As we remain standing, let us pray. Father God in heaven, we come before your throne of grace with humble and grateful hearts, acknowledging your sovereignty, your goodness, and your faithful love. We thank you, Lord, for granting us this precious opportunity to gather here today to reflect, to receive, and to plan ahead. Lord, we are deeply grateful for the gift of life and health. Thank you for sustaining us and carrying us through each day, and also for allowing us to witness this moment as we receive the full year result of Equity Group Holdings Plc. We acknowledge, Lord, it is not by our strength, nor by our wisdom, but that your grace have enabled us to come this far. We thank you, Lord, for the year 2025, for the milestone achieved. We thank you for every challenge overcome, and also for the lessons learned.
Your faithfulness has been evident in every step we have taken. Your mercies, Lord, are indeed new every morning. Your steadfast love never fails, and for this, we give you glory and honor. Father, as we convene in this meeting, we surrender everything into your capable hands. We invite your presence to be in our midst. May your wisdom guide our discussions, your peace guard our hearts, and let everything said here be aligned with your will, oh God. We thank you for our investors, shareholders, customers, staff, and all the stakeholders within our business. We ask of your blessing for every person present. Grant us wisdom, understanding, and the spirit of excellence. We lift our team leader, Dr. Mwangi, before your hands. As he comes to address us, Lord, we pray that you grant him strength, grace, and divine insight even as he addresses this gathering.
We thank you, Lord, and we commit ourselves to you, asking for your guidance and blessing. For this we pray through Christ our Lord.
We can take our seats, and let's appreciate Reverend Evans. For those who are following us online, kindly as we go through the investor briefing, you can pose your questions and we will share them so that we are able to respond. It's now my honor and privilege to invite our Group CEO and MD, Dr. James Mwangi, to take us through the financial results of Equity Group Holdings Plc for the full year 2025. Welcome, Dr. Mwangi.
Thank you very much, Alex, and a very warm welcome to the financial analysts, to the investors, to our shareholders. It's another wonderful day where we are here to share with you the performance of your investment for the year 2025. 2025, we retained and sustained our corporate philosophies. We have seen how they have been codified in our anthem, but we constantly remind ourselves. If you look at our walls, you see our beliefs, our ethos, and our philosophies. They are our guiding light. Our vision has not changed. Our mission has not changed. Our essence and purpose has not changed. We remain committed to changing lives, giving dignity, and expanding opportunities for our people using financial tools, providing accessible, inclusive financial services.
I'm glad that we are no longer a bank, but a financial services group providing the whole range of commercial banking, investment banking, and insurance financial services. It's end to end, and we wrap them together so that we could be able to make a big difference in transforming lives, giving dignity, and giving people tools that they can use to change not only their lives, but more importantly, expand their opportunities. We are a value-driven and value-based organization. Our value speaks to us. We want to be that financial service provider with a human face, with a human soul. We have branded the organization using core values. We really focus as a bank on professionalism, creativity, integrity, teamwork, unity of purpose, and effective corporate governance that will act as the rails that provides guidance on how we can do our business.
The corporate governance and risk management framework has become elaborate. We acknowledge it has also become complex and sophisticated, reflecting what a group of our size and our stature requires. Why? Because we are in the business of trust. Our currency of trade is trust, so we protect that currency by strong governance structures, comprehensive oversight, driven from all the way from shareholders, boards, board committees, executive management layers, layer after layer, just to ensure that the segregation of duty, the oversight is comprehensively exercised. We're very happy that the insurance group is now complete with life, general health, and asset management, and that then complements the commercial banking group, which has distribution and has also investment bank on its arm. Again, these are mirrored in our group foundation so that we can continue to capacitate and de-risk the public so that it can be included in financial sector.
We take pride that governance is at the center of who we have become. The depth of governance and organization structure is layered with depth and breadth at management level, such that it's layers and layers because of succession. Such that at any point in time, there is a layer below another layer, below another layer, so that we can foster coaching and mentoring and ensuring that we continue to be really people-centric. The strength of this organization is in its people. I always regret that the value, the quantifiable value of the human capital doesn't reflect on the balance sheet. The quality of the board in this organization, the quality of the executive management, and it's because of the belief that an organization can never be better than its people. The results we'll be going through reflect the quality of people we have in the organization.
I'm happy that among us is the chairman of the group, Professor Macharia, who leads the corporate governance structures. Now, let's go down to the operating environment, 2025. What kind of environment were we operating in? 2025 was a turning point, where we saw transition from 10 very difficult years. If you remember from 2016, when we had the wave of interest capping that lasted for seven years, then followed by the hiccups of COVID, followed by the hiccup of last year Ukraine war that continues to be with us, the war in Palestine and Israel, and now we have another one in our hearts, the challenge in the Middle East. That shock after shock, after shock. These shocks have had significant impact in the macroeconomic environment.
We saw Ukraine and last year war really causing significant rise in the price of food and energy, causing maybe the highest level of inflation and instability in foreign exchange that maybe is the worst in the last 40 years. High inflation, volatile exchange rates, high interest rates. We saw 2025, the pivotal year, the turning point, and we are now starting to see. We believe the situation would have improved much faster, but uncertainty by geopolitics and the conflict in the Middle East or the Gulf region has now somehow dampened the expectations that we were expecting. However, despite that, the world looks like it's resilient. Because of the 10 years of shock after shock, the world is becoming resilient. People are taking shocks as part of life. They have normalized, and so we expect that the private sector will bounce back.
Beyond the global environment, when we come closer home, the East African region, we see a very resilient region, giving a lot of hope about the possibilities of riding those shocks. As we see, when you look at the top 20 GDP economies in 2025 and 2026, as estimated by the World Bank, our main countries are in the top 20. We expect that for us at Equity, we have a future that is a Southeast Asia movement, very rapid growth in the region. Ours is to adopt an offensive. For the last 10 years, we had a very defensive approach. We wanted to ensure we made the organization agile. We wanted to make the organization resilient. We wanted to restructure our balance sheet. That's what we were focusing on. Very defensive in our strategy.
We think 2025 ushered and gave us a moment now to be offensive. We have built resilience, we have built agility, we have restructured our balance sheet, and made it flexible, and we think 2026 will be a year of significant growth. We'll focus now more on our growth. When you look at the dynamics of those markets, it's very impressive that the same countries that are home to our subsidiaries are showing the highest resilience and growth of GDP per capita. It's one thing to grow GDP, but it's another to grow GDP per capita because it brings in the consumer's ability to be economically active. It brings in the spending power into the marketplace. If you look at Rwanda, Ethiopia, Uganda, Tanzania, Kenya, DRC, they are in the top countries in terms of GDP per capita, meaning that the population is achieving enhanced ability to consume.
