Turnaround Period This period provided a foundation for future growth. EBS shifted its focus from a mortgage provider to deposit mobilisation and efficient provision of loan facilities to the micro finance sector. In essence, the turnaround phase entailed a complete re-positioning of the institution and a change of strategy which is what is today celebrated as “The rebirth of EBS” With lessons learned from the emerging microfinance sector, EBS embarked . o customise the traditional banking model making it relevant to the micro, small and medium income earners and the un-banked population. Through extensive research, EBS was able to develop products and services that addressed the financial needs and seasonality patterns of this market segment. This turnaround period coincided with the liberalisation of the financial sector. Several large banks shifted focus from the retail to corporate market segment, creating a gap in the retail sector. At the same time, a number of banks were closing their rural branches and rationalising the urban branches. This created a steady flow of new deposits to the EBS. EBS continued to grow, a fruition of its commitment to relationship banking and improved customer service.

EBS management and Board of Directors made a concerted effort to develop a strategic plan that created a strong foundation for further growth and development. The then shareholders, customers and strategic partners were invited to subscribe for shares resulting in a fresh injection of capital amounting to KShs. 50 million. Strategic institutional partners were also appointed to the Board of Directors. It is also the same period that a credit rating was carried out on the EBS by Planet Finance of France with favourable comments. 2000 to 2004 – Takeoff Period This period was marked with rapid growth in all its parameters of performance. EBS experienced an average annual growth rate of 65. 0% from 2000 to 2004.

Total operating income stood at KShs. . 03 billion up from KShs. 4. 9 million in 2000. Similarly pre-tax profits also grew from KShs. 33. 6 million in 2000 to KShs. 28. 2 million in 2004. Total assets grew five fold to stand at KShs. 6. 7 billion up from KShs. . 26 billion. Deposits from customers rose from KShs. 977. 8 million to 5.  billion during the same period with gross loans and advances growing sixfold from KShs. 502 million to KShs. 3.  billion in 2004. 23 In 2004, EBS was recognised by the World Bank as a model institution for the impact its products and services made on reaching the un-banked population and success in poverty reduction .

Over the years, EBS partnered with networks associations and development partners such as MicroSave, United Nations Development Programme (“UNDP”), Financial Sector Deepening (FSD), The Consultative Group to Assist the Poor (“CGAP”), World Bank, International Finance Corporation (IFC), SwissContact, German Development Bank, Department for International Development (“DFID”), AfriCap Microfinance Fund Limited (“Africap”) and the European Union in areas of technical expertise, product and market research, policies and procedures,

Cite this An Overview of the Banking Sector in Kenya

An Overview of the Banking Sector in Kenya. (2018, Mar 06). Retrieved from https://graduateway.com/equity-bank/

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