Global investors from Kenya, the United States, the United Kingdom, South Africa, and other countries arrived in Kinshasa, the capital of the Democratic Republic of Congo, for the second leg of the Kenya and DRC Investors Roadshow that started in Nairobi. The charter jet touched down at N'djili International Airport early morning for the delegates to begin a two-day mission of meetings and tour of enterprises in and around the city. Speaking at the plenary session of the meeting in the DRC capital, IFC Managing Director, Malick Fall, said the DRC is a victim of an image that it shed many . ago.
Comme aujourd'hui, 2 ans après, nous avons multiplié par 5 les effectifs de la SFI ici au Congo. Nous doublons chaque année nos investissements dans ce pays, et nous sommes encore loin du compte. Tellement les opportunités sont importantes dans ce pays.
Equity BCDC Managing Director, Celestin Mukabu, said challenges facing DRC are opportunities for investment, particularly in energy, mining, and agriculture.
The country is divided in five economic regions. We have the west region, where we have the Kinshasa town. It's already more than 15 million inhabitants. There is a lot of trade happening, especially when you want to do manufacturing. It's something which would be considered. Still to the west, there is an agriculture potential, so the food basket of Kinshasa is just near. More in the south, there are the mineral region, where there is most of the mining activities happening there. You have huge concentration of different mineral in the DRC. We have two time zones. This is the west time zones, but in the east, we have another time zone. It's plus one.
If you want to manage operations and to start, you could start it depending on your activity in the west, or you can start in the south, or you can start closer to the east region, where there is a lot of activities as well going there.
Mukabu said Equity BCDC customer base has crossed the 2 million mark and is poised to grow even further because the country is lowly banked.
The country is not yet fully digitalized, so that is an area where somebody could explore and see it as an opportunity.
Although the DRC is known for its mining potential, the ecosystems to the sector, including food supply, housing, transport, roads, and energy, remain largely untapped.
On agro-industrial sector, this is an enormous opportunity. The land is very fertile. Last time, we saw some maize growing in the bridge, and you could see across the bridge, there was maize. Nobody has planted it, but it was growing. So the land is so fertile, and it gives an opportunity of starting growing food. And the country used to be, in the past before the period of instability, a food basket in many aspects.
Kenyan Ambassador to DRC, George Masafu, said the Kenyan fraternity was proud of Equity, which he said has become the face of Kenyan enterprises in the country.
We are so proud to host the cream of the Kenyan investors coming to DRC, and this could not have been possible without the leadership of James and his team. James, we are very proud of your leadership for organizing this kind of tour to DRC. Equity Bank is now flying the flag. It is the face of Kenyan enterprise in DRC. What does it mean now for you investors who have come to DRC? Visiting DRC means you're looking for opportunities to invest, and you cannot come to a country to invest if you have no confidence in that country. It's an expression of confidence in this country and why you want to invest here.
The visitors were surprised by the opportunities in various sectors and were keen to find a niche in the country that is argued-
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Global investors from Kenya, the United States, the United Kingdom, South Africa, and other countries arrived in Kinshasa, the capital of the Democratic Republic of Congo, for the second leg of the Kenya and DRC Investors Roadshow that started in Nairobi. The chartered jet touched down at N'djili International Airport early morning for the delegates to begin a two-day mission of meetings and tour of enterprises in and around the city. Speaking at the plenary session of the meeting in the DRC capital, IFC Managing Director, Malick Fall, said the DRC is a victim of an image that it shared many years ago.
Comme aujourd'hui, 2 ans après, nous avons multiplié par 5 les effectifs de la SFI ici au Congo. Nous doublons chaque année nos investissements dans ce pays, et nous sommes encore loin du compte. Tellement les opportunités sont importantes dans ce pays.
Equity BCDC Managing Director, Celestin Mukabu, said challenges facing DRC are opportunities for investment, particularly in energy, mining, and agriculture.
The country is divided in five economic regions. We have the west region, where we have the Kinshasa town. It's already more than 15 million inhabitants. There is a lot of trade happening, especially when you want to do manufacturing. It's something which would be considered. Still to the west, there is an agricultural potential, so the food basket of Kinshasa is just near. More in the south, there are the mineral region, where there is most of the mining activities happening there. You have huge concentration of different mineral and in, in the DRC. We have two time zones. This is the west time zones, but in the east, we have another time zone. It's plus one.
So if you want to manage operations and to start, you could start it depending on your activity in the west, or you can start in the south, or you can start closer to the east region, where there is a lot of activities as well going there.
Mukabu said Equity BCDC customer base has crossed the 2 million mark and is poised to grow even further because the country is lowly banked.
The country is not yet fully digitalized, so that is an area where somebody could explore and see it as an opportunity.
Although the DRC is known for its mining potential, the ecosystems to the sector, including food supply, housing, transport, roads, and energy, remain largely untapped.
On agro-industrial sector, this is an enormous opportunity. The land is very fertile. Last time, we saw some maize growing in the bridge, and you could see across the bridge, there was maize. Nobody has planted it, but it was growing. So the land is so fertile, and it gives an opportunity of starting growing food. And the country used to be, in the past, before the period of instability, a food basket in many aspects.
Kenyan Ambassador to DRC, George Masafu, said the Kenyan fraternity was proud of Equity, which he said has become the face of Kenyan enterprises in the country.
We are so proud to host the cream of the Kenyan investors coming to DRC, and this could not have been possible without the leadership of James and his team. James, we are very proud of your leadership for organizing this kind of tour to DRC. Equity Bank is now flying the flag. It is the face of Kenyan enterprise in DRC. What does it mean now for you investors who have come to DRC? Visiting DRC means you're looking for opportunities to invest, and you cannot come to a country to invest if you have no confidence in that country. It's an expression of confidence in this country and why you want to invest here.
The visitors were surprised by the opportunities in various sectors and were keen to find a niche in the country that is arguably the most sought-after investment destination. A visit by several delegates to a construction site revealed the insatiable demand for housing in the city.
Parkland is located in Kinshasa, Democratic Republic of Congo. We see a great future for Parkland and other construction companies because there's so much potential. In Kinshasa, real estate development is on the up and up, and we believe there is a lot to come in that space.
Congo is still a very virgin country in terms of opportunities. We really appreciate Equity Bank for this opportunity, because we've been able to see Congo in a very different way in terms of the opportunities that are in this country, especially in the area of mining. Rather, the interest that I have, the reason I'm here, there is a lot of opportunities based even for the meeting that we had. We can be able to lift a lot of opportunities in terms of
I n terms of mining, agriculture, and general construction.
The kind of imports that this country has, from food, you know, everything that you see around, even at the hotel, looks imported and not locally manufactured. So a lot of opportunities for people who are willing to invest in local manufacturing.
There's a lot of potential in this country, though there may be a bit of challenges, maybe on the infrastructure and such things, but this is a country with a lot of potential. I'm also thankful to Equity Group for having managed to arrange this roadshow, which has been a big, a big source of information to investors and also to government technical people, to just compare how the places are. We are thankful to have participated.
The 2023 Kenya and DRC Investors Roadshow started in Nairobi to run through Kinshasa, to end in Lubumbashi, to the south of the country. The Democratic Republic of Congo imports 80% of all food consumed in the vast country. It is no wonder, then, that agriculture and related industries present a growing opportunity for business. Deputy Governor of Katanga, Jean-Claude Kamfwa, told delegates on the Kenya and DRC Investors Roadshow that agriculture is now a priority area for investment in alignment with other sectors, such as mining. The deputy governor thanked Equity for leading enterprises to DRC by example of investing in DRC and organizing for others to follow suit. Equity Group Holdings Chairman, Professor Isaac Macharia, said the mission had brought to DRC an assortment of people, including entrepreneurs and economic analysts, to open their eyes to the opportunities available.
We, as Equity Bank, have identified the opportunities that are available in this very rich province. That is why we've taken this step of coming with our investors, coming with businessmen from Kenya, and also coming with international analysts who write about our business in BCDC.
Equity Group Director of Strategy, Brent Malahay, illustrated the need to bridge gaps that have persisted in Africa.
As Equity Group, we appreciate in a country like the DRC, despite the abundance of natural resources in agriculture, the crop yields that the DRC produces is around 40% of the world average, whether it's maize, soy, it is well below average, and Equity Group, with its partners, is looking to improve that.
DRC has over 80 million hectares of arable land, but only 10% is utilized. Some of the delegates had an opportunity to witness agricultural production at Go Congo Farm, located 60 kilometers northeast of Lubumbashi. Go Congo, established only a decade ago, has over 60,000 heads of cattle and thousands of hectares and maize, soya, and wheat. The chaff and other waste from harvested crop is used as feedstock for the cattle that produces quality beef for an insatiable domestic market.
Our strategy is to grow food locally. The DRC imports around 80% of its food requirements, and we've set up this farm to substitute that consumption to locally produced food. We're at about 8,000 hectares.
... And we're producing about 25,000 tons of maize a year, about 2,000 tons of wheat a year, and about 1,500 tons of soya a year.
While the maize goes for milling, sifting to produce the packaged Twiga flour meal, all the wheat produced at Go Congo is used for making biscuits in the company's bakery in Lubumbashi.
Our product is called Twiga. It's a maize meal. It's in a yellow bag, which you'll see around town. We distribute it to over 2,000 shops, and we have two formats: We have a 25-kilo bag and a 2.5-kilo bag. We are banking with Equity. We are very proud customers. Equity puts their money where their mouth is. They want to promote agriculture. They are promoting us, they're growing with us, they're helping us grow, and we are very proud to be their customers and to work together with them.
Go Congo is clearing more land to plant more grain, of which it hopes to grow by irrigation on large scale. When the Kenya and DRC Investors Roadshow came to a close, the delegates expressed their satisfaction that the outing helped to open their eyes to know the country better and see opportunities to invest in, as well as establish alliances with the Congolese for win-win partnerships.
The journey began in 2021, when Equity Group handpicked RentCo Africa and a few others to venture into the DRC for investment purposes.
We're seeing the slogan, "Energy for all," ensuring every household access energy affordably, conveniently, and in a manner that it can contribute to enhancement of their quality of life.
Schneider Electric Vice President, Gwenaëlle Avice-Huet, said the partnership is an enabler for the youth to access energy for innovation and relevant skills for their livelihood.
In this project, we mixed our strengths, to be on the field with the team of this bank everywhere, close to the people, to contribute to innovation. To have new solution, we have to work very differently in the future. To have new innovation and so on, it tries to transfer our skills linked to-
Most welcome to Equity Group Holdings PLC investor briefing for full year results. If you allow me, I want to start by inviting, Sister Theresa to open for us with a word of prayer, and then we'll invite, the Equity team to lead us with, Equity anthem, while the rest of us will be seated kindly. Sister Theresa?
I'm going to read Exodus thirty-three, twelve to fifteen. When God called Moses to deliver the Israelites, Moses wanted the Lord to give him a sign that He will be with them on the way. God replied to Moses' prayer, his request for a sign, by saying, "My presence will go with you, and I will give you rest." God offered something better than guidance. He promised to be their guide. He promised to accompany them, to be with them. When we walk in God's presence, we cannot fail, we cannot stumble. He renews our strength each and every day of our lives. He makes known to us the paths of life. His presence, His fullness of joy, is there with us each and every time.
We can only have true rest and joy in the knowledge that God is going to be with us every step of our way. And we echo the words of First Thessalonians 5:18: In every circumstances, give thanks... For this is the will of God in Christ Jesus for you. We gather today to give thanks to God. He has blessed us with our customers, with us who are investors. Where we are, we give thanks to Him in every circumstances. Let us pray. In the name of the Father, and of the Son, and of the Holy Spirit, amen. We thank you, Heavenly Father, for the gift of this day. We thank you for what you have done to us for the past year. We thank you for each one of us. We thank you for investors. We thank you for our customers.
We thank you for our leadership. We thank you for Equity family. We thank you for everything that you have done for us. We will always praise you and honor your holy name. As we plan ahead, we pray for your guidance and for your presence. We pray for your strength. We pray for our families. We pray for Equity Group, that you may bless each one of us, you may bless all that you have invested in us. We pray this through Christ our Lord. Amen. In the name of the Father, and of the Son, and of the Holy Spirit. Amen.
Equity, Equity we are. All the staff that are one partner. Coming together, our paths are forward, creating wealth and transforming lives. I am a member, you are a member, we are united by Equity. Equity, our listening, caring partner, transforming people's lives. I am a member, you are a member, we are united by Equity. Equity, our listening, caring partner, transforming people's lives. Serving our people with happiness and joy. Moving together in honesty and trust. All dedicated to their call of duty, embracing change for prosperity. I am a member, you are a member, we are united by Equity. Equity, our listening, caring partner, transforming people's lives. I am a member, you are a member, we are united by Equity. Equity, our listening, caring partner, transforming people's lives. Reaching our people all over the world, quality services to community.
All stakeholders beaming with delight and celebrating dreams coming true. I am a member, you are a member, we are united by Equity. Equity are listening, caring partner, transforming people's lives. I am a member, you are a member, we are united by Equity. Equity are listening, caring partner, transforming people's lives. And by His grace, we all arise. To our Creator, praises we sing. Moving together, every day we grow. Our hearts so grateful for what we match. I am a member, you are a member, we are united by Equity. Equity are listening, caring partner, transforming people's lives. I am a member, you are a member, we are united by Equity. Equity are listening, caring partner, transforming people's lives.
Thank you. Let's give it to them. That's the English version of the Equity anthem. Kindly allow me to invite our Group MD and CEO, Dr. James Mwangi, to take us through the full year results for Equity Group. Dr. Mwangi.
Thank you very much, Alex, and good morning, esteemed shareholders, investors, analysts, colleagues. We're privileged to have you this morning. We are delighted to be with you this other morning, as we look back to the year 2023 and seeing how we performed, what drove for the performance. I want to acknowledge the presence of our group chair, Professor Macharia. Thank you, Professor Macharia, for joining us and being with us this morning. 2023 was a very unique year for Equity Group. Over the last five years, when making our investors presentations and briefing, we have been pulling together the thematic pillars that were driving transformation of Equity Group and updating investors as to where we are.
For the first time, I will be presenting the unified formation that Equity Group has become because of executing consistently a very strong strategic plan, codenamed the African Recovery and Resilience Plan, and positioning ourselves and adapting ourselves to the needs of that plan. So what we see is an organization fit for purpose, to drive, to execute the African Recovery and Resilience Plan. This is an African transformational plan, where Equity Group has chosen to provide leadership, act a facilitator and a catalyst for change by empowering Africans to drive the transformation themselves. We are using financial tools to enable people to play their role. It's an innovative way of private sector playing to the development agenda.