When you look at those economies, how they are being perceived globally, and look at their Eurobonds, the dynamism reflects that these are countries that have become now destinations for foreign direct investment. Each of the countries, including DRC, they're in the Eurobond market, and they are all becoming successful, and when you look at the pricing of the Eurobond, it's winning. When you do a deep dive and look at foreign direct investment, this region is becoming very attractive. We saw in the last just three months, we have seen the investment in East African Breweries or Diageo as we call it. We have seen the investment in East African Crude Oil Pipeline. We have seen the investment in Safaricom. It's attracting foreign direct investment, and there's a lot of activities which are globally driven.
That is a real signal to me and a confirmation that truly the East and Central African region has started its journey of being the next Southeast Asia. Underlying that is the strategic minerals, it's agriculture, it's infrastructure, it's demographics that are likely to provide significant dividends with labor and the market. The good thing is that we are systemic in all those markets. When you look at Kenya, when you look at Rwanda, when you look at DRC, we're in the top two banks, and so we become very systemic in terms of presence in those very dynamic markets. When you are systemic, then you are able to drive cross-border trade, enjoy economies of scale at the subsidiary level, not at the group level, and to have presence and visibility at each country level. We are very optimistic at these positions.
The way we chose our expansion, regional expansion, the footprint that we have built, as you can see, has built up as a hub. Essentially, we are very well positioned to facilitate cross-border trade. East Africa being the most integrated and most advanced in regional trade, we are very well positioned then to catalyze that trade and achievement of the African Continental Free Trade Area, aspirations of cross-border trade. Going back to the strategy in such an environment, we have looked at ourselves internally and asked ourselves, "What should be our competitive advantage?" We have built that around our governance. If you look at governance, who are managing the governance? Who are at the top of governance? You see we have borrowed very heavily from global capabilities, such that we are a global company with its headquarters on the African continent.
That is where we felt we should be able to invest most. We become outstanding in governance, and then a strategy that is built on who we are. Build a brand that people buy before they buy product. Build an organization culture that underpins that brand, and refine the business model that it speaks to the aspirations of the market and the capabilities of the organization. Then build a collaborative framework of partnerships. We know if we want to go fast, go alone. If we want to go far, go with others. We developed the Africa Recovery and Resilience Plan so that we can invite like-minded organizations so that we can be together, we complement each other, we synergize, we bring our capabilities together and be able to make significant contribution in the transformation of the African continent. We are aware that is not about us.
We'll use customers as agents of that transformation. It's they transform themselves, or we give them tools, or as they pursue wealth creation, they use the factors of production, particularly labor in the continent. We become an inclusive growth continent. We are focused more on our customers, looking at our product house and asking, are we providing them with the right products that have the power to help them achieve wealth creation, exploitation of opportunities? The sum total is their experience. What is their experience? What do they say about achieving their aspiration? Of course, that will not happen unless we have the right people. I'm sure you all know that, as we said, our performance reflects the kind of people we have at the board. The question is, how do we attract the best talent? How do we develop the best talent?
How do we retain the best talent? How do we make the best talent perform at their best? Essentially, we have looked at the hygiene factors that will make people find Equity to be the right place. We have looked at their needs, short term and medium term. I take pride that we are top payer in the market, competitively in the top 75th percentile. Then we have looked at the medium term. We have looked at the hygiene factors, medical cover, pension, ESOPs, and group life. That has created an enabling environment. I'm glad that we are able to attract whatever talent that the organization require. Then we have looked at ourselves internally and asked ourselves, how are our processes and systems in empowering our staff?
How have we made it easy through processes and systems for customers to have a good experience? We have expanded our infrastructure, made it extensive, whether it's branches, agents, ATMs, focused on channel stability systems, and more importantly, a world-class technological investment, knowing that we are becoming increasingly a technology company, with licenses for financial services, and then focus. If you look at our strongest departments, it's the control and compliance departments. It's the third line, second line, and first line of defense. That's where we got it quite fast, and heavy investment now in the technology segment and shared services capability so that we can enjoy the economies of scale. That is really how we have structured ourselves, and that is what is driving the performance of the organization.
When we look at 2025 in terms of performance, we realize that the greatest thing we achieved, and this will be a learning theme, is optimization and efficiency. We did extremely well because we focused on asking ourselves, how can we reorganize the internal environment so that we optimize? I want to draw your attention to the net interest margin. As you can see, we don't perform well because of high margins. That is not what drives the organization. The margins are all single digit, so it's not about pricing. It's about efficiencies. If you look at return on assets, let's look at return on asset. That is what we really take pride in, is that we have been able to replicate ourselves in the entire region. Equity Bank Kenya, the mother bank for the group, as you can see, it's now fighting for visibility.
Our youngest subsidiary, DRC, is now top performer in terms of return on average asset, beating Kenya. Okay, they are neck and neck, but Moses, as you can see, the two of them are sitting together, the MD for Kenya and the MD for DRC. We are cheering them up, because DRC, everybody expected would take us ages. What it took Kenya 16 years to achieve a 4% return on asset, it has taken DRC 10 years to reach there. The difference is DRC is growing much faster than Kenya. When I predicted that DRC might overtake Kenya in profitability by 2028, looks like it will happen 2026. If I'm wrong 2026, it will certainly happen before 2028. It's likely to happen. I'm just Ali Fadhi. I'm allowed to speculate. Prove me wrong, Moses. That is really important.
One item I would like to draw to your attention about when I talk about optimization and efficiency is a small subsidiary, like Rwanda, like Tanzania. Those are the two smallest subsidiaries. They have the highest return on assets. Tanzania, which we kept on talking about in the past, that what happened to Tanzania, has the highest return on assets at 4.4%, followed by Rwanda at 4.3%, followed by DRC at 4%, Kenya 3.9%, and Uganda 3.1%. Uganda, as you can see, it's coming from 0.5%. We have really optimized, we have become efficient, and time has now come to say, can it be better? Of course, it can be better. The best way of doing it is not now pursuing that, because it's marginal improvement in efficiency. It's growing the organization. The strategy going forward will be retain defensive position, but be aggressive in growth.
Grow when you are creating enormous value. It will be a value-creative growth, because of the efficiencies. If you look at return on equity, again, the top player is Rwanda, followed very closely by DRC, followed by Tanzania, followed by Kenya, and ending up with Equity Bank Uganda. We can see that it's not just return on asset, return on equity. Once you reach 4% return on asset, nearly 30% return on equity, then growth becomes self-funding. Internally generated funds become sufficient to fund growth of 40%, because you leverage. We leverage 7x the capital base. You can imagine what possibility of growth that could be if we can leverage 7x a growth of 30% on capital. Essentially, that is what the strategy is. It's a pivotal point.
