Equity receives Sh850m dividend from fintech unit


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

Equity Group received a Sh850 million dividend from its fintech unit last year which became the second-highest paying subsidiary to the parent firm after Equity Bank Kenya.

Finserve Africa Limited, which was operationalised in 2014 after several years of dormancy, had previously not paid a dividend to the mother company.

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

Equity Group runs all its digital and technology 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 includes partnerships with the fintechs Alipay and WeChat, and remittance service providers such as Wave, PayPal, Western Union, and Money Gram.

Finserve was operationalised in 2014 when Equity started offering its MVNO services, and in 2018 was elevated into an autonomous commercial enterprise that offers services to other parties outside of Equity Group.

Overall, Equity’s dividend income from subsidiaries rose more than 10-fold last year to Sh8.7 billion from Sh607 million in 2020, after the resumption of payments from its Kenyan banking unit.

Equity Bank Kenya, the group’s largest subsidiary in terms of revenue, paid the parent Sh7 billion in dividends last year, while the bancassurance arm remitted Sh400 million in dividends, a similar amount to its 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 remitted dividends of Sh150 million (2020: Sh100 million).

Banks have been building up their digital arms to offer shared services across their expanding regional and local subsidiaries, with the high income from Finserve reflecting the potential for these digital platforms to become key revenue earners for the lenders.

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

Most digital banking services are expected to become more profitable once the Central Bank of Kenya allows the institutions to reinstate charges on bank-to-mobile transactions.

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