Equity is using two engines: an economic engine composed of banking services, insurance services, technology services, while at the same time having a social engine that capacitate and de-risk, to enable everybody to play and to guarantee inclusion as we transform our continent, ensuring nobody is left behind. So if you see a difference in format, it's because we now can see visibly what Equity has become through the intention. That phase of the last seven years, though characterized by very significant shocks, Equity has demonstrated great resilience and has managed to transform itself. But before we really go into the performance, let's look at the environment. If you look at the global or macro environment, we see higher for longer interest rates and through gradual rate cuts by major central banks.
We have been waiting for cut of interest rates. It's coming through. We are of the view that maybe we'll see the first cuts in the fourth quarter, but we are encouraged. Switzerland has become the first country to start cutting the interest rates, confirming evidently not just by the absence of three quarters without the Fed touching on the interest rates, that maybe the moment is here with us. The prediction is that 2024 we might end up with the Fed rate being at 4.6, assuming approximately two cuts and ending up hopefully 2026, with approximately 3% interest rates. And we have seen the period that we have gone through, how challenging it has been when the effective interest rates are high.
But we have seen the inflation has started showing signs of being tamed, but stubbornly remaining high at above an average 3% across the world. When we come to Africa, in midst of all this, Africa has emerged, and specifically East Africa, has emerged as one of the fastest growing regions in the world. In the top 10 countries, we have Tanzania and Rwanda as two of the fastest growing countries. If we expand that to 20 countries, Uganda joins the rank, and if you extend to 50, then you get Kenya, DRC, and South Sudan joining the rank, making a region whose countries are all in the top 50 fastest growing countries. And again, that shows the momentum.
When you look at the characteristics, then you see maybe this growth will be sustained for a long time. Why? Because it's fueled by foreign direct investments, and the region has become the second largest recipient of foreign direct investment on the African continent. When you look deeper, you see the ability of the region to integrate with the global markets, the ease of raising Eurobonds so that capital flows beyond foreign direct investment can be market made. But more importantly, we also see the resource base, whether it's agricultural land, whether it's strategic minerals, and whether it's readiness to support the centralization and the globalization by becoming a new hub.
We see a significant upside opportunity as a result in East Africa, and we feel Equity Group Holdings is uniquely positioned to tap into this growth. Not just to drive this growth, but to benefit itself, to be fully transformed, and to significantly reward its stakeholders, may they be staff, may they be shareholders, may they be depositors, may they be lenders. It's not just Tanzania and Rwanda are among the top fastest growing countries, but a country like Tanzania is showing a possibility of very high ceiling in terms of opportunity for growth. The gas finds in Tanzania, the agricultural potential of Tanzania, the infrastructure development of standard gauge railway lines in Tanzania gives it the impactors that will be necessary.
When you look at the entire region, 63% of the entire population of nearly 380 million is below the age of 24. So if you take that as a consumer, it's a consumer that can be a customer for the next 80 years, given modern science and modern medicine, and the fact that lifespan within the region is growing. More interestingly is the median age of the region is below 19 and ranging between 15 and 19. Again, affirming what may be demographic dividends that would come from the region. Again, DRC stands out, whether you talk about energy potential, clean energy, whether you talk about strategic green minerals to power clean energy technologies, whether you talk about hydro, whether you talk about arable land, DRC stands out.
Of course, when you look at the financial sector, banking has done well. Penetration is reasonable, but insurance penetration is still at the range of 1%, and the headroom of 99% gives us a huge opportunity as a group to grow. This is a region that has adopted technology, and if you look at the mobile penetration, and particularly if we single on Kenya, which mirror the other countries, we have 124% penetration. We have more mobile phones than the population, suggesting that adoption of modern technologies. But it's not just this region is endowed, but this region has proactively positioned itself to be an ecosystem of trade connections. This is the most integrated region on the African continent.
The common trade area has really been adopted. And if you look closely, you'll see Uganda is Kenya's largest trading partner, and you can see Tanzania is not far, Rwanda is not far, and we can see the countries are trading with each other. When Kenya exports $820 million of exports to Uganda, Uganda also exports $601 million. So it is inter cross-border trade at another level, and this is the region that is likely to make the African free continental trade area viable and to set the example of what it is. Given then, Equity Bank in that region is number one or number two.
In four of the countries, and particularly the two largest economies, Kenya and DRC, it demonstrates how well Equity Group Holdings is at the heart of East African thriving ecosystem of trade connections. Equity has been proactive of facilitating trade missions in between these countries to make it a common market and ensure our business people are faced by a 380 million people market other than the country population. We can zero in on DRC and see the largest country in Sub-Saharan Africa also presents a new and exciting frontier of continued sustainable growth for Equity Group Holdings. This is what we're saying: strategy has been positioning Equity to be at the center and the heart of this formidable transformation that is happening before our eyes.
I'm pleased to inform you that Equity is 27% of the entire banking industry in DRC. What it means is that for every 10 customers in DRC, three are in Equity Bank. That's broadly what it means, or the value of transaction for the banking industry. In the midst of what we have just talked about, the endowment of DRC, then we see how well Equity is positioned to be a catalyst of transformation, whether it's value addition in the mineral resources, whether it's in the agricultural transformation of the world's powerhouse, whether it is in development of energy, hydro, whether it's the headquarters of Equity being in Kenya, strategically positioned as the gateway of entering East Africa.
Kenya's elevation in terms of human skills, Kenya's elevation in terms of social investment, particularly energy, education and health, a very skilled human capital, a functioning civil service, elevated infrastructure development, interconnectedness with the bordering countries, position Equity's headquarters at the core and at the center of what things will happen. So I would call it strategic positions, positioning. We're also very impressed with the reforms, the governance and institutional reforms taking place in Kenya and DRC particularly, and the transformation we are seeing in Uganda, Rwanda, Tanzania, Uganda.
So each of the markets is at a different level of transformation, and we trust that will really give us a very unique positioning and a unique opportunity needed now to benefit from the transformation happening before our eyes. If we look at Equity specifically as a group, Equity has now emerged as a premier regional financial service provider. It's no longer the Kenyan banking leader. We see that there is significant transformation, and we can see the impact in terms of what Equity has become. A KES 1.8 trillion balance sheet that tells you the largest regional banking customer base, branch network, deposit base with very efficient operations, cost-income ratio of 52.
We see organic and fast-tracking that through mergers and acquisition, and we can talk about the latest acquisition in Rwanda that has converted Equity in Rwanda to be an 18% market share financial group in that country. So, when you look at 27% market share in DRC, 18% market share in Rwanda, 14% market share in Kenya, then it speaks of how significant Equity has become. Despite all these and being the largest balance sheet, we see the group continuing to grow, deposit growing at 29%, speaking to the customers' preference of Equity Bank.
Deposits is a choice of the customers who to deposit with, and when your deposit grow at 29% during difficult, turbulent, period, then, it means the brand is not just, celebrated as the strongest banking brand in Africa, second strongest banking brand in the world, but the customer growth, in terms of deposit, acts as a huge testimony. But Equity also, has been prudent. It doesn't say, the times are difficult, the risks are too high. As we can see, it grows lending at 26% when we are dealing with high inflation, rates or very challenging macroeconomic times. Equity doesn't avoid risks, it manages the risk, and we can see it never abandons the customer, and for that reason, that it has created a symbiotic relationship, a trusting relationship with the customers.
That is what guarantees Equity, that even during difficult times, it can still have Equity and a return of 22.3%. Significant return above market rate because of the confidence. When you look at our customer, human capital and brand, as we have said, we take pride of being the owners of the strongest banking brand on the African continent. Second strongest banking brand on Earth. We take pride because that is a reflection of who we are, who-- what people say we are, how people regard us, and how people hold us. And that is because of who we are.
That speaks of our governance structures, that speaks of the quality of our human capital, that speaks of our systems and our processes, but more importantly, speaks of our governance structures that build partake to this growth, and forever we'll be grateful to the shareholders for giving us, 5% of the value of the bank as staff, so that as we work for the shareholders, we work for ourselves. We are aligned in interest. We give our, all, our all because we are beneficiaries of what the customers' generosity has been.
So the governance and organizational structure continues to attract, breadth and depth of management team, and, an organization can never be better than the quality of its people, and we take pride that, we are the best, second brand on Earth because we have, some of the best, human capital anywhere in the world. We have, 26 nationalities in our executive management, reflecting a brand that has a universal acceptance, across, the board. Very strong governance structures, to manage the risks and to manage, accountability, to hold people to account, and to ensure a mechanism of cross-checking each other, both at, the strategic level and at, operational level. As a result, we have been able to build a sustainable financial ecosystem.
We have been talking about it, but now we have the banking group in six countries and a rep office in the seventh—for its doors to open, knowing that Ethiopia is one of the top fastest growing economies in the world. We have Equity Insurance Group projecting by the end of June to have a life insurance, a general insurance, and a health insurance, completing the entire offering of health so that we can protect lives, we can protect health, but more equally important, to protect the wealth that we have helped to build, so that our growth becomes sustainable. And of course, we all know about Equity Group Foundation, which has become increasingly bigger and that is shaping the brand of the group.
Now Equity has a more evolved, from the brick-and-mortar infrastructure, to now, be on a technology platform, that has allowed us to digitize our business, to become an online business, to compress the time and distance, and more importantly, to give our customers the power of control of their money. They do bank, they onboard themselves, they navigate on the platform, and they consume the products they wish to consume, across the four groupings. This has then led to positioning ourselves to grow with the East Africa of tomorrow. We truly believe that if East Africa is the fastest growing region in the world, the East Africa of tomorrow will look very different from the East Africa of today.
We take pride that we took a proactive strategic decision to position ourselves at the heart of that entire region, and now we have strategically positioned ourselves to grow to be the bank of the East Africa of tomorrow. With the largest capital base in the region, the largest customer base, the largest balance sheet, and being systemic in all the countries in the region, being in the top four countries except one, it shows how Equity has positioned itself to drive and to benefit from that unique position and the opportunity of rapid growth. So Equity has also equally transformed itself into a unique financial services platform with exposure to attract East African market. So it's no longer focusing on one country.
It's looking and recognizing the opportunity that the East Africa of tomorrow will generate, will create, and saying, "We want to be in the driver's seat. We want to be a catalyst. We want to be an enabler, and we want to have the capacity and competence." And Equity's credentials have been proved by the last seven years since 2016, when we went through the interest cutting challenge or shock, went to COVID, went to Ukraine last year war. We went all through to disruption of global supply chains. We went through the current macro, and yet Equity is emerging stronger, resilient than ever before.
I want to pay tribute to our team of risk leaders who really have kept us true to our conviction that risk need to be proactively managed. Risk need to be managed through governance structures, policies and procedures. Risk management is a culture. It's not just transactional. It's a culture of decision-making, of behavior, and we are very grateful that we are able to do so. So the high growth potential in the markets our banking group serves or the entire group serves again shows the size, whether it's the domestic credit, what is the opportunity. And if you look at the opportunity in private sector lending, it's enormous.
Kenya has the highest penetration, 31%, but from that one percent, we go straight to Rwanda at 23%, Tanzania 15%, Uganda 13%, DRC 17%, and South Sudan 3%. Showing the headroom, the opportunity, and maybe the length of the runway, or the height of the city, that provides us with the opportunity. When you look at banking account penetration, Kenya with 86%, followed by Uganda at 60%, Rwanda 56%, Tanzania. All this data confirms the East African region is a growth region for financial services. And again, when you look at our position, position one in South Sudan, position one or two in Rwanda, DRC, and Kenya, and position five in Uganda, and position thirteen out of 54 in Tanzania.
9% return on equity, 26 in Kenya, DRC, 21, high-earning assets, and then you can see. In all this story, we see loan-to-asset ratio is at 45%, and we believe we cannot optimize profitability at anything between 75%-85% loan-to-deposit ratio, meaning DRC can double its profitability at the present size, simply by allocating cash into loan book. And that is the opportunity that we all need to see. Tanzania, another high-potential market, where we are smallest in size, but with the greatest potential. But we can see its potential that we are unlocking. Revenue growth 32%, asset 32%. So there is a direct correlation in each of the parameters.
You grow asset at 32%, revenue grow at 32%, and you get at that level between the countries, Uganda. And when you go to Tanzania, 29, 26. So the efficiency of operations, the execution of power, which this group is known for, is at play, and that is what has completed the picture. So the new frontiers for growth in the banking for Equity then becomes again, Rwanda. And we'll talk a little bit about Rwanda when we celebrate the acquisition and merger that happened in the last six months of last year, giving us a market share of 18% of the entire market. Rwanda, one of the ten fastest growing economies in the world.
So the picture would not be complete if we were not to look at the asset quality, distribution, and mitigation, the loan book growth, which is in the next slide. It's good to look at the earning asset mix and how well it is. We have achieved almost the same mix in all the countries, whether it's Kenya, BCDC, the NIMS, the return on asset, to just give investors transparency so that you can really be able to frame. But, if you look at, the slowest growth is happening in Kenya, 4%, DRC 67%, Uganda 25%, South Sudan 56%. You may be thinking of South Sudan, as I said, our loan book is growing at 56%, Rwanda at 92%, giving the group at 26% a distributed growth.
There's no concentration, and truly, that's why we said, it's an East African risk. It's no longer a Kenyan risk. I always see us being tied to the macros in Kenya, but we should be tied to the macros of the 6 fastest growing countries in the world. And when you look at them, Kenya is not. But when it gets priced, we are priced on Kenya, yet the DRC is where we have 27% of the market share. Rwanda is where we have 18% of the entire market share. Kenya is only 13%. We are not a Kenyan risk bank or group. We are a regional risk group. So it's very well distributed. Again, a tribute to the risk team, Manuel leading us in credit.
Our NPLs, as we promised, last time, we believed it had peaked. As at September, we are 12.2, we are down to 11.7, and we believe we will sustain a downward trend, a downward, improvement in the quality of the loan book. It again demonstrates our credit team, led by Manuel MacDay, that they fully understand this risk. They promised in September, they have delivered, in December. I hope they will, you also deliver in March. Confirmed, so the decline has started, and that, to me, is... But it's the coverage that gives me courage, the prudence, the conservative management, style in the organization, that, despite, showing improvement, the bank decided, not to carry the risk of this NPL into the future and, bring it to this year.