Remain defensive, but now be very offensive and grow and grow and grow, because any growth that we make is very value-creative. What does it mean? There will be a conflict and tension between dividend payout and retention to fund growth. That will be a good debate for the shareholders. Do they want immediate cash in their pocket, or do they want high returns going forward? We leave that to them. We just advise. When you look at the regional diversification in practice, and you look at Equity Bank Kenya and the regional subsidiaries, they are now neck and neck. The regional subsidiaries are contributing 49%, and Kenya 51%, of deposits. When it comes to loans, the regional subsidiaries have 54%, and Kenya has 46%. A quick turn. When you look at total assets, the region 51%, Kenya 50%.
We can declare that our regional subsidiaries are bigger than Kenya. We are no longer a Kenya institution. We are a regional institution, with Kenya being the largest subsidiary, and very close to DRC. I think the most interesting aspect of it is if you look at return on assets, Kenya and the region are at par, 3.9%, 3.9%. We have been able to perfectly replicate ourselves. If return on equity is 27.1% and 26.8%, it's 27%/27%. Return on assets, 3.9%/3.9%. They say the apple never falls too far from the apple tree. What we have created is Equity Bank Kenya in six countries, in every respect, because the dynamics are very clear. Of interest is this growth, how is the quality of the balance sheet? We said we are really focused on balance sheet optimization.
We're very happy to note, we have always said our biggest problem of NPLs was in the corporate sector, and you can see what we were able to achieve. The corporate sector that the previous year had NPLs of 22.4, they are now down to 13%. In one year, moving NPLs for corporates. That's the problem of corporates. Corporates go to defend themselves in court, but when the judgments are made, then you are able to have significant recoveries. We said it's 17 loans. We have recovered 3, so we are optimistic we'll recover much more this year, and that will drive the NPLs. As a result, our NPLs have moved from 12% to 10%. But remember, at the end of last year at 12.2, NPLs had not fully peaked. Our NPLs peaked fully in the first quarter, 31st December, when the NPL ratio was 14%.
Since then, we have seen quarter after quarter. It was 14%, 13%, 12%, and now 10%. It's really constant, and we can predict with almost certainty that we'll see this trend continue, because as we can see, it's corporate loans driven. Corporate loans, you can be able to predict with certainty to say where you are in the cycle of debt collection or loan management. That in NPLs per country, we see Kenya and Uganda had problems last year. Uganda has been able to cut its stock of NPLs by 50%. Kenya has shown now it was above the average for the industry. It's now tending to below the industry, so we are very fairly confident.
What we take comfort is, that despite the deduction, we have maintained coverage ratios on the loan book, and this coverage ratio can only go up because we are no longer under pressure in terms of performance. We have a coverage of 111, the highest we have had in the last 5 quarters, with the coverage of guarantees where we have not deployed cash. When you look at the insurance group, the insurance group has started, as we all said, with very good assurance. We see the insurance business that started 3 years, its third audited results has become, in terms of return on assets, because we focus on efficiency and quality, it's now number 3 out of 56 insurance companies. When you look at our profitability, it's number 5, and in terms of premium, it's number 6.
We like playing in the top league, and you can see where it is placed. The most exciting of it is when you look at the growth momentum, growth of gross written premiums of 75%, insurance revenues 150%, and insurance results 32%, and profit before tax. As you can see, we have adopted very conservative provisioning in terms of determining very conservative profit recognition. It's simply because it's early years, and we continue to see the insurance business make steady growth. When you look at our investment bank, that's giving us a lot of confidence. We have put it at the disposal of the Africa Recovery and Resilience Plan, and we are seeing its client base growing pretty well. Asset under management growing very well, income very well, and profitability up top.
This is the business we want to put a lot of effort on, particularly on asset management. We have realized the market has shifted. They want high returns, and they have gone to alternative markets. We are positioning ourselves with an asset management business, which we hope will be able to scale significantly. In terms of our investment in technology, we have seen that the peak that we achieved during COVID, when people wanted to only transact digitally, we are back there. We are very excited that 88% of all our transactions is on digital channels. When you add the merchant and the ATM and the agents, you realize that 98.2% of all our transactions are outside our branches. Our branches are only handling 1.8%. That reflects the level at which we have been able to digitize the bank, which we forecast.
I want to give credence to this strategy of digitizing in achieving efficiency at operations and optimizing our cost structure so that cost-income ratio is improving because of this digitization. Of course, digitization come with its own challenges. The environment changes, the model changes, the skill requirements changes significantly. Let me say this digitization is not led by Equity, it's led by the customers. You can see the channels that are driving this digitization. The channels are those of the customer's choice. Alex, the next slide. You can see the most popular. It's Pay With Equity, where we have 1.2 million merchants. It's really driving. The next one, people always underestimate Equitel, our MVNO. That infrastructure has become very powerful. What we have seen is that people regard our infrastructure because it is embedded in the SIM card.
It's not necessarily driven by internet to be more safer because you are not on the highway of harm when it comes to cybercrime. When you are on MVNO, you're using the SIM, you don't need a smartphone. You get the feature phone so that you are not on the highway of internet risk. We've protected our customers effectively. That doesn't mean we have not allowed the customer. USSD is growing, and we are seeing internet is now also picking up and what one would call corporate cash management, which we are calling Equity Online, is also picking up and if you look at the volume of transactions.
If you compare self-service channel, where customers serve themselves, with the variable cost channel initially, and compare that with the fixed cost channel, we have moved from fixed cost, from variable cost, to self-service model, and that is why our efficiencies are reaching where they are. That leaves us with the biggest opportunity and challenge, that the skills of a brick and mortar are different from the skills that are required in a digital environment because of the challenges of cyber. We have really focused on, and we thought we would share with you a slide that the board has taken. Of all the staff, 11,900 staff, we can see 7,300 have completed their courses to become generative AI for business transformation, so that all the staff in the bank.
If you look at our costs and pay attention to cost, our fastest growing cost is staff cost. Why? Because we are transforming all our staff. You can see it's not selected. It's mass transformation of the capabilities and abilities of our staff. We want our staff to fit in the new business model that is technology led. We're no longer IT led. It's now a digital AI first environment. You don't want to put staff in a AI environment without equipping them with the skills and the competence. This might be a one-off cost. You see the cost going forward. Again, the efficiency will be unlocked because we are pumping. This is not spending. It's pumping money to our staff, making it mandatory, that you have only a short period to have qualified.