As we saw, this is the highest provisions we have ever made in the history of Equity Bank, KES 32.8 billion. Not because the loan is deteriorating, but because you want to properly apply IFRS 9 provisioning, taking the entire lifetime risking a loan during a performance year. So we chose that we leave the challenges of the difficult times behind by ensuring we have fully provided for the loan book, and that gives us the coverage that we are seeing, very high coverage of 90% when you compare actual provision and the guarantees. Again, you can see prudence in segment distribution of the loan. It's corporate SMEs, personal, and retail. A fair distribution, again, geography.
We see Kenya, the oldest subsidiary, only 51%, DRC, 32% of the loan. So you can see the correlation between and the parity between deposit and loans, and consequently, size of the risk and distribution within the region. But I don't think the picture is not complete without saying it's not that we are managing the loan well, but relative to the industry. Our NPLs are at 11.7%, when the industry is at 14.8%, and we have the best coverage in the market. We again that talks about the defensive approach management of uses prudently provide. And of course, the potential, the hidden opportunity is in the treasury efficiency. 40% of the entire balance sheet, actually more than 40%.
We're talking about a KES 1.8 trillion balance sheet, but KES 500 billion is in government securities. That is the biggest opportunity, that you could be able to reallocate this to credit and increase the earnings, the yields, the margins by nearly 60%. Given that the East African region is the fastest growing, the opportunity to allocate, reallocate is not a constraint, because the market is growing, the region is growing, the demand of the market is pretty high. So we are parked this, and we can see how efficiently it has been done. And I want to really thank our team, treasury team, trade finance team, led by Sishia. Sishia, maybe you could wave, our group treasurer, the Kenyan treasurer, then you got Shao, Kennedy, treasurer.
That team has done an amazing job to look after 40% of the entire balance sheet, and not just look at it, after it, and manage it well. As we said, the headwinds seems to be breaking. We can see the mark-to-market improvements as at September, we were KES 88 billion, as at December, we were at KES 55 billion. We are now below KES 49 billion, and we have seen the yields on the Eurobonds are below 10, suggesting that by end of March 2024, that number will improve. Remember that mark to market is passed through a comprehensive income. It's netted off against our capital. So if you are computing net asset, please add another KES 50 billion to net asset to do actual valuation of the bank.
We look at trade finance. Kennedy seems not to be in the room. That's the team that has demonstrated that equity has gone up the value chain. Our fastest growing product or tool is trade finance, again, confirming the interconnectedness of East African Community, the economic activities on the trade routes. Trade finance revenue grew at 90%, but trade finance, it did lead in 106. I was amazed when we took our 300 traders to DRC. After two months, they had given us an opportunity to fund them $2.1 billion of facilities. That is what is reflected here. The cross-border trade, the interconnectedness we talked of, the trade connection between the countries, it's a huge opportunity.
And you can see trade finance guarantee and off-balance sheet items, again, making it easier for our traders. And of course, when you look at profit, the interest margin edging up, as we move money from government stock to lending, the yields edging up. Cost of funds, again, looks like we said, has peaked and has started to show early signs of decline from 3.9%-3.8%. And when you look at the yields on loans relative to the market, we seem to be doing pretty well, 12.7%, enhancing when the industry is coming down. It was slow, and I may say this, because the top line in Equity, we see that interest income is growing much slower than interest expense.
We couldn't shield ourselves from interest expense, but there is a segment of Kenyans we said we will not pass the interest expense. Beginning of last year, our risk-based lending was approved. We could have adjusted consumer lending, salaried, and payroll salaries, but we chose not to subject Kenyan workers to the headwinds. The payroll lending, consumer lending, if you call it, constitutes 32% of our entire loan book. Anybody who had borrowed as at January last year, they are still paying at 13%, when if you borrow today, you pay 24%. That is the general heart of Equity Bank. When we talk about caring financial partner, Equity practices what it says.
When you hold 32% of the entire loan book at 13%, when you hold 50%, KES 500 billion, 40% of the balance sheet at 11%, it means 70% of earning assets are earning below 13%. Weighted average between treasury bonds and consumer loans is 11%, but we are funding that loan book at deposit at 18%. That explains to you why you see cost of funds, we are above the market at 18%. Yields, we are below because of subsidizing consumers.
But we take pride that the civil servants, the teachers, the salaried people are able to take care of their families because Equity has stood with them during these high inflationary times, and when the Kenyan shilling has shown signs of weakening against the dollar. It's something we take pride of. It's what the foundation then takes to the next level. We all know what Equity Group is doing. As we earlier said, Equity is not just banking like it used to be in Kenya, it's now a financial group. Insurance is promising to be as big as the bank, and we see the opportunity in insurance. In East Africa, our penetration is only 1.34%.
This is where banking was in the 1980s, and as we saw, we disrupted that, and now 86% of all Kenyans are included or have bank accounts. This is the opportunity Equity is chasing to see to it that inclusion reaches 50% in the next five years. So when we talk confidently that the insurance group will rival the banking group, it's because of this opportunity. Low average insurance penetration and consumers in Africa are in financial distress, we all know. We insure ourselves through social group, families, plots, and such things. We think like we disrupted banking, we shall disrupt insurance. And we disrupt insurance as we think, by making insurance accessible, relevant, and suitable, affordable, and bringing trust that its insurance is reliable and dependable than we think.
That explains why we have taken a very challenging tagline for our insurance group, "The insurance you can trust," because we want to be challenged on trust. It's only by breaking the barrier of trust that we believe insurance will take off in this region. We are taking a three-pronged approach to insurance, protecting life, protecting health, and protecting wealth. We work very hard. We all service our cars every three months. We want everybody to service themselves through a health wellness program covered by insurance, that when an incident comes, then there is we don't pay out of pocket, but insurance pays. By collectively bearing the burden, we can make the burden very light for each of us, bringing affordability to insurance, distribute insurance adequately, the supply side.
I'm glad to say we now have almost 120 Equity Afya hospitals. This month will be a record month. We'll be able to see over 100,000 patients in one month, suggesting that the product... And Rating has placed us number 1 in health provider when you combine accessibility, affordability, and quality. And if on quality stand alone, we are ranked number 2 or 3? Number 3 in the country. So that is the offering we are making, and I'm glad that the MD of Equity Afya, Maywa Ebwe, is here with his team of doctors. So that is. So the opportunity for health is much bigger.
So the Equity Insurance Group, as we can see on the next slide, the opportunity is big in whichever country you take, and, that data. So we have analyzed the data to map the opportunity to be able to, craft it, and I'm glad that, we have our MD, for the insurance group in Nigeria. We have the MD of general insurance in the room, the MD of the life insurance and the health insurance. So we are not talking of what we shall do, it's what we have done, and that is why we are able to provide, these... From the onset, insurance, has done better than we did in banking. In terms of market positioning, it's a very, very good start. We have only been in operation for a very short period.
We have been in operation for 21 months as at December, so it's less than 2 years. The first year was 9 months. Last year was our first full year. But as you can see, as at September, we had managed to take position four in profitability in Group Life, 7% of the entire market share of Group Life and Credit, and we had managed to get 2% of life industry market share and take position 11 in the ranking of insurance and position five in terms of Group Life. So very confident that this is an area we do very well.
If people have been judging my enthusiasm about insurance, my pronouncement about insurance, data supports my confidence that we'll transform insurance like we shall transform health, because health will be part of this. So the growth and expansion story of insurance, as we can see, it's very well covered. We know the potential with the distribution capabilities we have, the alignment we have been able to make to our anchor strategy, the African Recovery and Resilience Plan. We know where the market is. We know the headroom, we know the length of the runway, we know the tools to use, and we are glad that we have entered insurance, and it is profitable.
If you look at the product offering, again, we are addressing the needs of the customers. We can see the first few months, the number of customers we reached, unique customers, and where we are, what is to be insured, what product, and how the cost structure, how the non-funded income will be affected. I will invite you to look at these details because as they say, "The devil is in details." So you understand the preparation. So if you move to the next slide, then we see performance and growth and demonstrated distribution capability. Look at what has just happened. Insurance revenue last year grew by 57%. Total revenue grew by 68%. Profit before tax grew by 39%.
This is a startup. We're talking of a startup, and if you look at the total assets of the startup, is KES 20 billion balance sheet. And the issue we could see is last year's but one, numbers KES 4.9 billion gave us position 11. KES 20 billion will put us in the top five largest insurance. Look at return of a startup. Last year, return on equity, 60%. Despite the growth, return moves to 70%, a return on asset of 5.4%, much higher than the return that we have in the bank and the group, and we have been able to manage the loss ratio. But look at the startup's contribution to equity profit before tax, 1.8%. Almost 2% of the entire profit of the group before tax is now coming from insurance.
Revenue, KES 1.4, total asset, KES 1.1. But look at total asset, KES 1.1, but profit before tax, KES 1.8. The amplifier because of the efficiency because of leveraging on the capabilities. So but what is most encouraging is the uptake of policies. So if you look at the performance and growth and distribution capability, we have been able to issue 9.94 million policies in 21 months. So if you divide that by 21 months, it gives you the intensity of distribution of policies per month, and we can see new policies last year were 5.5 million policies. The unique customers reached in just 21 months, 1.3 million customers. And we can see digital distribution, 82%.
People might have been asking themselves: Why would a startup have a return of equity of 70%? It's simply because the insurance is not using brokers and agents who take maybe close to 40% of the revenue. It is using technology capabilities, and it's also leveraging on bank assurance. And we are grateful to the MD of Kenya, Gerald, maybe you could wave for giving us an opportunity to partner with the bank assurance and be able to demonstrate. Now, explicate this growth, George, and tell me where insurance will be by 2030. And give me just one reason, George, as a friend, why insurance will not be bigger than the bank? Ajara, you will have failed if you not become, insurance will not be bigger than the bank.
I know failure is not part of your vocabulary. So we're very, very confident. We, as we said, we have the right people. You can have the right strategy, if you don't have the right people. Ajara is really supported by a very able team, the MDs of the insurance company, and the leadership of the insurance group, I will, will put that. As you can see them, they are very seasoned persons. Very seasoned persons. The best MDs we could get in the market. As you can see, they are all MDs from, the best, insurance in the market, and that is like why- a, a good. Thank you very much, colleagues, I'm very proud of you. And that is the power of a strong brand.
A startup attracts the MD of the or the MDs, not one, not two, not three, of the largest insurance companies in the country. The reputation. People seem not to understand when you talk about brand value, and I'm really excited that the brand value of Equity is nearly KES 70 billion on a standalone basis. That is how you monetize brand. You say you want leaders to start your business, and you attract the best people globally. I guess you are South African? Eh. Botswana. Zimbabwe. Zimbabwe. Zambia. Zambia. You can see... Kenyan. Kenyan. Now, you can see we are spoiled of talent. Now, you can see how easy it will be if Equity chooses to go to Southern Africa.
They have already understood the culture, they like the brand, and they have chosen to come for the brand and take it home. So that is the power of brand, and we are glad that we saw it in advance to protect the Equity brand, and we are able to monetize it. That is now the second group. The third group that I'm very grateful about is the technology group. The technology group has managed to help us move from a brick-and-mortar infrastructure to a technology platform. This group provides coordinated, agile, and extensive technology capabilities. And so it provides across... It is mapped against the African Recovery and Resilience Plan. I want to recognize our IT gurus, led by Michael Offei . Michael Kofi and your team can stand.
I can't thank you enough, for liberating us. Very good. Again, very seasoned, people from Tanzania, from, Nigeria, Kenya, Ghana. Again, Africa is in the room. If you didn't really understand Equity, that's the power of our brand. So we solve the problem with the best talent you can get anywhere in, in the world. Thank you, colleagues. Let's look at what, the technology group has done in just a very short time. By moving, us from branches, look at what, the, that team did. It allowed us last year to give 6.2 million loans, worth KES 284.6 billion, rounded to KES 285 billion. You can never do that in a branch. You can't be able to have 6.2 million people walk through a door and do manual papers.
We can see, and when you look at the repayment of the loans, as we can see, it is very high. One slide back, please. If you look at the revenues are growing at the same level with the repayments, with the growth in disbursement. So essentially, very efficient capability, very efficient system with minimal capability. Alvin, you didn't start with the technology team. You hosted them in Finserve. So Alvin provides them with the infrastructure, and they bring the capability. So the group enablement, as we can see, it's group wide when we look at the next slide. And so these loans are distributed throughout the entire region. So it's a one instance system that provide loans across the entire region.
We can see the impact that it has, the growth rates we are able to achieve in each country, whether it's in disbursement and whether it's on value. And then we can see the freedom of choice we have given to the customers, to choose the channel and to choose the device. So the technology group enables banking business, and we have migrated to fixed and variable channels. So there is still a group of customers who are going to the branches, but as you can see, it's declining. Last year, the number of customers are going to, or transaction done in the branches remained the same like the previous year. The number are going to the ATMs declined by 10%.
But if you look at the value, ATMs grew by 17% and branches by 14%, meaning branches are now for the high net worth transactions. They are SMEs, they are corporate businesses. The individual transaction, personal transactions have moved, and they, they have moved to the variable channels, agents and merchants. But again, we can see the customers are moving from merchants, they're moving away from agents. And where are they going? They are going on the self-service channels. And whether it's EazzyNet, pay with Equity merchants, whether it's EazzyBiz, whether it's EazzyFX, whether it's Equity Mobile, whether it's Equitel, that's where the customers are. That's the banking of the future. That technology stack of capabilities has transformed this group, and now, this group has first mover advantage. The COVID acted as a tailwind for adoption.
We struggled a little bit the last previous two years because the volume of transaction grew faster than our capability. But I want again to praise and to acknowledge the technology group for what they have done. They've been able to migrate under the leadership of Sam Kirubi our technology the new movers from legacy systems, and we now are confident that we have the best breed of technology system, whether it's for processing, whether it's for storage, whether it's transaction processing, whether it's the application, but more importantly, the customers have the freedom of choice. Equity Group is no longer the place you go to. It's what you do on devices, wherever you, wherever you are, whatever time. We have compressed distance, and we have compressed time.
We are now an online banking business, based on our technology. So when you talk about technology companies in financial services, start with Equity, because we are now using digital capabilities. It will take time to carry people along, but we have seen the transactions, we have seen the channels and the movement. Branches are now for customer acquisition. Branches are advisory centers. Branches are centers of excellence. Branches are centers for selling, not for transacting. We transact online. We have become a digital business, as we can see in the next 2 slides. And we see how the channels are moving. We have moved too fast the merchants, the ATM, the branches. At the bottom, it's agency, which are flattened out, it's the digital channels. Look at the number of digital channel transactions in millions.