A good thing, 62% of all our staff who have completed, and if you see that 7,000 and you can see 2,000 are in progress. Gradually, we hope the 2,000, because it's voluntary, but it's only voluntary for three years. After three years, if you have not qualified, then you don't fit in the organization because this is being made for free. The staff are not paying anything. It's not just that we have partnered with people such that it's advanced. It's not just these online courses. WorldQuant University has given us an opportunity, and we have seen 7,000 of our staff have finished courses with the WorldQuant Academy on generative AI. That is a very high number of staff. Of course, when you look at, we're asking ourselves, what next? We have partnered with WorldQuant University.
Already, we have registered 53 of our staff to do a Master's degree in Financial Engineering program, and another 164 will be enrolled before end of March. That tells you how Equity is preparing itself for the future. While it will be good to invest in servers, the most important layer we thought of is the soft layer, the human capital. Invest as much as possible, invest in all, because you might lose staff because of other companies. Essentially, we hope by end of this year, we'll have enrolled 5,000 of our staff on a Master's program on AI and generative. Why? Because that is the future. We see no other choice other than the future. Now, let's combine insurance, investment bank, and technology. How are they performing, and the non-banking group? We see the non-banking group continues to improve.
Assets have grown from $1.4 to $1.9, revenue from $2.7 to. Despite the banking group being big and dominant, the insurance, the technology, and the investment bank are chipping in slowly. We believe that the future of this group will be on this group, the non-banking group. As we saw, the banking group is now mature with a return of 4% on asset, return of 30% on equity. We are likely to see a little bit of stagnation there unless we take another bunch of new markets. Banking will be now mature bank, just releasing value. Where will growth come from? Of course, expansion. Our aspiration is public. We want to be in 15 countries by 2030. We are in seven, so there is headroom there, but the biggest headroom is in the diversification in the non-banking group.
As we do this, we believe in shared prosperity, and as you all know, 2% of our revenue. I'm sure you see the tally. We have reached a revenue of KES 225 billion. 2% of that goes to our foundation for impact investment. We see where we are spending our money. The more money we get, the more we spend. Education and leadership development take the lion's share, 46% for education, 36%. Education is the secondary program. Leadership is the university program. Now look at how big the university program has become. We have 60,000 scholars in the Wings to Fly program. We have 29,000 in our university. The number speaks to you. You'll have access to this presentation. That's how we are spending and investing in society and impact.
Where there are pain points in society, I want to pull out one pain point we all know, health. Health has become a big challenge, and I'm happy to say we have now moved on. We have 150 hospitals. Those hospitals, since 5 years, they have seen 4.6 million patients. There's no outpatient network that can be bigger than that, and Dr. Johan continues to push. We are now piloting or pilot testing. We have been able to provide community with quality, affordable, accessible health or access to doctors. What can we do to ensure drugs, medicine, or pharmaceutical commodities become affordable? I'm glad to say we are piloting with our first pharmacy, the Equity Afya pharmacy, so that we not only make access to doctors affordable and accessible, but we ensure the commodities are affordable.
that is where the partners, because of our governance structure, we have continued to be attractive and now almost any partner would wish to, whether it's a banking partner, whether it's a funding partner, whether it's an implementing partner, we are spoiled for choice, and we take pride that the brand, remember we said our strategy is to build a formidable, trusted brand, and that trust is now paying very big in terms of attracting partnerships for our foundation. I've talked a lot and people are eager when we reach the numbers. let me give you the numbers because results are about numbers. Oh, yes. Okay. Let's look at the balance sheet. As we said, it was defensive. It was not a growth year. It was optimization. It was efficiency. the balance sheet of the bank has grown from KES 1.8 trillion to KES 2.197 trillion.
That's a 9% growth. If you look at that growth, the biggest driver of growth is the shareholders fund. A vote of confidence, and maybe a sign from the shareholders that they are willing to fund the growth of this bank because it has optimized. It's very difficult to reach a 4% return on assets. It is even more difficult to get it across all your subsidiaries. You see quite a lot, and as I said, there will be tension. How do we share this money that the shareholders have got? Do we fund? Do we pay out dividend? That has been a very big debate, and as Chief Executive, I've enjoyed watching the Board debate that tension. As you can see, our loans have now started to peak. We said going forward is offensive, is growth of loan book.
Our deposits have shown the first signs, 4%, loans 8%, and that is growth. People are saying we are not going home with a balance sheet. We are going home with profit. Let's turn to profit. Let me start with what people would like most, profit. The profit of the group has grown by 55% to hit KES 72 billion from KES 46 billion last year. I can hear the silence. Your guess is mine. Equity has broken the corporate record of profitability. No bank or company in East and Central Africa has ever recorded a profit after tax of KES 72 billion. We are now the most profitable company ever in this region. I hope now you are settled. I started there so that I said to you, "So how did we make this money?" As you can see, its net interest income went up by 17%.
As I said, it was not growth, it was defensive. The defensive strategy there was how do we reduce the cost of funding? The top line. How do we improve the top line? The top line was not about growth, it was about efficiency. We reduced our cost of funding by 24%. We continued with our offensive to grow the non-funded income. As you can see, interest income grew by 2%, non-funded, higher quality, grew three times. That it grew at 7%, bringing our total income growth by 12%. Of course, again, defensive, we saw the improvement in quality of loans significantly from 14% in January to 10.5%. That ensured that we could be able to reduce loan loss provision or rather, the cost of risk, and that was reduced by 28%. Other operating expenses. Look at other operating expenses.
When we talk about efficiency, it's when you are able to control discretionary cost. They went down by 10%. As reflected, the asset that we want to reinforce is human capital. What will drive this bank going forward is capital. As we all know, we gave very generous salaries averaging 20% last year. We entered into, as we saw, the concept of thinking about staff, 5% contribution to ESOP, comprehensive medical, comprehensive pension. The objective is to ensure we are able to attract the best breed. When you are the most profitable company, you must reflect that by paying your staff well, but more importantly, attracting the best people the world has ever had. Investing in the people, and we saw that it will be mandatory by 2030. Everybody must have a master's in AI. Nothing is being left to chance.
We are a technology-led organization, so it will be technology-driven. People assume technology is investment in hardware. Organizations are driven by people. When you say technology-driven, it is the skills that changes from banking skills to technology skills. It's using algorithms to do lending. It's using AI to sell, to understand customers, to cross-sell. It's being able to sell online. The skills must reflect the change, the environment, and that is why there is a growth of staff cost. We are conscious. We are not controlling staff cost. We are spending on people aggressively so that we can build a fortified human capital that can take this bank to the next level. As we said, we are at a turning point from being very defensive or defensive rate.
We'll still be defensive, but we'll be offensively so that we can achieve value generation. That gave a cost of 12.5% down from 13.3% at 5%. Income grows by 12%, cost grew by -5%. The door opens significantly, and that gives you a profit growth of 52%. Being efficient in tax doesn't grow at 52%, grows at 37%, and consequently have a profit after tax of 55%. That sets us into tension. What do you do with this KES 75 billion? The shareholders last year had earned KES 12 per share. They now have KES 19 per share. Last year, they got 30% of the KES 12, they got KES 4, and the board said, "Why don't we retain the same ratio?" From KES 19, they get KES 6 minus KES 0.25.
They get 35% increase in dividend, and the dividend payout is KES 6 billion above. Last year, it was KES 16 billion. This year, we'll be paying a record payout, the highest dividend ever paid in the history of Equity of KES 22 billion minus KES 300 million. That's broadly where we are. When you look deeper into these numbers and try and see, this is the best dashboard of all the things I've presented. I've never been able to achieve green on everything on my dashboard. Customer deposits are up, customer loans are up, total assets up, total income up, profit up, profit after tax up, efficiencies are going in the right direction, profitability ratios in the right direction, shareholders' ratios up. This is why we said, if this is where we have achieved, we are at an equilibrium point.
At equilibrium point, what you do is then grow so that you can create value. I appreciate what the board was having a difficult time saying, "How do we square this?" One will ask, how does the future look? That is the present. Actually, it's not even present. It's past. It was up to 31st December. Balance sheet date is at a point in time. How does the future look? We are convinced that the future looks much better, and we are convinced because when we look at the trend of efficiencies, look at what has happened. From last quarter, the fourth quarter of 2024, every quarter, the profit being made is better than the previous quarter. That to me is very historic that every quarter is better than the previous quarter. My challenge is to ensure the first quarter is better than the fourth quarter.
If I achieve that, then it's almost a guarantee that the future will continuously improve. Why is that trend coming that way? Because the shareholders have developed full confidence, and whatever funds we need to fund that growth, they are funding. Look at the shareholders' funds. It's growing at the same rate so that we don't have a constraint of funding growth. Look at average return on assets. Where are shareholders? Look at it from 2.8%-4.2%. It's not a jump. It's a gradual improvement. That is what I want to pay great respect to the executive management and the board. This is the most difficult thing you can ever do, guarantee the future by the thread that you have taken. It's not a thread, now you see me, now you don't. You see me all the time.
That is what management has chosen as the posture of management, that it's continuous improvement. It's continuous improvement. That is best seen when you look also at return on average equity. It's not a one-off. It's step by step, baby step by baby, but consistency. What has Equity achieved? Consistency. You can predict the outcomes. Why? Because it is consistent application of management. If you look at NPLs, that tells the best story. From a high of KES 125 billion, we are down to under KES 100 billion. That is the stock of non-performing loans have reduced by KES 25 billion during the year. No wonder, the NPL ratio have moved from 14%-10%. Look at the ratio. Again, it's gradual. It's not a single loan. It's loans continuously being managed. It's loans continuously being corrected.
That predictability that management have introduced in performance. Look at the consistent improvement and the momentum that 2025 have delivered. It's not one subsidiary. This is across the board. It's uniform. I'm really glad that all the MDs and finance directors of all our subsidiaries are in the room because this is a moment of pride for them. We don't have a weak link. Organizations are defined by the weakest link, but there is no weakest link now. It's a team that you can count on because it's a team. I know it was painful to reach here. We had to change to ensure we have a team that can play as a team, that is committed, and that takes the challenge positively.
Those who like dollars and you are tending to follow them, the balance sheet is now a $15.3 billion balance sheet. Because of what we are talking about, we now are introducing quantifying this balance sheet in dollars. Because we can say comfortably, we have made a profit in excess of $700 million. You can really talk about dollars because it's big numbers, whichever you look at them. It's also good to say, wow, we're just short of $2 billion revenue. Why are we saying this? Because essentially, we have moved from our village team. When I was in primary, I went at the national level, I lost it. I almost lost everything in sports.
What are we saying? Equity has been able to move from the village, if Kenya is its village. It has gone to East Africa. It has won. It has gone to the continental level. It's Africa's best financial brand. It's the most valued brand in valuation, brand valuation in the region. Equity is now positioning itself not to be a village league player. It wants to go international, and that's why we have started introducing dollar, that we can now quantify our performance in dollars because this kind of performance in Sub-Saharan Africa, you can only find it in South Africa. We now can be the champion of Sub-Saharan Africa outside South Africa in numbers, not in brand, in what you can put on the table and feed the children with tons.
Size of balance sheet, because it determines what you can do. With a balance sheet of $15.3 billion, we now can comfortably start financing infrastructure. That is if you look at human capital, and I hope Opufre would introduce this, we have changed significantly. Does the ratios allow us to continue growing? This is the best indicators of efficiency and optimization of balance sheet. You can see it for yourself how well-positioned we are. I want to pick just two lines that tells you how well-prepared we are. The first one is cost of risk. It has moved from 2.5% to 1.7%, suggesting we have solved our internal problems of worry. The second line I want to draw your attention to is NPLs. We now can confirm, hope Opufre, Christine, that the first quarter we shall be in single digit.
Yes, Christine has nodded. The internal problems we have struggled with because of turbulence of macroeconomic, we have now been able to manage that. If we manage that, what we do is grow. Does the capital allow us? Yes. Core capital to risk-weighted assets of 19% gives us headroom to be able to fund the growth significantly. Total capital to risk-weighted assets of 20.5% against 14% gives us a headroom of 650 basis points. The best number is liquidity. They always say cash is king. We have a liquidity of 64.7% of the balance sheet. What does it mean? That we can comfortably be able to move the balance sheet. We have made it, we have optimized it, we have made it agile, so we can move resources from low-earning government bonds into lending, because the environment is enabling.
The balance sheet has become pretty agile. The more important thing, as the chief executive of the organization, I can say with certainty that we now have been able to wrestle with the shock, we've been able to stabilize them, and we can predict the future. That can be tested by how we predicted and gave you guidance on the performance of this year. We had told you our loan growth will grow between 5%-10%. We gave you 7.5%. We had told you subsidiaries will contribute 45%-50%. We gave you 51%. We had told you assets in subsidiaries will be between 50%-55%, we gave you 51%. NPLs, we had told you 10%-8%, we are at 10%. Cost of risk, we had told you between 1.8%-2%, we are at 1.7%.
Return on Assets, we had told you will be between 3.2% and 3.7%; we are at 4.2%. Return on Average Equity, we had told 25%-30%; we are at 27%. Cost-income ratio, 48%-52%; we are 51%. We are not missing the target. We have learned to hit the bull's-eye, and that is, to me, what then brings the believability that what we tell you about 2026, we'll deliver. If we are to sell you a share, Mr. Kimotho, factor that you are selling the future. You will be selling a growth of loans of between 8%-12%, deposits of 8%-10%, net interest margin improvement all the way from 8.5% to 9%. Non-funded, you'll be selling 40%-45%. Cost-income ratio, you can see, we are very aggressive there. We'll be able to deliver below what we were.