805 on digital devices. Branches, 18 million; merchants, 19 million. So self-service capability. Equity Group is a technology platform, providing financial services. And the data then becomes even more clear, greater clarity when you look at 98% of all transactions outside the branch, in the digital channels, in terms of numbers. So broadly, this speaks a lot about the capabilities that have been built, and the build-up is complete. We now have a capability. And when you look at number, cashless transactions, 2022, 82%, and this year- last year, 85. So if they are cashless, then we are a digital organization. We have digitized banking, we have digitized insurance, and access is in that perspective. And very few go over the counter.
The rest, 9% is third party, 7% is in the branch in terms of value. So... And that then gives us an opportunity to go to the fourth group. We have done banking, we have done insurance, we have done the technology. Our fourth group, we are no longer in core banking. We are a very diversified investment group in banking, in insurance, in technology, and in philanthropy. And with that, let me introduce you to impact, investment, and sustainability. The Equity Group Foundation, which, as we saw, is in education and leadership, Wings to Fly, ELIMU, and ELP, leadership development and the ELP, enterprise development, financial and inclusion, entrepreneurship, health, energy and environment, food and agriculture....
I can broadly say in agri-food and agriculture, you all know we're in partnership with the government on Kilimo Biashara since 2008. It's our flagship agricultural produce. This intervention of the foundation to capacitate small-scale farmers to move from peasantry farming to agribusinesses has increased our lending to agriculture from 3% to 16% of our entire loan book. I take pride as a Kenyan that I respect and recognize where I was brought up in rural villages. If we don't fund agriculture, which is contributing 30% of our GDP, something is wrong. We have chosen to lead the way, and we promise by 2030, 30% of our entire loan book will be in agriculture, so that we give rural communities an opportunity to be funded.
We are a bank that is a listening, caring financial partners. Agriculture failed to transform because of lack of credit. We thank the foundation for being the catalyst by capacitating the farmers, de-risking them so that we can. We are the sole partners of World Food Programme, IFAD, and FAO in the entire region because of our commitment to transform this region. Energy and environment, as you all know, we are taking pride, we are in celebration mood, and we want to invite you to celebrate with us. IFC, the private sector arm of the World Bank, named us last year as the bank that has the highest number of climate financing loans for mitigation and adaptation worldwide.
Not in Kenya, not in East Africa, not in Africa, but worldwide, and we take pride that we have chosen to provide leadership. The adaptation of sustainability talks about our mindset about risk. Risk is not just within the internal environment, risk is also about the external environment. If climate has threatened our communities, we have chosen to address that by providing our communities with risk mitigation tools. That's why we have the highest number of loans anywhere in the world dedicated to mitigation and adaptation. We also take pride that we have been able to empower 450,000 households to transition from fossil wood fuel energy for cooking into renewable energy.
That is something, if nothing else, we are proud of, is that we are addressing health issues with families that are exposed to dust or smoke dust in crowded kitchens. We have extended that now to schools, and we are on our way to converting 8,000 schools that operate kitchens to move away from using wood to using LPG, again, to liberate our kitchen staff in all our schools, to protect our school children from harmful smoke and emissions, as our contribution to lead a responsible citizen, but more importantly, because it's the right thing to do. So quite a lot of investment.
Health, as I said, this month will be a record month when we see more than 100,000 patients walking through the doors of 120 Equity Afya clinics providing health. Health shows the circular nature of Equity Group Foundation. The medical doctors who are running Equity Afya franchise started as wings to fly. We took them when in form one, when they were disadvantaged, they had financial challenges. We went through a journey of four years. They joined the Equity Leadership Program internship in the bank. Most of them, we sent them out of the country.
But those who did medicine, then after graduating and practicing, we took them back and say, "Solve Kenya's problem of access to affordable, quality health." And they are the ones who hold the franchise of the 120 hospitals. We are not in it for profit. The franchise is held by Equity Afya, a non-profit making subsidiary of Equity Group Foundation. So it's not for profit. This is to solve a social problem. That is the heart of Equity. When people say Equity has a soul and a human face, Equity Afya speaks of what that means in practical terms. Enterprise development, I think that's where we have done very, very well. We have trained, de-risked about 580,000 young people we have trained. We have funded 284,000.
We have given them KES 234 billion. They have started their businesses, and they have created 1.3 million jobs to their fellow young people. That could never have happened if it was not for the foundation, de-risking them by training them, capacitating them to be able to, enter into the financial sector, and also the foundation providing us with a guarantee, risk-sharing guarantee, that we are not on our own. The foundation is with us to support young people. So that is the foundation in a nutshell. If Alex will go to the next slide, you can see the magnitude. 55,000 scholarships. I'm sorry, the number for this year has not been taken. That should be 60,000. We have clocked this, 60,000 this year. 887 are in global universities.
As we can see, 218 are in TVET, are in, the top universities in the world. We can see the TVET. We can see the transition. Any child who comes through the Wings to Fly, out of 82% of all of them will go to university. That's amazing. And, 97% of all of them will finish secondary education. We take care of our children. It's not about a scholarship. It's an integrated scholarship that provides including love and support for the child in every... We have seen the youth that we have been able to train. We have seen the SMEs that, we have given KES 275 billion. We have seen the farmers, the 3.8 peasant farmers, we have turned into agribusinesses.
We can see the agribusinesses that we have turned into medium businesses. We have talked about the clean energy devices, the 25 million trees that we have been able to plant. The Equity clinics are now 120, so this seems to be. Oh, December. They are December numbers. I'm talking about today, I'm up to date. As you can see, we have spent a total of $648 million. If you multiply that by about 130, that gives you a figure of KES 100 billion-plus that Equity has devoted to doing good. We are believers that doing well can be done alongside doing good to society. Peace Award because of this program, we are winners of the Global Vision Award because of this program.
We are winners of the World Entrepreneurship Award because of this intervention. Equity has a two-engine business model, economic engine and a social engine. Equity has redefined philanthropy. It has brought in corporate philanthropy that the corporates can give. We give 2% of our revenue, both in cash and in kind, to make this happen, and as a result... The market has been very kind to us. It has validated our—these are our partners, you can see. And that, again, is, the power of a brand. Look at the people who are partnering with Equity Group Foundation. It's simply because of strong governance. We can be trusted, we are reliable, we execute, we deliver. That's the message, when you see this.
But the market has also validated us, and we are very excited that when we look at the market cap, we may not be the biggest by balance sheet, but we are the biggest in market value. The market would be willing to pay KES 127 billion. That was as at December, when the price was KES 33. As yesterday, the price was nearly KES 50. So it gives you where Equity is. We're excited as the market starts to recover. The biggest recovery is Equity Bank. On US dollar terms, the Equity share is 78% up since the beginning of the year, and in Kenya shillings terms, we are 64% up. You can never lie to the market.
The market gives you the feedback, and we look at the market as the true mirror that validates what our strategy is. Now, I've given a long story, and I can see some people asking, "James, where are the numbers? Yeah, where are the numbers?" Because numbers never lie. What they are. Let's go to the numbers. Customer deposits is up 29% to KES 1.4 trillion. Loans, 26% to KES 887 billion. Interest margin edged up 0.2% to 7.4%.... Total income, 25% up to KES 180 billion, ranking us now one of the largest companies in terms of revenue on the African continent. The number you have been waiting for, there it is, 43.7 billion shillings profit after tax.
We are 5% down simply because we decided to maintain 32% of our entire loan book below at 13%, while we are funding the bank deposit at 18%. It's a trade-off, money or the customer, money or the client. There are times expanding by 26% during a global macro headwind environment. Let's look at the income. We have talked about it. Let's validate what we said. Look at interest income growing at 30%, interest expense, 53%. That's what we have been shielding our consumer customers from. We took the heat, we took the bullet on their behalf. I hope this will strengthen our relationship with Kenyans. That when we were called upon to be there for them, we answered, we responded. If your account is not in Equity, we are not providing you with an umbrella.
We provide our customers with an umbrella when it's raining. So I invite you, that is the ethos of Equity. That's what Equity believes in. It's not when it means changing or safeguarding lives, expanding opportunity are what it is. And hence, our net income grew much lower, 21%, even lower than non-interest income, 30%, total income at 25%. But look at protecting the future, ensuring that we have a buffer ahead of the crisis, 139% growth in provisions, and that's how we have ended up with NPL coverage of 90%. Inflation, exchange rate, you can see its effect in operating expenses and salaries, total cost, 52%.
We believe those things are over, and like me, I'm sure you are seeing the P&L I will present to you next year. It will be very different. This is a safeguard of the Kenyans. This is a P&L, which is an umbrella during a rainy season for Kenyans. We don't need to continue. When times are good, they don't need us, and that gives us profit before tax of KES 43.7 billion compared to KES 46 billion last year, 5%. But remember, we have provided an umbrella to our customers. The debate was: what do we do with the shareholders? So the board, in its wisdom, resolved to give the shareholders a record dividend of KES 15 billion. That dividend is KES 4 per share.
As you can see, the dividend payout is 36% of the entire KES 43.6 billion has been given to the shareholders. Dividend yield, 11.9%. Tell me of another company with a dividend yield of 12%. But more importantly is the dividend yield on par. The Equity share that we said is paying four shillings. When you paid, when you bought and paid the price, the only amount of money that came to Equity as capital is KES 0.05. The par value of the share of Equity is KES 0.05. And for KES 0.05 that you paid, you are getting KES 4 per year. And as you can see, even last year, the shareholders were paid the KES 4. A sustained record payment of dividend, predictability. Shareholders, like customers, can count on Equity Group.
So that gives us the income and statement. But if, again, you've looked at it, the next slide, you see what we talked about. Profit before tax, as you can see, the third and fourth quarter, they were very low. Why? Because that's when we decided to be prudent, to be aggressive in provisions. The KES 32 billion provision came through, the third and fourth quarter. The engine is not impaired. There's nothing fundamental change in Equity. It's prudence, it's risk management. Take the hit and close the chapter of a challenging, turbulent macro and go into the future confident that you have, you can deliver in every respect. If we move on, that gives you then subsidiaries.
If you want a breakdown, investors like, breakdown, who did what in deposit, in loans, in total assets, in revenue, you have it there. If you want the cost, before provisions for a subsidiary, you have it. Profit before, provisions, you have it. Now, this is the most interesting graph. If you-- Alex, you go one slide back.... Alex, yeah, here. 50% of the deposits are now in the regional subsidiaries. Kenya, as we said, is 51%. You go to loans, Kenya is 50%, the subsidiaries are 50%. Total assets, 50/50. Profit revenue, subsidiaries 56%. Now, these are subsidiaries in the fastest growing countries in the world, Tanzania, Rwanda. I don't think I need to tell you how the future looks like. That's what the story was all about.
The future of Equity is not the growth rate of the GDP of Kenya, it's the GDP growth rate of East Africa. If you look, if these countries are growing at a GDP of 6, our profitability, our loan book is growing at 30% minimum. Our profitability, Alex, go to the next slide, is growing onwards of 40%. Six times faster than the GDP. These are frontier markets. I'm helping you to complete that template of valuation. That's really what this data speaks to. And that then brings me to return on asset. And as we have seen, we are giving you a picture of the two largest subsidiaries, Kenya and DRC, and we can see how quickly Kenya, DRC is climbing up, catching up with Kenya. It's Kenya which almost wholly took the provisions.
It's not that Kenya has been impaired, it's not that, the returns of Kenya will be like this next year. Kenya will challenge the subsidiaries because it decided to write off its and provide for its NPLs. In terms of ratios, because those are important, as we all see, the most important one you may be concerned about is the return on assets, the NPL ratio, the coverage, but more importantly, capital. Look at it. Whether it's core capital or total capital, Equity has a buffer of 4 percentage points, 400 basis points above the legal minimum. What does it mean? We can release the brake. We can grow. We can allow the technology platform to disburse another 6 million loans without worrying about capital. We are well funded. What are we saying?
If you look at liquidity, 53%, we talk about capital, 400 basis points buffer. The buffers that a business require are capital, their liquidity, and quality of portfolio. With 90% coverage, the quality buffer is there, the capital buffer is there, the liquidity buffer is there. That is the best health check of an organization and the business. As a doctor of business, world best entrepreneur, Ernst & Young 2012, I can declare Equity Group to be in very good state of health, to grow, to expand, and to fulfill its purpose. Professor Macharia, I will not ask you about the health of the business. I will ask you about my health, but for business, there we are. Dr. John, this today is my day, is about businesses. The health of the Equity Group couldn't be better.
A business can't ask for liquidity more than 50%. What does it mean? Of the entire balance sheet of KES 1.8 trillion, 50% of it is in cash or near cash. Five hundred billion in government securities, KES 300 billion in cash. We already know the near ones, and bank accounts, and the rest, and the rest, so are the health of the bank. Because of that, then we are able to confidently predict the future. As you can see, loan growth and deposit growth, the momentum has been growing. We have been very prudent. We think we'll grow both of them at 20%. Net interest margin will expand from 7.2% to 7.6%. Non-funded income will remain close to where it was, 42. Cost income ratio, we'll make significant progress there.
We'll move from 52 to between 48 and 50. A 10% improvement in cost income ratio on a KES 1.8 trillion, on a KES 200 billion level. It should tell you how the numbers will look like next year. Return on equity, we are confident to say it will be between 25 and 30. Return on asset will range between 3.2 and 3.7. Cost of risk, as we said, we took a 4.4 cost of risk this year, a provision of KES 32.8 billion. As you can see, we are talking about half that. If there is anything that will need to be cleaned up. NPLs, we are saying we are headed to single digit and subsidiaries contribution, there will be a rivalry between subsidiaries and Kenya.
As we can see, our subsidiaries contribution was 50, and we are now saying as at 50-55. But when it comes to profits, they were 56. But you can see what we are predicting. They will be 45-50, not because they will not be profitable, but because Kenya has fully provided its loans. Kenya is the one that will bounce back in a big time and will edge back the recent. So after that is appendices, but let me run you through appendices. That is global recognitions. Equity is a global company with its headquarters in Nairobi. As you can see, these awards, they are Moody's, they are Brand Finance, they are The Banker, they are not local or regional, they are global awards. That's the league that Equity plays on. Don't go too fast, Alex.
If you look at the lower level, again, all global awards, but to a company with its headquarters in Africa in Nairobi. If you go to the next slide, Euromoney. Sorry, Alex. I'm sorry. Euromoney, African Banker, The Banker, and all that, Visa, again, these are all global awards. But when you come domestic, local, that is where we know to play. This is what you call a home game. Out of the 24 awards that the banks compete for, we took number one, 18 of them. That is Equity on a home match. Continue the next slide. And globally, number two, Best Brand, Banking Brand in the World.