We were at 51%, we are confident it will be 46%-49%. Return on equity, it will be 25%-30%, and return on assets will be at four. Why not 4.5% or 4.8%? Because we have said the strategy is to grow the balance sheet. To grow that balance sheet. You see, it's not that the ratios on capital are not high, it's because the objective is to grow balance sheet significantly and also, we are anticipating that the war of payout and retention, we have chosen to fund the growth. That is where we are. We are very optimistic. Our subsidiaries, we expect them to continue to punch very hard, and what we expect to see is that, how does the market take Equity and we see Equity industry positioning?
It's not that we are vivid when people say we are the most highest valuable brand. As you can see, we may not be the biggest, but we are the most valuable. That is actual valuation. Brand valuation includes much more than what is tradable. Broadly, if we summarize what we have said, that Equity is announcing a record historical results, 55% growth in profit to KES 75.5 billion. Out of that KES 75.5 billion, KES 21.7 billion will go to shareholders, an increase of 35% dividend payout from KES 16 billion, and from a payout rate of KES 4.25 to a payout of KES 5.25. That this profit contribution is driven across the board. Kenya has grown its profit after tax by 63%. DRC has grown its profitability by 53%. Tanzania has grown its profitability by 125%.
Uganda has grown its profitability by 500%, and DRC has grown its profitability by 58%. That the balance sheet of the group have started showing momentum of growth, with DRC growing its loan book by 17%, Rwanda by 22%, and Tanzania by 61%. We are not just talking that we are entering an era of growth. We can see the growth being registered and that the insurance business has shown very strong momentum, a 75% increase in gross premium return and 36% of its profit, and that we continue to invest 2% of our revenue. Now we have reached KES 99.5 billion investment in the foundation. That's a long and short story. I want to thank you for your patience. The numbers spoke for themselves. I didn't need to sell them. I've outperformed my record of presentation, so you have more time for questions.
Thank you very much. I hope you can get the mics. George wants to go first. Who else want to go so that we give you the mic? Okay. Give the mic. Very good. Give the other lady the mic there. Give her the mic. Very good. Let's take the first three questions. John.
Dr., I like the way today you've become a self-sworn HR man. You say that you'll continue to invest, and invest, but in human capital. An Equity, not a very senior Equity person once told me that hustle of that scale overconfidence is the amount of money that you put in training them. These are things that they also feel and believe in. You said that more or less, the institution is very good at absorbing shocks. Is the worst behind us, whether it is weather, politics, war, and everything else? Do you have any fears for 2027? Thank you.
Brent, what guarantee can you give that we have become resilient enough against shocks? Give the other mic to Therese. Therese, is the balance sheet structured appropriate for agility to respond to any kind of shock? Where is Therese? Therese, you could come and sit. Take this seat, Therese.
Let me respond to the question. You'll notice over the last three years, James showed that expansion in our returns, and this was over a period of challenges when it came to Ukraine, Russia, the elevated inflation, interest rates that played out in our markets, and also the exchange rate volatility. You've seen through difficult times that the business has continued to remain robust, if I can call it that. What is also important is the current position of the balance sheet. James mentioned that the liquidity remains elevated. You'll notice there's a lot of what we would call latent value in our business.
If you do a simple calculation of the proportion of cash to total assets, so this is basically physical cash sitting at our branches, our ATMs, cash reserve requirements with the central bank, it is 20% of our balance sheet as a group of that $15.3 billion. We have 20% of that sitting in cash. Over and above that, we have around just under 30% of our balance sheet in government securities. These are risk-free assets in our context. We are sitting with a very defensive balance sheet, very liquid balance sheet, as we report these record results and higher returns. Our intention, as James mentioned with the outlook, we expect us to reallocate in a disciplined manner, taking cognizance of the risks that are playing out globally, including the geopolitics. We have a lot of levers to pull, whether it's the balance sheet.
Also importantly, we don't need to grow just the balance sheet to generate the returns. I'll point you to our non-funded income. This is essentially revenue streams that do not require us to take credit risk for most part. Our non-funded income to total revenue is 42%, and we're guiding for that to remain at around 40%-45%. We are very wary of how the geopolitics, the global macros transmit onto our balance sheet and our P&L. Hopefully, over the last few years, in spite of all the other global shocks, we've been able to report these results and importantly, continue to report expanding returns. I will highlight, and this goes to James' earlier point around diversification.
The decisions we've made 5 years ago, for instance, to allocate capital to the DRC, which at the time when we reported the consolidated acquisition in 2020, reported a ROE of single digits. As James mentioned, this business is now generating almost 30% and 4% ROA. What we've been able to demonstrate as well, and there was always a perception that the DRC is a challenging environment. We've been able to demonstrate again how we can grow and generate shareholder value in markets across our region, including DRC. That question is actually very important. As we look to grow the business, we've demonstrated our ability to allocate capital, our ability to generate shareholder value from that capital, and also our ability to pay back in terms of dividends to shareholders so they can realize those returns we're generating.
More specifically to the question, our ability to navigate, hopefully, history has shown that we have been able to navigate difficult environments. Our current position, if you look at our balance sheet, we are well-positioned, if things turn out to be a lot more difficult as well.
Thank you very much, Brent. I remember George, first quarter, you asking me what will happen given DRC has tension with its neighbors, M23. If you look at the numbers now. Profitability in DRC is up after tax by 53%. That's what Brent is saying. We're able to navigate. Why? Because the business model is grassroots based. It's ordinary people. It's micro small, while survival. So they borrow and pay their loan despite the challenges. The second aspect I think, maybe George, I don't want you to miss, is that Brent has told you out of the KES 2 trillion, KES 1 trillion is in cash or near cash, KES 400 billion in cash, and KES 600 billion in government securities, all of them which are available for sale.
That gives you the agility and flexibility with which we can respond to opportunities and how defensive the balance sheet is to shocks because the money is in the highest category of quality asset, that is sovereign risk. Let me introduce Tharis. Tharis, as you rightly said, we are not just training our staff, but we are also picking staff globally. Tharis used to be the treasurer of the largest bank in Africa, covering Africa. He's South African, and we said, "Our balance sheet is now like that of the South African banks. Can you come and help us?" That's why I've put the question, how well is the balance sheet flexible to absorb shocks? Tharis.