Position one in Africa, and as we can see, it's a triple A star and a brand value of $450 million or KES 64 billion. That's the brand value. We talked about the brand a lot. At global rating, again, Bloomberg places Equity in the top 50 in the world. People call this the Nobel Peace Prize on for business. We are holders. And then, as we can see, global ratings continually across the board, a reputation. You tell me who you work with, I will tell you who you are, and we can see what matters to us. And yeah, so that's Equity in a nutshell. I'm very grateful for the opportunity you gave me. We'll give you a complete deck of this investor briefing before you leave. It's printed for you.
Don't leave it behind. The summary of everything I've said in a press release, so that you take the notes away with you. I want to stop there. I know I've talked a lot, but I was summarizing a whole year, so I've done very well to summarize a year in under one hour. So I, I'm not shy to have done that. But we told you what we wanted you to hear. Tell us what you wanted to hear with your questions. There is a panel here. Yes, George, go first.
And if I introduce, next to me is Angela. She will answer insurance questions. Sam Kirubi will answer banking questions. Brent will answer questions on strategy, and Mary's there to answer questions about loans. We know you always have loans questions. George, go.
You can point who you want.
On NPLs, which sectors would you point a finger to as the ones, I mean, creating a drag? Because even though Equity is doing well compared to the industry, but, of course, it is not doing very well compared to itself. Are there specific sectors which are not doing very well with their loans? And if so, why? Or is it just a macroeconomic issue? When is the Equity Africa relaunching, as you promised us last time? And, in terms of, professional accountability at strategic and operational level, are Kenyans becoming an endangered species around here?
Very good, Dr.
Tongue in cheek.
You can proceed there. You take question two about Equity Africa, who has it on the floor. Number question one is yours, Mary. Brent, I think the last question is yours, eh? Mary, do you want to go first?
Sure, and thank you for the question. The sectors I'd highlight that have been a drag, and this is throughout the year, would be real estate, manufacturing, transport and logistics, and government-linked construction companies.
So that specifically for Equity Group contributed to maybe 70% of the deterioration that you see year-on-year. So those would be the sectors that I've highlighted.
So once the government pays, and the government eventually pays, so we will release the provisions that we have made on those loans. The second question, Dr. John?
Okay, so thank you. The question was on the relaunch, I think the continued expansion of Equity Afya. I think we'd given a commitment that we're going to do a full launch once we are in all the counties of the country, and once we feel satisfied with Equity Afya's expansion. I think we're excited to say that at the close of the year, we had established presence in all the counties of the country, and the target this year is to further that expansion into the sub-counties of the country. So I think it would then be a good time to organize for that launch when our customers in the market can see presence of Equity Afya very close to their proximity. So thank you.
George, we don't want to launch when your auntie can't have an Equity Afya in the sub-county. We don't want her to go to Kakamega or Bungoma. We want Equity Afya. So we're at 120. We hope by the end of this year, we'll be at 300. The second thing we are waiting for is Equity Health Insurance, so that it launches insurance to make health affordable, so it's and make it almost universal for everybody. So instead of you either paying out of the pocket for your parents' health, then you just take a policy for them, and hopefully they will just be going to the sub-county. The sub-county will be a hub. Maybe closer to your auntie's home, there will be a satellite, and the location or center spoke.
So there will be a community nurse almost close to the village, who either can be providing health to your parents without them having to travel, and you don't have to worry so much because a medical skilled person or, like, medical staff is available. Particularly parents who have chronic ailments, diabetics, high blood pressure, screening them constantly and taking their vitals so that truly the doctor at hand. So it's really a distributed community health. Remember, it's not about profit. It's purely sustainability. Brent, do you want to go for the third question?
So just in terms of the observations you've made of the names that were mentioned, so I would just like to highlight that Equity Group is an East African bank. You'll notice from the results that more than 50% of assets, revenue, and profit is generated outside of Kenya. The way the group has positioned itself is as a platform to what is essentially the highest growing region—one of the highest growing regions in the world. So the reflection of the capacity and the skill set is not reflective of the geographies that we operate in, but is more reflective of the ambition we have. You'll notice to your observation that six of the people standing in front of you, one is not Kenyan. So the new businesses we have are businesses that are including the banking.
You'll recall and observe from the presentation that we have four verticals. There's the bank, there's the insurance, there's the technology, and there is the foundation, and these operate across and will operate across six geographies. So again, the reflection of the capacity and skill set is reflective of our ambition. Thank you.
And George, maybe if I extend that a little bit, as you can see, Equity is an equal opportunity, organization. When you look at, our customer base, 54% of our customers are women. If you look at, the people, answering question together with myself, we are six. Six are ladies and six are men. It's an equal opportunity organization. When you talk about sustainability, Equity lives what it says. Integrity is doing what, you say. Another question? Very good. There, and then, yeah, very good. And we will take three questions, so keep on writing.
Good morning.
That mic is off.
Thank you. Yeah, I'm now. That's how Jones can start.
Now, let him... Let her. Let's give, be patient with her. Please, go on.
Sorry. Good morning. My name is Purity from Abojani, and I have a question for-
Is that mic working truly? Let's go there until the mic works, please.
Thank you, Doctor. I want to start by thanking Dr. Mwangi and, Professor Macharia, heading the board, for a well done job because you have been ranked number 2 in Africa and many other activities we are so-
For number one-
Number one in Africa-
Number two in the world
Number two in the world, and other various capacities we are adding on. Mr. Mwangi, I would want to say we, as shareholders, we are very thankful for the declaration of the for a very high dividend today, because we have never enjoyed that. We are going to enjoy a very high dividend. We also want to thank you for the effort you have shown to improve the two regional branches, the DRC and Rwanda, for a very quick time, very, very shortest time that has become banks, regional banks, which we can count on. The other time when we were in this room, Mr. Mwangi proposed efforts and careful consideration has to be extended to Ethiopia to see whether we can come up with a regional bank to boost our business farther and farther.
Because the area has potential because of the population, and I would wish... I know it takes time to come up with a regional decision, but I would want to emphasize to you to keep on studying and see whether we can come up with something. Finally, finally, I would want to say there is a question mark in DRC on receiving money. Counting money has been a bit slow to our bank. Are we doing something to improve that, receiving money in DRC? Because money for the DRC is a huge market and unpredictable, and the counting takes a day before you know what a customer brought. Can we be improved further? Thank you.
Thank you. Kirubi, you take the banking question. Brent, you take the regional question, and Gertrude, prepare then to share your experience of acquisition of Cogebanque in Rwanda. Yes. The next one. Okay.
Okay. So my name is Phoebe Chiruma from Abojani. I have a question for Angela, in, in the about insurance. So, I know, I understand that the bank is very, optimistic in terms of disrupting the insurance industry, that you have disrupted the banking industry. But, we are seeing a challenge, of penetration, and at the same time, we have, around five insurance companies that are still yet to solve this very challenge. So my question is, other than technology, what, what other strategies are in place to make sure that we actually improve the insurance penetration in the country? Thank you.
That's to Angela, back there. Pass the mic here, down here.
Thank you, CEO. My name is Sally Chekorir, and I am a shareholder. CEO, we are cognizant and alive to the fact that incredible leadership is the bedrock of every success in any given company or institution. I want to laud you for producing incredible results despite the most difficult year, 2023. We are very proud of you, plus Professor, plus the whole team, and we know that we are far, we are going far. We came from far, we are far, and we are headed far. Now, on to my question. My question is on AI, and Mr. Kirubi will answer this. AI is to stay. AI is here to stay. Do you plan to incorporate fully in your company?
And if so, is it a threat or an opportunity, or is it an enabler or a distractor to human resource? And what plans do you have in the company so that you can educate us, as, as consumers or, or, customers, so that we can make informed decisions? Thank you so much.
Thank you very much. A powerful question. Professor Macharia, shareholders would like to hear your voice looks like, so we'll give you 10 minutes at the end.
Good morning, and congratulations for the wonderful results. I want to ask whether there are any specific challenges or risks that the company anticipates in the near future, and how you plan to mitigate them? Thank you.
Very good. Sam Kitwekere, that is your question, risks, that you are managing. And I think, Beth, from oversight on behalf of the board, what does the Group Chief Auditor see? Yeah.
Good morning. My name is Liljoth Kordensa. I'm from CIC Asset Management and a youth representation to UNEP. Firstly, I'd like to congratulate you for the outstanding performing, performing results. So my question is more focused on, sustainability and the ESG. Given the long-standing partnership between Equity Bank and the United Nations since 2021, how has the collaboration evolved over the past three years in terms of driving sustainable development goals and promoting ESG principles within the group's operation and across its ecosystem? And could you kindly provide an overview of the specific ESG-focused projects and initiatives undertaken by Equity Bank since the inception of the strategic alliance, and highlight any notable achievements of or milestones in advancing sustainable objectives? Thank you.
Very good. Reshma, are you in the room? Reshma? Joy? Is Joy in the room? Somebody call them. Let them come and answer that question. So let's first of all, answer the questions that have been asked. Who wants to go first?
Okay, Kirubi, go AI.
Thank you, our investors and shareholders and colleagues. The question about AI, and thank you for raising that, is very timely. Let me start by saying that we've embedded AI in a lot of our processes, currently. You did ask whether we plan to incorporate that fully. That's already what we are doing. In the bigger scope, when what was explained about the groups that we are having, banking group, the insurance group, the foundation group, we are using what's called the enterprise architecture to embed data and improve decision-making through AI. Is it a threat to the customers? It makes it easier. AI will be able to offer you more solutions as you spend on lifestyle.
Just to give an example, if you are buying a car, you'll be able to be offered an insurance product embedded in the same product, and the bank will be able to lend you, in case you need to buy financed, to purchase a premium, for your motor. If you are borrowing in agriculture, AI will be able to know what are you borrowing for? Do you need training? Which crops are you planting? So for the customers, it will make it very easier. In the architecture that we are doing, we've ensured data security, that you are safe, in all your data is embedded and within the practice of the regulatory. So all that has been factored, through. Internally, we're already using AI, to manage the processes, reconciliations, for the whole group.
All those have been made easier, and that's why we are synergizing a lot of efficiencies by using AI, so it becomes a part of day-to-day life. Are there risks associated to that? Yes, and the risks come in each and every day. And some get we care, we talk about risks associated with AI. So it's something we can't live without, but to keep our eyes open on that. Speaking about DRC and the cash economy, yes, DRC is a cash economy, but moving quite fast towards digitizing that. There are areas we can improve. I hear what you said about receiving cash in the branches, speed of counting that cash. That's an area that can be improved. But just to mention, we've rolled out agency banking in DRC, so our customers are able to use agency banking to do that.
But beyond that also, we're also digitizing. All customers that we acquire are digitized. DRC would be a bit little behind in digitization if you compare to Kenya, but it's a plan that we plan to quickly move into that space. As we acquire customers, of over 2 million customers we have, they're using the current and most digital tools in transacting. On cross-border trade, the systems have also been made available. As you trade across the market that we are in, you can move money across to Kenya, to Uganda, of course, within the regulatory requirements on giving proof of evidence on invoicing, etc., but the platforms are ready for that. Thank you.
Thank you. Brent, about region.
So maybe just on the region, and, and let me step back a bit here. So James mentioned that the, the global headwinds are abating, and that's very important for this region. What it implies is that there is increased positive investor sentiment and risk appetite for markets like East Africa. That's important because of the flows that we expect over the medium term. So James mentioned that this region is one of the highest growing regions in the world, and it has a high concentration of countries neighboring each other, generating north of 5% all the way to almost 7% if you look at Ethiopia. So Equity Group has seen this opportunity, and it has made decisions in the past in terms of allocation of resources and capital to this geographic growth area of East Africa.
The acquisitions that we've been doing, the allocation of capital, what it speaks to in terms of this region, it speaks to future growth, future returns, and for the shareholders, ultimately, future dividends that we've been investing in in the past and even today, and we expect in the future as well. What is also important to highlight about this region, in addition to the high growth that each of these countries provide, is the integrated nature of this region. It's one of the most integrated regions in Africa if you just look at intra-member trade between the EAC members. Also, you'll notice that the EAC is growing in membership. This integrated nature highlights the natural position a regional bank like Equity Group will have and the relevance of regional banks. The...
You'll notice in the results that more than 50% of balance sheet and PNL is now outside of Kenya, and we've taken you through our positions in each of these markets. We are at least in the top five in all of them, mostly in number two. And as James mentioned, we've turned around Tanzania, and we're looking to grow that business now. So I'd also like to highlight that when you think of Equity Group, don't just think of Equity Group as an East African bank, but as an East African integrated financial services group. So I would like to expand your question to: what are we doing as an East African integrated financial services group? You've seen what we've done with the banking business, how we've grown that organically as well as inorganically, to position ourselves to be systemic.
You've noticed the four verticals in the group. There is the bank, there is the insurance, there is the technology, and importantly, is the foundation that ultimately looks to, and it somewhat ties into the question that you had from CIC on ESG. When you look at the four verticals, the bank, insurance, and the technology is essentially the economic engine that James talked about. The fourth vertical of the foundation is essentially where a lot of the activities happen in terms of what we're doing around sustainability, around social. That environmental and social pillar that the foundation provides, acts as a catalyst, acts as a de-risking capability to drive the three verticals in our economic engine. So James talked about the circular outcome that has taken place with this social engine of ours.
So for us, what we do in the foundation is not CSR, and it's to your point around the sustainable development goals. We believe we're having a real impact, and it's visible in the numbers in terms of what we're doing around environmental and social. If I stand back and look at the biggest strategic intent of Equity Group, and that strategic picture is essentially what we're doing around the Africa Recovery and Resilience Plan. Our strategy is not your typical corporate strategy. Our strategy is a social and economic transformation plan for Africa. It ultimately looks to take this economic engine of ours, but importantly, take the social engine to have real economic impact, but importantly, social impact.
You've seen the numbers that we've provided in terms of the number of kids we've sent, the health initiatives that we are doing, what we're doing around social payments. These are all part of the ecosystem that we are looking to essentially penetrate, and that we see as customer numbers in this region of East Africa. So for us, I would like to leave you with a couple of things. One is that... And it goes to the question of the resources, and the capacity, and skills required to have social and economic transformation. We are blind to who the individual is, but are more wary of their capabilities and their mindset. So the first point I would like to leave you with is, Equity Group is an integrated financial services group. Secondly, it is indeed an East African group, not a Kenyan group.
It is an East African financial services group. It has a twin-engine business model, a model that we believe will have real transformative impact in the value chains that we are looking to integrate. You'll appreciate that the value chains that are very fragmented. Our social engine allows us to capacitate, catalyze, transition, for instance, smallholder farmers to become agro businesses, which in turn, our economic engine, our banking, insurance, technology, provides the financial means, the convenience to essentially participate in economic activities, to participate in a more integrated value chain. So when we talk about ecosystem banking, you can get a sense of how our twin-engine business model is applied. You can get a sense how this East African platform of banking, insurance, technology, and foundation, will ultimately catalyze, de-risk, and capture the growth opportunities in what is probably the highest growing region in the world.
So hopefully that answers-
Thank you very much, Brent. Let's jump to Gertrude. Your take on that question, given your leadership position in the acquisition and merger of Cogebanque.
Thank you, James. I think the recurring theme this morning-
Bring the mic closer.
Thank you, James. Good morning, everyone. I think the recurring theme this morning is the unique position of East Africa as a growth region and the opportunities that come with that. Last year, the shareholders gave us the mandate to acquire Cogebanque in Rwanda. We completed that acquisition in November and moved forward to merging the two banks, our bank in Rwanda at the time, Equity Bank Rwanda, and Cogebanque, and brought together an integrated business of just about KES 128 billion. I think for us, the integration is not for the sake of being big, but the systemic position puts us well positioned to expand our offering to the people of Rwanda. As Brent has emphasized, James emphasized as well, we are an integrated financial services provider, but we are providing interconnectedness across the region as well.
And so we look at our Cogebanque transaction and the merger of the two banks as a unique opportunity for us to strengthen our position in Rwanda, but overall, strengthen our position in the East and Central African region with that connection. We will, obviously, in the months and years ahead, continue to consolidate that so that whatever opportunity that we thought existed is actually obtained, and we see the transformation that we're looking to get extended to the people of Rwanda. Thank you, James.
Thank you very much. It looks like we are down to Agera. The insurance question.
Thank you, James, and good morning, everyone. Thanks, Purity, for that question. I think we've been talking about our strategic intent, but I'll keep it brief. James started by saying that one of the things we wanted to focus on was winning the trust of consumers. Largely, when we engaged our members, they indicated that one of the reasons that they prefer to use social insurance, the WhatsApp groups, families, etc., is because there was a lack of trust with formal insurance organizations and policies. So one of the biggest things which we feel will give us a strategic advantage to contribute to the efforts of the industry is, number one, bringing to the table a brand such as Equity, which is trusted. I think we all agree that Equity is known to be member-focused, member-centric.
Equity has been known to provide solutions that are relevant to customers, and so already looking at our DNA as Equity, we know that we can present a brand that will focus more on what customers need, as opposed to a supply-driven solution. The second thing we've worked a lot to do is focus on what are the barriers. One of the things that have come through is that a lot of the solutions are not demand-driven, they are supply-driven. And by nature, it means that insurance policies, when you look at the benefits, they're not tailored to provide value to the customer. When you look at the terms and conditions, they are not favorable to the customer.
So what we've decided to do is intentionally only provide demand-driven insurance, where the solutions are tailored to fit the customer's needs, but also, at the same time, and in a very simple way, be honest and disclose to customers what the terms and conditions of the policies are upfront, so that they understand the rules of engagement, and they can also have an opportunity to buy back some of the exclusions from insurance policies. So, for instance, we have some policies where we are willing to cover certain exclusions if the customers go for additional medical testing, allowing us an opportunity to profile their risk a little bit better. So we're planning to go further, and increase the level of risk underwriting we're doing in partnership with the customer, so that we have more holistic insurance solutions.
I think I'll also talk about the interconnectedness of life, particularly in health. What you'll see in the market is a level of silo provision of products. For instance, a customer who has adopted a very healthy lifestyle, undergoes wellness and medical testing, is less likely to present as a risk on a life insurance policy. But because products are not priced for a single customer view, they are priced at a policy level. There's no benefit from a customer. So what we plan to do is look at a customer holistically, so that when they adopt, for instance, health-seeking practices, we can then extend preferential rates to them on life covers. So looking at holistic or a single customer view, when we're looking at our solutions.
Lastly, in our view, we believe that customers want lifestyle-driven insurance, and they want to consume insurance as part of their day-to-day activities, as they are driving, pay for it mile per mile, kilometer by kilometer, or load for load. So for us, insurance is going to be lifestyle-based as opposed to policy, and at the same time, through the partnership with the bank, we will also extend affordability. Where customers are not able to pay annually in advance, we are, through partnership with the bank, able to provide insurance premium financing, so that we can then make affordability one of the, one of the benefits that we bring into the insurance conversation. But as I said, Purity, I can be here for a long time.
Please allow me to stop there, and happy to share with you a little bit more at a later time around what we are planning to do on insurance.
Just before we go to the question of risk, let me make two comments or three. I think the first one is on insurance, and it's a very pertinent question. I remember the story of Equity in early 1990s. What we did was to ask ourselves, only 4% of Kenyans have bank account. Where do the other 96% bank? And when we went to the Kenyans through focus group discussions, they gave us 80 barriers that made it impossible for them to be banked. You could remember, the first one they said was, banks opened at 9:00 A.M. and closed at noon. Moving from the villages to the district headquarters, you'll not be there by 9:00 A.M., and if you leave after afternoon, you'll not be able to get back home.
So they were saying banking branches don't operate hours that are suitable for rural communities. The second one they talked about loudly was minimum balance. They said KES 10,000 is too big or is too high a balance as a minimum balance for somebody whose income then, the GDP per capita was only $240. They said, "How can you have a GDP per capita of $240 and tell me to keep KES 10,000?" And it was not just keep KES 10,000, that's the minimum to be able to open. That was beyond the threshold of people. Then they talked, they were uncomfortable with an annual ledger fee that kept on going to their accounts and taking KES 300 every month, which they didn't understand what service they had, and they moved on.
Equity was a creation of removing those barriers. Insurance, only 1.3%, are insured. We have gone out and asked what are the barriers? And that is why in just 21 months, we have been able to sell 9.3 million policies, 5.5 million policies just in one single 12 months last year. So you, you can see, it's, it appears it's the same trend. Why? Because we are removing barriers to access of insurance. But the biggest, barrier is trust. Insurances are not trusted. So that is why we have avoided the traditional distribution channels and are distributing using a trusted channel, a bank assurance and online. It's the brand equity which we are monetizing.
And that is why before we could go into all this foundation, insurance, technology group, we first of all developed a unified brand, the One Equity, so that we capitalize on the brand equity, and that's what is bringing the results that we want. I think on the question of AI, it is true, and particularly you take it from generative AI, artificial intelligence, you will realize that analytics skills are very significant. That is a challenge. There's a challenge of skills. There's also a challenge of inability to use. There's also a challenge of misuse, like we have cybercrime, we have unethical hacking, all those, that kind. AI also gives us many challenges. However, we have chosen to see the opportunity of using AI.
Of the six companies under the technology company, one of the companies is data enterprise. Nobody can beat Equity in terms of data generation because of our payment capabilities. If you look at 1 million plus 1.1 million "Pay with Equity" merchants, if you look at Equity's 100,000 agents and the data they generate in transactions, if you look at the 12 million transactions per day that we process, the data we are accumulating is significant. When we look at that data with the lens of big data and distill it, we believe a lot of insights will come from there. If you look at the moment, 98% of the transactions are happening out. That is also true of loans. Loans are being granted online. Insurance is being acquired online.
It's simply because we have significant information about the customers. We can credit score them, we can price their risk, we can verify a lot using the data we already have, and that is all because of AI. So we see that as the growth opportunity. We see as an online business will be driven by AI, but we are also cognizant that we became, like, we became cognizant of cybercrime and invested heavily. So we manage the risk that go with that. In terms of the question of region, just another thing I could answer, is that if you look at Equity approach, we said the East African region has a thriving ecosystem of trade interconnectedness driven by strong regional integration and robust infrastructure. If you look at DRC, DRC cannot fully covered without thinking about Zambia because of interconnectedness.
You can't think fully about supporting DRC without thinking Agora. You can't think DRC without Mozambique, and I don't believe you can think about Ethiopia if it has chosen Lamu to be its gateway to the sea without integrating that corridor. So essentially, there are huge opportunities for us to pursue using that metrics of looking at the trade routes, the connectedness in the country, and how trade has organized itself as a facilitator. So we'll focus on the trade routes and the countries that are attractive in the trade routes. The way we started with Uganda, because the bulk of trade between the two countries is exporting to each other, then we'll increase the look at those countries. But as you can see, we're talking about East and Central and Southern Africa.
That is more of the region. But again, we are informed by policy, we're informed by the opportunity and the ease of doing business in those countries. So that broadly is the only thing I want to add, and then push it to the question of risk. Paul and Beth, you will add a little bit.
Thank you. So in our strategy and business model, operating model, we've identified 16 principal risk types that break down into two categories: financial and non-financial. Currently, the financial risks that we pay great attention to include credit, which we have discussed today, include liquidity risk, market risk, and we've talked about the buffers that we hold against each of those, along with the capital buffers. So those four we pay great attention to at the present moment. On the non-financial risk side, we have nine principal risks that we manage. Those that we are paying great attention to currently include financial crime risk. We are all familiar with the fact that early this year, the country was gray-listed by the Financial Action Task Force.
So prior to that, in fact, over the last 2-2.5 years, we built our capability quite significantly to manage financial crime risks, both people, processes, and we continue to invest in systems to give us that capability. We have also strengthened our governance at the management level. We've introduced financial crime risk committees in all subsidiaries over and above the board committees responsible for this area and the non-financial risk committee at a management level. We also are paying a lot of attention to technology information and cybersecurity risk. So technology is concerned with ensuring our systems are up and running, available to customers at all times. And you've heard that in that space, we've done well. In fact, as we speak, our app rating at the moment is 4.6 out of 5.
Tends to hover to about 4.8 out of 5, so very good app rating. We are responsible for ensuring customers can transact securely on the app and securely in all our other systems and, branches, agencies, and all of that. So technology information and cybersecurity is really important. We had cyber incidents last year affecting the country. Happy to say that, by virtue of the work that we as Equity have done and the team capabilities we've assembled, we managed to ensure that our channels, our digital channels and our back office operations, operated normally. We pay attention to fraud risk, again, ensuring that customers are able to save with us and transact securely, and our own operations are free of fraud.
Happy to say that, digital fraud, this time last year, I was reminding our shareholders and customers of our universal number, 0763 000 000. If you get a call, somebody says they are calling from Equity Customer Service, that is the only number that you should respond to, 0763 000 000. Any other number is a fraudster. That should be reported to the bank and to the authorities, for action. We pay attention to model risks. Within Equity, the CEO has mentioned, spoken to our use of data. We use the data to develop models to inform our decisions.
Those models carry risk by virtue of the assumptions that go into building the model, the data, and the quality of data, and certain limitations, and also the fact that the environment can change. We saw how COVID came upon us very suddenly and unexpectedly. That would upset the functioning of any model. So in the risk function, we have developed capabilities, we have frameworks, we have expanded teams to ensure that we validate the models that we use, both those that we develop as well as those that come from partners outside entities that work with us. It's the same approach that we would take for AI models, and we recognize AI-...
As the CEO has said, both as an opportunity and also as a threat, because there are bad actors determined to make use of AI for criminal and other purposes, deepfakes, and other tools that are developing for AI. But we see the great opportunity for use of AI and machine learning. So in areas such as predictive capabilities that we use to assess our credit portfolio, to see who's likely to go into default or into difficulties before they actually go past due, even one day. For fraud, to scan customer transactions, to pick out unusual trends in the customer transactions, but also financial crime risk monitoring. So we pay a lot of attention to that. I will also touch briefly on ESG and climate risk.
As a country and as a region, we're exposed to the effects of climate risk, droughts, floods, and other effects, plus also greenhouse gas emissions. A number of our customers are involved in activities that contribute to those emissions. So we take that very seriously as a group, and we try to manage that very actively, also in compliance of central bank regulations. So that's just picking on a few of the 16 principal risk types and giving priority to those that we're managing actively at the moment. But there are others that we also look at.
Finally, we review the enterprise risk framework periodically to see whether there is need to make changes to those risk types, to bring in new ones and to reduce or de-escalate some of the existing ones. So that's an ongoing activity that we undertake. Thank you.
Thank you, thank you very much, Sam. That question has been answered by the second line of defense. What they do is oversight. The first line of defense is headed by Paul Wafula, and I'm really glad that Paul chose to join us. He leads the compliance level. Sam Kitwekere deals with the policy and oversight that the policy are complied with. The person who leads and keeps risk registers in the entire group is Paul Wafula. Each of us have been given a register. We assess how we are managing our risk, the risk that are assigned to us, and that is what has created the control environment. Then his responsibility is to ensure that control environment. Wafula joined us recently.
He was a global leader based in Dubai, covering Asia, Middle East, and Africa, for one of the largest global banks, in charge of compliance, and is now our group compliance leader. Paul?
Thank you. Thank you, James.
Your take on building the capability?
Yeah, so just to explain. So my belief is we are as strong as our weakest link. And so like Dr. James has said, in order for us to protect the bank, we need to identify what are the risks that could go wrong. And so what we've focused on is having the process owners tell us from their processes, what are the things that could fail? And then once we've identified those things that fail, we've put in place controls, and we then monitor those controls. What we want to be is more anticipatory. We want to know what could fail. A bit like on a flight, before you take off, you identify what are the things that could fail on the flight, and those are the things that get checked before the flight takes off.
So our focus is implementing the enterprise risk management framework, and what that means is, based on the processes, the process owners know, what could fail in their processes. And then based on the risk types that Sam has talked about, we then make sure we apply the standards that those policies for those respective risk types adhere to. And then, of course, based on the assessment, we prioritize those are high and very high, fast. And then with the mitigants, the controls we have in place, we actively monitor them. So the aim is for us to be able to find out what could go wrong before it happens. And once we do this, we're then better at knowing what could fail us before it happens. And so that's, that's what we're doing.
We've been able to identify the entire universe of activities that get done across the different groups of the bank, and once we can do that effectively, we'll be able to predict or know what will fail us before it comes, and we'll be able to address it in advance. So yeah, that's pretty much what we do as a first line.
So essentially, how Equity manages itself is, say, let's imagine the universe of our risk, and we map all of them. And we ask ourselves, "If these are the risk, where can they play?" Then, we create processes and procedures to mitigate the areas they can play. Then those procedures and policies create the risk register, and whoever is touching those, operating in that area, then gets the register and told, "Manage the risk, assess yourself, but we'll be overseeing how you are ma-" That's the first line of business. And so risk management is a culture within the bank. So what that we have done is, as you know, our, we adopt a twin strategy: offensive, growing the market, and defensive. And defensive is risk management.