Thank you. Thank you, and good morning, everyone. We spent a lot of time over the past six months dissecting the balance sheet to make sure that it has been shielded from any major shocks that could potentially happen. What we have done, and you will see also going forward, is that we have de-risked most of our exposures greater than 10 years. Because when the market offers us an opportunity to de-risk our balance sheet, we took advantage of that opportunity during the course and over the past six months. Going forward, the budget will be a lot more agile for growth. We've also spent a lot of time unearthing inefficiencies so that as and when the market offers us an opportunity to grow, we can redirect our liquidity from treasury assets into commercial assets. You would have seen the liquidity ratio sits around 64%.
That was a deliberate step, as the GCEO has explained, that we have taken a very defensive approach in managing the balance sheet. Now that we have gone through, hopefully, the worst that we have seen, we have prepared the balance sheet to take advantage of growth going forward. We're very optimistic. We will work together as a team very collectively, and we have taken the right decisions at the right time that we have structured the balance sheet to prepare us now for growth going forward. There will be a lot of focus on capital value accretive growth. We make sure that every single shilling, every single dollar that we commit to our clients, they must be capital accretive in nature, but also look at the whole overall return for our stakeholders as well.
Very optimistic and, we are, I think, well prepared for future growth, as you can see in the numbers.
Brendan, take the floor.
Yeah.
Exchange positions. Ideally, what Tharis is saying is that we now sweat the balance sheet because it's agile and flexible, and he's inviting you to look at the performance of Treasury Department going forward. He says, "Now I'm in charge, I will sweat this balance sheet. I'll grow it. It's liquid, it is flexible, it's agile, it's responsive, it's big in currencies, it has a lot of cross-border transactions," and he's saying Treasury will compete with lending, to generate more revenue than credit. It's not about yields, it's ability to optimize on balance sheet and convert balance sheet into revenue. The second component of that answer will come from Brendan. Brendan was based in Dubai and UAE. He was orchestrating trade in the largest bank there. We have brought him to become our Group Director for Trade Finance. Again, Trade Finance and Treasury work together.
As you can see, we are avoiding on balance sheet lending and saying, "Why don't we take our customers now to use trade finance assets? Why don't we go to LCs to guarantee so that we minimize the risk of what one would call hardcore financing through credit?" You go into trade finance instrument. So over to you, Brendan, on the same question. Are we well positioned to operate in volatile geopolitical conflict world?
Thanks, James. Yeah. Over the last few months, similar to what Terence has said, we're looking at diversifying the balance sheet. If we talk about diversification, it's not just the balance sheet's made up of different sectors and segments, so it's diversifying across various segments. Then also in the way that we look at our solutioning. Most of the solutioning that we have is obviously short-tenured. There may be others that are slightly longer tenured, but then it's around how we assess that risk, for a specific sector and client that's in that sector. I'm very optimistic. If we look at already going into 2026, there's very positive momentum on the balance sheet, and looking forward to that. I'll pause there. Thank you.
Before going to Dubai, he ran the treasury of the largest bank in Africa, covering the entire trade finance on the African continent. We are built. Last, let me comment, George, on what you said. Yeah, that is what I believe in. Those who know, when I joined the bank many years ago, my nickname then was Mwalimu because I believed in training and teaching. Today, I believe I've become an excellent coach and mentor to my colleagues, with the experience I've gained, the insight I've learned, because I believe that great people make great decisions. Great decisions lead to great outcomes. That is why organizations can never be better than their people.
Truly, as an executive, if there's anything I will ever wish to be remembered for, it's for developing people around me, mentoring and coaching them, and challenging them with the knowledge that they have been equipped. You can see, like now we have said, we'll all convert ourselves into AI experts, and you can see all the way to masters, paid. When I joined the bank, I think we were only two university graduates. You know what we did? In 2002, we made it compulsory for every staff who was in the bank to enroll to university to become a graduate, because I never wanted any staff to ever be discriminated because they never went to a university. Again, another movement has come. I want none of my staff will ever be discriminated because we have become a technology led, that they don't have a technology degree.
They can now have it for free up to master's level. It's all about people. Leadership is about inspiring people, is getting people to do what they can do and sharing your vision, dreaming and being able to articulate the vision. You are right, George.
Good morning and thank you. Congratulations.
Let me invite you to stand so that we can have visibility, and you can introduce yourself.
Good morning and thank you. I was just saying congratulations on the record results. I have three questions. Looking at the total assets, the government securities growth 13%, net loans growth of, I think, 8%. What is your stand in terms of private sector lending going forward, given as CBR has been trending downwards? Are you still going to maintain a defensive stance or what are we going to see in terms of net loans? Two, could you kindly break down the deposit mix? Specifically, I've seen a 4% growth, specifically fixed, and versus CASA. Finally, you mentioned business diversification. I'd like to know the value proposition when it comes to Equity Investment Bank. Thank you.
Thank you very much. Immediately after this, we'll give you the published version of the account. The breakdown of the funding is there. Let me take the two questions about lending. We are very excited that the banking industry with our regulator, Central Bank, we have now found a formula that will tie our lending rates to the Central Bank rates with an automatic movement. The day the Central Bank reduces its rates, there is an automatic reduction of your lending rate. For us at Equity Bank, we're very excited by the trend that the Central Bank has taken over the last four quarters, cutting rates every time because it is making our lending much more affordable. As you can see, because we have been following the Central Bank promptly, we have now started seeing the signs.
I want to draw your attention that for the last six years, we have been experiencing declining lending, particularly in Kenya, and it's the first time we have seen appetite. What we are doing is, we have asked ourselves, how can we encourage customers to borrow? We have seen the pain of interest rates, and we have said, "You don't have to borrow to do what you need to do to import, for instance. We can give you a non-balance sheet tool that is an LC, a guarantee, so that we reduce the cost." We want. The second one is we are focusing this time on ecosystems. We're taking large companies because our balance sheet is big. When you have a capital base of KES 325 billion, if you take 25% of that, it's nearly KES 75 billion.
We can give a single bigger lending, say KES 60. We have gone to the corporate and said, "We can lend you, but we will only lend you if you allow us to lend your entire ecosystem of wholesalers, of distributors, of logistics transporters." That is how we intend to grow the loan book, using ecosystem. As you can see, yes, we grew by 4%. If you look at the projection we have given, we have said the minimum is to double that growth rate to 8% and preferably at 12%. That is the trajectory. What are we doing?
We have asked our foundation, the money we are giving them, can they do more in training young people under the Young Africa Works to get to de-risk them, train them for 11 weeks, provide them guarantees so that we could be able to lend to young people to start business. I will ask maybe Joanne Korir, just to give you a snapshot of what we have done in the last three years with young people, making them come to the bank, being able to borrow. Joanne Korir.