So what we have done as a group is to intensify, strengthen our risk management governance framework, and focus on value-based organizational culture that emphasizes on human interactions, attitudes and behavior, norms, and practices that drive a customer-centric innovative approach, while at the same time developing a strong, prudent risk management culture. So it's purely in building staff, and for that reason, I will give maybe Ssegawa an opportunity to say a few things about how we have used people to manage risk. How the recruitment policy is different by attitude, norms, and the rest. But as you synthesize, is there anything you wanted to add, Emmanuel, from credit? Because the greatest- There are two areas of great exposure: credit and operations, cash management.
Sam talked quite a lot about cash. Just two minutes about credit risk.
Shareholder, like my colleagues, I will just make it snappy. In terms of credit risks, we are in a turbulent environment now, challenging environment, as a result of interest rates increases, depreciation of currencies within our environment. So what do we do, basically? We need to go back to basics. When you're in a turbulent environment, you go back to basic, and that will require that you do proactive and prudent credit risk management through early alert mechanisms, getting very close to your clients, and to ensure you follow the money. Secondly, in such an environment also, you need to embark on very aggressive recovery strategies, focusing on short-term lending, and then maybe selectively only doing what we call medium-term to long-term lending.
But most importantly, the resources of any or the most important resource of any organization is basically the quality of the people. So what we have done in Equity is to really resource all our credit units within our subsidiaries with the right skill sets, to be able to onboard quality exposures. Because in such a... the type of environment we are in now, if you don't have people with soft skills, you may be really, really booking very bad exposures. Thanks.
Wafula is from Uganda, Mark is from Ghana. Back to Uganda, Ssegawa, people as an organization culture that breeds prudence and co- risk management behavior.
Thank you, James. From a human capital perspective, there are two things which we've been very keen about to accompany the risk and compliance culture in the organization. First of all, we've invested a lot of money and time in reskilling, upskilling, and multiskilling our employees, to really make sure that they fully understand how they own risk management from the outset. And the risk register, as we have talked about, is really part of the immersion all employees are taken through to really understand that they actually are supposed to be part of the solutioning around risk management. But very importantly, we have also embedded risk and compliance into the key performance indicators for every employee. We deploy a tool we call a balanced scorecard.
In the balanced scorecard, there are four quadrants: financial key performance indicators, customer performance indicators, people and leadership development as a critical aspect. But very important, risk and compliance is a very critical one. And so every employee is expected to have a key performance indicator on how they will proactively mitigate risk. But equally, if there's any risk identified, how will they remediate and resolve and fill, or bridge any gaps that could be identified. So that, to a great extent, is how we've been able to embed a culture of risk and compliance. Thank you, James.
Thank you very much. So the last line of defense is oversight by the board and the Group Chief Internal Auditor. Floy Ziuas, formerly KPMG partner, then went to Central Bank, advisor to the Governor of Central Bank of Kenya, eventually Chief Internal Auditor of the Central Bank, and we are pleased to have her as our chief internal. Beth, over to you.
Thank you. Thank you, Dr. Mwangi, and good morning, shareholders and colleagues, and our chairman. My work is to help the board sleep better at night. I think simply put.... And for me, the importance of our role as internal audit is to be able to assure, advise, and anticipate what emerging risks are coming in the environment. Now, how do we do that? So one of the things we do is we continuously audit, and we continuously monitor our controls to make sure that the management and the board have a true real-time state of the control environment. Secondly, we want to be, and we are, a catalyst for change.
So all the strategic initiatives that are being done by the group in all the geographies that we are in, we support, and we advise, and we provide assurance for those strategic initiatives. So that means that as the business is focused on going to market in whatever space we are in, whether it's in insurance, banking, technology, or even at the foundation, we work with management to provide them real-time assurance. I cannot emphasize the importance of being a technology-driven function, and so for us, data analytics, AI, that was spoken about today, are very key. So what you'll find is we are augmenting our team to make sure that we have relevant people, people who are upskilled.
We are reskilling, upskilling in the various spaces, the emerging risk spaces, whether you look at it from a cybersecurity perspective, you look at it from ESG, cloud assurance, AI. In all those spaces, we need to play as internal audit. I think lastly, for me, and most important for me, is to ensure that the business, the group, is future-proofed. To ensure that we take advantage of the opportunities that have been spoken about today. It is no small feat, and so we need to make sure that the group is ready to take on those opportunities, manage our risks effectively, and anticipate the risks that will be coming our way as we grow. Thank you.
Thank you, Beth. And broadly, I've been really impressed. Beth has come in and introduced robotic automation auditing. All transactions are audited by robots. It's no longer... So it's a risk-based audit, but she doesn't go doing the ticking of boxes on transactions. That is automatically done for her, so it's purely risk-based. And she says: "Why don't I advise before you take the risk? And why don't I monitor as you do the risk?" So we have moved audit from post-mortem to prevention and watch this space. I've been very, very impressed how audit has evolved to in terms of thinking and how you could use AI to really monitor and audit the bank. We had an audit department of 80. She came and said: "Maybe, James, I don't need 80.
I just need a maximum of 15, but with different skills." That is where the level of Equity. So it is not that the market is a low risk. Risk is where the industry is 17% NPL, but because we proactively manage risk, that's why we are at 11, so, even in credit. That's why I asked, the credit. Thank you very much, Beth. There was a question that was asked... I've seen Leshma, Joy has come in. Eric Naivasha, you are in that question. Saladin, you are in that question. Dr. Joan, you are in that question. I will ask, the person who had asked the question on, UN collaboration. They are all in now. So if you could kindly repeat, to be very kind of you. So Joy, Leshma, Eric Naivasha, Saladin, and Dr.
Joan, the question is yours. They are ready.
Thank you for the floor once again. My question was based most on sustainability and ESG. So, there was a given long-standing partnership between Equity Bank and the United Nations since 2021. So my question was: How has the collaboration evolved over the past three years in terms of driving sustainable development goals and promoting ESG principles within the group's operations and across its ecosystem? And can you kindly provide an overview of the specific ESG-focused projects and initiatives undertaken by Equity Bank Group since the inception of the strategic alliance, and highlight any notable achievements or milestones in advancing sustainability objectives? Thank you.
Thank you. So the question is three-pronged: governance issues, social issues, environmental issues, all under sustainability. Let's look at the social issues. Saladin, that's why I called you first. So if you could take the floor, what are the partnership with UN, and what are you addressing, with the UN agencies, and which one? Give them credit.... The next one will be Florence.
Thank you, James. We have been working with the UN on a number of programs, particularly focusing on supporting vulnerable and marginalized households. We look at cushioning the households from socioeconomic shocks and stressors, such as drought, forceful displacement, in which case we are dealing with refugees, old age, and so on. So within that, what we do is facilitating access to cash-based assistance or cash transfers through technology-based means that then foster ease of access, dignity in terms of ensuring that the beneficiaries are served, as opposed to where vulnerable households would be supported, say, through in-kind assistance, where they queue to get food rations. We provide technologies, where then they access that support through bank accounts. So that serves as an entry point to formal banking systems.
But within that, we walk a journey with them. A journey then that facilitates their transition from systemic reliance on humanitarian aid to self-reliance or economic independence. So we are working with the likes of the World Food Program, UNHCR, which get us to refugees. We're working with IFAD, we're working with FAO, with UNICEF, UNDP, and many others within the UN ecosystem.
How many, how many households?
We are supporting about 5.4 million households across the region.
5.4 million households being supported socially, through safety nets. Eric? Okay, Florence, come first. It looks like Eric is not ready. Quick, 2 minutes or so.
... who need to be capacitated and de-risked because we know access to finance in agriculture has been considered minimal. The industry reports about 3%, and as you have heard, we want to take our access to finance, especially for agriculture, to contribute 30%. So this needs to be de-risked, and this needs to be capacitated.
Eric? Thank you very much, Florence. Eric deals with UN-Habitat.
Thank you, James. I think in addition to what Florence has said, we are working with UNDP on clean energy transitions. UNDP is helping with proof of concept, especially transitioning schools to clean energy. We are working with UNICEF on water, especially looking at marginalized counties and how we can utilize underground water. So we have created a partnership with UNICEF. I think the others Florence has talked about IFAD, what we are doing on climate resilience within agricultural food systems. UN-Habitat as well, because we are also looking at what we can do in slums in terms of greening the slums, reducing pollution and water pollution, especially in the slum areas. Thank you, James.
Talk briefly about energy for tree planting and household empowerment.
Thank you, James. We started the environmental program, conservation, in 2019. Today, we have planted 25.2 million trees, and through technology, we are now able to tell where every tree is and how it is doing. This year, we started on mangrove restoration in the coast, because we think that's where we can create significant impact in terms of restoration of the marine ecosystems. At the household level, that's where we have the highest burden in terms of cooking and lighting. We have a program called EcoMoto that, together with our partners, IFC and others, we are solarizing and bringing clean cooking technologies and water to households, so that then they are able to access clean energy for cooking, lower the emissions.
Today, we lose 23,000 people every year in Kenya because of pollution in our kitchens, and that's what we are trying to fight with our partners, through clean cooking, clean water, and access to solar energy at the household level. As James said in the beginning, we have reached 150,000 households, and, we quickly want to accelerate that through technology to reach 1 million households in Kenya and in the region.
Briefly about KEMRI and the research on school kitchens and the project of transitioning schools to LPGs.
Thank you. Thank you, James.
Briefly about the research fighting with University of University of?
Of Liverpool.
Very good.
Yeah. We partnered with University of Liverpool and KEMRI to understand the disease burden within our institutions and within our households that use solid biomass for cooking. And we've studied about 232 schools, and the results that we found are quite shocking. The recommended levels of pollution by the World Health Organization, we are also working with, is 35 micrograms per cubic meter of air.
Thirty-five micrograms?
In some schools, we are seeing 20,000.
Twenty thousand-
Twenty thousand.
Micrograms. Now, you can imagine the... And that explains why we are obsessed by ensuring the 8,000 transit. It's not a habitable environment, but that's what our cooks in schools are subjected to. You see, even in the fields, in those schools, the dust particles, smoke particles, concentration reaches 3,000.
Yeah.
It started from one kid. Now, you can imagine the exposure of their health. Please continue.
Yeah. And we are doing this to bring the health conversation into environment, because we've been pitching our story from an environmental protection perspective. But we want to tell the government and policymakers that use of biomass is a significant health issue. We are carrying a huge disease burden. We have gone to schools where cooks are born gone blind, because of smoke. And therefore, we want to use that data to inform policy, to inform investments by the government, by our donors, in terms of fast-tracking the clean cooking conversation as part of our climate change action.
I told you Equitel is no longer a bank. It's more than a bank. Look at it, we are now informing health policies, the way we used Wings to Fly to inform education policies and change the entire structure. Thank you very much, Eric.
Thank you.
Reshma, what has been left out?... sustainability holistically.
Thank you, James, and good morning, everyone. So my name is Reshma Shah. I'm head of sustainability. So not to repeat anything that's been said, but just to add a few other areas where we're working with the UN. But one of the main ones is all kind of private companies join the UN Global Compact. We are also a member of the UN Global Compact, where we drive some of the private sector initiative. But in addition to that, not just the UN Global Compact Kenya network, but we are also established with the UN, the Africa Business Leaders Coalition, which is for all African CEOs in the private sector, of which Dr. Mwangi is chairing that ABLC.
In addition to that, we're also working with UNEP, so the environmental program for the UN, primarily around nature. That's one of the reasons why we have become an early adopter of the Taskforce on Nature-related Financial Disclosure, TNFD. We are also working with UNEP FI, which is the financial institution sector of the environmental program, and we are part of the working group that's looking at how to transition banks and their clients into a net zero position. In addition to that, we are also working with the UNFCCC, so the climate champions of the UN, and a big part of that deliverable was what we did with them in COP 28, where there was a significant presence of equity representing not just the financial sector in Africa, but private sector in Africa as well.
Those are some of the other areas where we're working with the UN.
Joan, what else, is the foundation doing with the UN that might have been left out?
Okay, thank you, Dr. James. I think, in addition, or to sum it up, is to say that the way we collaborate across the foundation is that, number one, in terms of how we target our work, is that we want to look at the UN SDGs as one of the ways in which we can set down our targets in terms of what we'd like to achieve across the foundation. So what we've done is to map the UN SDGs to the work of the various pillars, and you'll find that there's very close alignment in terms of the goals and then the targets. And then, beyond that, we also look at the countries where we operate, and we say, "Let's look at their national priorities, how they've set them up," such as in Kenya.
The bigger picture is the Vision 2030, but as well as the current government's priorities. Partnerships is a key one for us because you've heard my colleagues talk about the various partners that we work with. So of course, we've talked about the UN, we've talked about the governments where we operate in, and then partners who are trying to achieve the same kind of work that we are doing. So we believe if we collaborate, we're able to scale the work that we're doing rather than replicate. And then I think to sum all that up is that, within the foundation's board, the Equity Group Foundation Board, we do have a UN seat on it, which is currently occupied by the UN Resident Coordinator for Kenya, Dr. Stephen Jackson. Thank you.
So Dr. Jackson sits on the board of Equity Group Foundation just to ensure alignment of our collaboration and closer monitoring of outlay. Lastly, is to say all the 17 sustainable goals have been mapped around the Africa Recovery and Resilience Plan , so that each of the six verticals then take care of the appropriate goals. So they're completely mapped. So it's like by executing the Africa Recovery and Resilience Pla n, we are executing the UN mandate on sustainable development goals. Joy, maybe you could play a little bit on the role we are playing globally on climate and sustainability. Joy is our Group Director of Communication and plays on a lot on my diary on global global service.
Thank you, James, and thank you for the question. I think that climate and sustainability are actually redefining the brand that we have globally, and how we are, as a private sector player, really looking to support not only what the United Nations is doing in terms of their agenda here in the region, but what we can do as a private sector to support Africa's industrialization and growth, clean and green. One of the things that we did during the Africa Climate Summit that was held here in Nairobi last September is we recognized in the program that there was not a private sector voice. And so we quickly mobilized through our own networks, working with ALN, working with the Commonwealth, a private sector declaration that actually laid out activities that the private sector could accomplish to support climate and sustainability mitigation.
I think that we are looking for opportunities with our partners, but really through the private sector, to support climate mitigation and to do it sustainably as Africa industrializes and grows over the next 20, 30 years.
Our partnership with UN on climate and environment?
I think that what we're doing with the United Nations is to really... We have the same goals, and we have the same values. So as the United Nations works on its development agenda, as the countries that we operate in work on their development agenda, we are together looking at ways to do that, sustainably across the East Africa region.
UAE?
... The UAE, we have been working with the COP28 Secretariat, with Reshma, myself, the foundation, on really trying to bring the sustainability agenda into our development. The UAE, I think you'll see as a leader going forward, and we've been working with the government there, with the sovereign wealth funds there, to really drive sustainable development in this region.
So as somebody said, Avia, we have taken the issue of sustainability very, very seriously. I've been privileged to have been appointed by the President of Kenya on his advisory of African Business Leaders Alliance to drive the issue of sustainability for Africa. As I said, I chaired the panel of private sector for the African Climate Summit, Nairobi. I've been privileged to be appointed by King Charles III, as his co-chair of Sustainable Market Initiative, and also, what used to be Prince Charles Trust, and all that we are focused on is on climate change. So I'm able to bring those capabilities, advice to UAE government, and with a focus on Africa. And broadly, we're working very closely with African governments to make sure that governments provide leadership.
Anything else you want?
I think the only other thing I would say is that really, as we try to champion and deliver on the Africa Recovery and Resilience Plan, we are really looking to work with UN agencies that are, that are in that space. So for instance, we're working with the WHO on actually how we create value chains for affordable medicines into the Equity Afya project. As we look to support value chain development, we're working with the WTO on how to redirect supply chains sustainably into Africa. To the UAE point, we recently were in the UAE at the WTO Thirteenth Ministerial, where James was an advisor to the ministers on how to do that.
So we're working very closely with the World Health Organization, Gavi for vaccination, so that the Equity Group Foundation, Equity Afya franchise, would be able to be available to use mitigation, particularly vaccination, for free, and any service that the world would support the continent on. I'm glad that this week we opened the 5 Equity Afya hospitals in DRC, and hope by June we'll have opened 30. So it is not a Kenyan issue, it's an African issue, and that answers to the question. Thank you very much. Now, let's move to another question that has been asked online. So I'll be reading who... Mary Ntedi, listen carefully, this is yours. What proportion of NPLs were written off during the third and fourth quarter?
Has the formation of new NPLs peaked during fourth quarter, or should we expect further deterioration during 2024? Ronak Gadhia . The second question is to Alvin: Could you please talk about the significant drop in transaction volumes on Equitel and Equity Mobile? Really analyzed already the accounts. Another question, Mary, this comes to you, Mary Wamai. Just trying to understand why directors' emoluments increased by 8% year-on-year, despite the decline in profits. Can you talk about remuneration policy of directors? So Lydia Dirango, you can also help Mary. This other one is to Brent and Kirubi Sam: Can you help us understand why the bank's cost of funding has increased to 27%, deposits and net income growth in constant currency terms?
So, Mary, you can take the seat, or Eric, you can start, and we end with Mary. So, Mary, do you want to go first? No, Mary, go first. Take the seat.
All right. On the question of the proportion of loans written off, we wrote off about KES 22 billion in the year, largely in Q4.
... As you can note, now that would then reduce provisions, and that would explain why our cost of risk has gone up to 4.4%. So as we've highlighted before, we are committed to keeping our coverage, relatively high to the industry and getting it back to where it was in the previous year, which is above 90%. Have the NPLs peaked? Yes, we've been highlighting this from Q4 going into before we were in the close period, that yes, from the review of our loan book, from looking at the numbers that we have now, our NPLs have peaked. You'll see we closed Q3 at 12.2%. We've closed the year at 11.7%. We do not see further significant deterioration coming in, the way we've seen it in 2023.
That being said, that ratio is likely to remain sticky. You've seen from our 2024 guidance, we hope to bring it to 9%-11%, so it will not significantly come down rapidly.
They identify first and foremost with the vision and the mission of the institution, and they are willing to serve. So for them, it is really a service, and what we do is just to try to defray the cost of attendance, and we pay a fixed allowance to them since 2007, irrespective of the entity that they serve. So whether you are in the group or in a subsidiary board, the allowances are the same and standardized according to the remuneration policy that has been set by the Governance Committee of the board. Now, the increase can be attributed to maybe one or two things, and I'm going to explain that now.
As James has explained, we have grown the business under the four strategic groups, that is technology, insurance, banking, and, of course, the social impact wing of the business or investment. Now, we got a lot of new directors coming in in the course of the end of 2022 to support the insurance business, which was completely new, and they started earning their allowances basically last year, 2023. I think you will also see others coming in very soon to support the general, another line factor.
We also planned because, as James explained, the social engine is also taking a very prominent and a significant role in the business and the entire impact agenda of the group under the African Recovery and Resilience Plan. So that also explains, you will see quite financials coming up very, very soon. Now, the other explanation is the sheer number of meetings that have been happening to support the growth of the business. For instance, last year, we had a lot more meetings than the 4 scheduled ones in the DRC, because remember, we are still in the integration after the merger, and that called for a few more meetings than usual. Whether it's the committees, audit committee met several times, just to make sure that the internal controls are in place as the two institutions came together.
I know also the governance met more times than normal, than the scheduled 4 meetings a year, and of course, the full board also met more times to give directions to the team. In Rwanda also, we had several extra meetings and in the group-
Chami, yeah, very good. Give Chami the other mic.
Thank you, Dr. Mwangi. I've got a question on the risks. How do you differentiate between business risk and financial risk, considering that they are interrelated? I have another observation I got from the presentation. The presentation reminded me of the quote from William Shakespeare, which says that, I quote: "All the world's a stage, all men and women merely players. They have their exits, and they have their entrances, and one man in his part plays many parts." Dr. Mwangi, Equity Group is up to the task. Thank you.
Ah, thank you very much. It's really nice, I mean, Chami, you allowed us to end there with a Shakespeare's quote. That must be a fourteenth century, yeah, but-
Group, Group Chairman?
Yeah.
Thank you, thank you, thank you, Group CEO. Thank you, all your members, all your team. Now, I think I must be very happy today. Starting this meeting from that time up to now, this is the only PLC, group PLC that has done that in Kenya, and Kenyans are the ones who are on the stock exchange. Thank you very much. And you have stood. You have not sat down. You have not taken any, any water from that time. So you are very strong. And, I think you, you must—I must pray for you to get another big job in Kenya. Apart from all that now you are doing. And again, group, group CEO, thank you for bringing us professionals from all over. Kenyans need other people, and they will work with them very well.
Afya, how have you gone about in Busia County, Afya? Because I think this, there are your branches there, there are now two. Agriculture, I think, to touch us for agriculture, let us have a meeting that we can learn about agriculture, especially we shareholders who have who are here and other people, interested people. Because, you know, what you are saying is so much, it is really, it's really touching on the lives of Kenyans, and it will, it will improve if we know what you are professionals are telling us. I don't know how far you have gone with the affordable houses, whether your insurance is insuring those houses, because they are in the government and you are near the government also. Other countries, our countries that equities 24%... Then, to improve on, on, Equity PLC, we must be, we must partner.
We must assist you. You have got professionals assisting you, shareholders. When I went somewhere, I don't want to say now, and I said I'm a visitor. They said, "Oh, doctor. Doctor, Doctor Mwangi?" They said, "No, you are welcome. You are welcome." So because you are known and you are going, growing high, we need to follow your examples. And you'll also be calling us sometimes. We'll also talk to you in private way because of exposing some things here is not good. That is not good, explanation of your experts, the ones you have chosen from all over, all over. I think all over the world. You have said Cairo, America, Botswana-
UK.
UK.
Thank you very much, sir.
Uganda. Uganda, I always go there, but I don't know whether it's Afya there, because I've been sick. I've not go to Afya, Afya Hospital.
Next to you.
Eh?
Two Zambians next to you.
Yes, Zambia. Zambia, our friend. Because we used to talk about our the former president who used to be there. He was very good, the former one. So
Thank you very much.
So, I think so. Now, we clap for you because-
Thank you.
Somebody is clapping here. We just clapped because you have truly have done. Let us now appreciate you very well and, and our chairman and the board, and all the-
Answer the question on Afya.
Yes. So I think, thank you very much.
Equity, Afya-
Thank you very much.
Quickly.
Asante sana.
Very good. Thank you very much, Chami. And also about training farmers in Busia, quickly.
Thank you, Dr. Mwangi, and thank you, Mr. Adosses Chami. We currently have an Equity Afya facility in Busia that's been operational now since last year, I think, in November. So it's working well, and of course, being a very busy town, I think the facility is so far picking up very well. Yeah, on our training for farmers, as Florence had earlier touched on, is that we anchor our offering as Equity Group Foundation through the branch. So we'll be able to do that. We currently do that through the Equity Bank that we have in Busia.
Some of our offering, we've actually added now Equity Afya as one of our implementation rails for other programs as well, so that as we serve them as farmers, they also present to our facility as potential customers as well at the medical centers. Thank you.
When you come there-
No, sir. Thank you.
On the differentiation between financial and business risk, an appropriate response to Shakespeare's give a joy da.
I did mention that, financial risk is concerned with, liquidity, credit, capital market risk and insurance risk, and sometimes we include country risk. But the first five are risks that you find in our income statements, in our financial statements, the balance sheet and, income statement. On the other hand, business risk is concerned with our competitive strategy. So here we're looking at, our customer acquisition strategy. We're looking at our products and the, customer value proposition or unique value proposition that we offer through our products and services. We're also looking at our distribution, so branches, digital channels, ATMs, and so on and so forth.
Finally, under financial, under business risks, we also pay attention to the external environment and how it changes and what opportunities, those changes, throw up for us and also risks that we need to manage. These include legal, economic, political, environmental, social, technological, regulatory, and so on and so forth. So I don't have. For Shakespeare, I could ask, to be or not to be. Thank you.
... Thank you very much. And where is, brand risk and reputational risk?
Reputational risk is one of the 16 principal risk types that we manage, one of the most important. But the business risks I have spoken to, including brand risk, we cover under strategic risk, under the umbrella of strategic risk. So strategic and reputational risk are part of the 16 principal risk types that we manage both on a proactive, forward-looking, as well as-
Yeah, was light, to the best of my knowledge. But let me close by saying what a privilege I had this morning in answering those questions. As you saw, I never attempted even one. You gave me an opportunity to answer the question you never asked about the depth and breadth of the leadership and management capability in this bank. It is not the numbers that are good, it's the leaders and managers in this group that are great. We have a great board, we have great leaders, and you can see how they take the questions. They don't need to be prepared, just direct the question to them. That depth of leadership, that competence and capability, is what has brought this bank where it is.
And as Shakespeare said, "Each of them is playing their role when their time comes, like I do." And so we have really answered another question: How far can this group go? This group can go as far as that capability has been demonstrated. It's not a Kenyan capability, it's a global capability. We recognize and appreciate that we have become a global brand, a global company, the second strongest brand, banking brand on Earth, but only happens to have our headquarters in Nairobi, Kenya, Africa. But this group could be anywhere. So, Jamie, I was humbled by your acknowledgment that the strategy and the policy of opening positions in the leadership and management be globalized, because it will be naive for us to think we can build a global brand alone. So your call for partnership, collaboration, and support, we embrace it with open hands.
As Shakespeare says, "Let each of them, when their time comes, play their role," and when their time ends, Shakespeare closes by saying what? Absolutely. So I'm grateful to have had this opportunity. I've tested your patience. I've seen how resilient you are. None of you have left. You have not even walked out. So allow me to invite our group chair, because he has been called out, his board has been talked about, Professor Macharia. For those who may not know Professor Macharia, this is a professor in medicine, an ENT surgeon, and so we are privileged to have him, and we learn a lot from him. The precision of medicine, we've seen the same precision in business. Professor Macharia, thank you.
Thank you, James. Shakespeare also said that, "The evil that men do lives after them, and the good that they do is interred with their bones." So our role is to make sure that we minimize the evil that we do, because that is what will be remembered after we go. Thank you. Good morning, and I want first to thank all of you for your patience. It's been a long morning. I want to congratulate the management of Equity Group for the very good results for last year. And at the same time, thank all our stakeholders who have brought us where we are and who have continued to show their confidence in us. I think I need not talk much about the group.
This morning, James has amply demonstrated the great capability at the corporate office through the people that he has answered your questions. I hope that they have answered them satisfactorily. That display of the capability is really to buttress the fact that the group is very well-positioned, has prepared very well for the diversification that was presented and for our expansion, and for the development of an integrated financial services group in this region. The board has lived to its mandate of oversight both through guidance to the management, through interrogation of the strategy, and making sure that strategy execution in Equity Group is not only timely, it is disciplined, and it is efficient, and that is what has brought us here. We have spent great resources...
To make sure that in our next phase, as we expand, that our house is not built on shifting sand, and our house has a very solid foundation. I can say without fear, any fear of contradiction here, that the outlook for Equity Group is bright and it is great. Based on our strategy, our geographical footprints, our business model, and our operational excellence, leveraging on technology. The board commits itself to the best corporate governance practices benchmarked on global corporations. In this regard, the board subjects itself to regular governance audits over and beyond the regulatory requirement, and all these audits have given us flying A's in our governance structures.
I want to urge you, those of you who are, stakeholders in various levels, whether investors, whether shareholders, to make sure that you really take your appropriate stake in Equity Group, because this group will be flying. At 40 years, we have learned from our past. We have, become stable, just like a middle-aged adult, is in that position where they start making very well-informed decisions. They don't make rash decisions, they consider the risks, and they manage those risks prudently. That is where we are as Equity Group. I thank you once again for your patience and for your attendance. Asante sana.
Thank you, Chairman. As we invite our colleagues so that we can close the investors briefing with the anthem, we want to remind those who are following that the investor briefing booklet for the full year, together with the financial statements and the press release, are available online on our group website. For those who are here, kindly pick your copy as you leave. We look forward to a great year. For those who still have questions, kindly post them online. Our investor relations team will respond to them. I want to invite Sister Theresa to close for us with our prayer, then we'll do the Equity anthem, and then we'll have one or two photos, and we'll continue with the breakfast. Thank you, Sister Theresa.
Once again, thank you for coming and for the members of the Fourth Estate, we are very grateful for your support. Sister Theresa?
As we close our meeting, I'm going to read Philippians four, six to seven: "Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus." In the name of the Father, and of the Son, and of the Holy Spirit.
Amen.
We thank you, God, for the gift of this day. We thank you for the wonderful work that you have enabled our management to do. We present ourselves unto you, that you may continue guiding us, that as we continue to serve our people, your people, we may continue to scale up. We thank you for the many times we have win awards. We thank you for our leadership. We thank you for Dr. James Mwangi and all those who are supporting her, him. We thank you for our stakeholders, that Lord may bless each one of them. As we continue to serve you, we pray for peace, we pray for resources that people may come up to support us, so that we can envision your good will that you started in Equity Bank. We pray this through Christ our Lord. Amen.