Thank you very much. I'll speak briefly about our Young Africa Works program, together with our key partner, the Mastercard Foundation. The Young Africa Works is a program that's really targeting empowerment of young people through capacity building and enterprise development for them to be able to start business ventures that then become successful. We had a target when we started the program to be able to create, through that initiative, 810,000 jobs through availing capacity building and de-risking tools for young people and in MSMEs. Over the life of that program, I think it's been very largely successful because we've been able to onboard within the program you've seen 962,000 MSMEs that have been onboarded into the program, of whom 720,000 have received mentorship, capacity building 650,000 of those MSMEs receiving capacity building.
Now, in terms of access to credit to be able to fuel their businesses, we've seen a total of $3.12 billion, which is about KES 390 billion, being able to be extended to these MSMEs under the Young Africa Works. In terms of even the performance of that credit, which essentially gives us a picture of how successful are those businesses, they've continued to post very remarkable, outstanding NPLs within that cohort. Very successful businesses among the young people. In terms of job creation, where remember the target was 810,000, they've been able to create triple the number to about 2.4 million jobs as we speak today. 2.1 million as at the end of last year. It's seen remarkable success, and now we are scaling the program, number one to the region, but also number two, to other regions of the country to enhance inclusivity.
Thank you.
400 billion shillings given to 600,000 young people to start businesses. Those young people creating 2.6 million jobs. That is the path we are going. Remember, that was the beginning, the first or second cycle of loans. They were short-term. We're now prolonging the loans from six months, 12 months, 18 months to 24 months so that they start becoming balance sheet creative. Because when it's short, it doesn't create the balance sheet. Again, that is what we'll play on, together with manufacturing. The Africa Recovery and Resilience Plan proposes we support African business people to transform Africa using private sector-led initiatives or private sector development financing, creating jobs in the manufacturing sector. That is how we have really focused on that area. We're very lucky. Where is the group director of credit? Is he in the room? Yeah.
You can see credit has become very big. The senior-most banker we have is in credit. Agriculture director is not in the room. We have now even gone to sectors. SMEs director? Collins. Collins is there. Women lending director? You can see we'll be very aggressive. Our approach is very aggressive lending, because we have really prepared, we are pilot tested and are confident. Yeah. Yes, your turn.
Thank you, Dr. Ari. Mine is a comment first. If you may permit me to say this.
Can we go to the question first?
No, it's a comment because I'm super excited.
Okay. Is a shareholder.
Allow me to thank you. My name is Sally Chepkirir, and I'm a shareholder. Allow me to laud you for not only being the powerhouse that you are, but the blueprint of the organization brand and a trailblazer. Daktari posting such kind of impressive results entails a lot of resilience, a lot of effort, a lot of teamwork. Allow me to laud the board and the management for this great achievements. We thank you for putting this company a touch of quality and a taste of excellence. Now back to my questions. Question one, how has the group social impact and sustainability initiatives translate into business value or risk reduction? Question two, how is the group provisioning for potential economic headwinds in 2026, particularly in markets in our other well-performing subsidiaries?
My final question is, as one of the strongest and largest financial powerhouse, what role does the organization play to catalyze entrepreneurship and support SMEs? Thank you.
Very good, Joanne Korir. Looks like all are your questions.
Okay. Thank you very much, Sally, for that question. Again, it's on MSME development and how we fuel capacity building together with de-risking efforts. We've been very deliberate on that, and it's a big focus area across numerous pillars of our foundation. Like for example, in food and agriculture, we focus on capacity development on farming enterprises. We do the same thing in MSMEs as well. Our training is delivered usually in 3 focus areas. Number 1, around the financial inclusion components. There's entrepreneurship education, and then also we offer digital literacy. Together with that, in terms of accompanying the MSMEs, we've also identified the need to probably promote the appetite of banking and financial institutions generally to offer credit to these MSMEs. We do that through onboarding partners that support us with de-risking tools such as credit guarantees.
We have numerous partners that are currently offering us those tools in terms of credit guarantee. Like for example, we are working with Proparco, we are working with Mastercard Foundation, African Guarantee Fund, just to name a few of some of the de-risking partners that we work with. Even as the MSMEs are currently growing in size, what we are doing now is to say, how can we enhance our offering for them? Because we've noticed that a good number of MSMEs now are scaling. It's to enhance the offering to say, can we offer them the solutions in terms of investment, insurance, and access to other financial tools that they require to grow? We are also building the business clubs to say that how can we continue to maintain the MSMEs that have been in our fold and have demonstrated good growth?
We're very excited because those efforts were rewarded in terms of numbers when we last year received a ranking from Kenya Bankers Association that placed us way ahead of our peers in terms of MSME engagement and lending. Really the bank that's there for the MSMEs. Thank you.
I think, let me just add a little bit, because I think what you've just pointed out is very significant, the social initiatives. If we don't invest in our young people, we're very busy burning the future. Equity has a history of investing in young people, particularly the most disadvantaged under the Wings to Fly. We realized there is no future without the present. We asked ourselves, what can we do with the youth who are jobless, who have university education and have no jobs? That's how we said, Young Africa Works. The objective is to reach 30 million young people starting businesses. As I have said, we have trained nearly 1 million, then financial literacy, business development skills, 700,000, and we have been able to give loans to 600,000.
You can see the NPL, so the non-performing portfolio for that segment is low. They have not only been able to borrow KES 400 billion, but they have been able to create 2.6 million jobs for their fellow youth, who are sisters, brothers, and we think that is the biggest way of detonating the social hiccup that we have seen with young people. When we see whether it's Gen Z, I don't believe it's a political statement. It's an economic statement. It's about a lack of opportunities. We went to school, but we can't feed ourselves, so we have decided to use loans to empower them. We must de-risk them by first of all training them. Because they don't have securities, we paid for a guarantee of $500 million from African Guarantee Fund.
That is why if you see in our NPL coverage, the biggest component is guarantee for those loans so that we don't impair the quality of our loan book while still doing transformation work. Giving a chance to young people to acquire dignity and to improve their lives, and put them on the path of wealth creation. You know our history with women, with a product called Fanikisha, makes it possible for women. It's now nine segments, and it's the flagship product for this bank. 54% of our customers are women because of those deliberate, conscious steps to bring inclusion to women, to women empowerment in economic activities. We have now said we're doing very well with women. Can we do as well with youth? We are very excited. If you look, our biggest focus now, and you'll see this going forward, is focus on the creative industry.
We are setting an entire creative industry. Joy, where is Joy? Joy, you can stand. Joy has been tasked to make sports, programming, fashion, and what else? Tourism. Tourism, a class of investable segments. Why? Because that's where youth want to be. The second one is looking at innovation. John Farah. John Farah graduated from Stanford as a graduate, stayed 10 years in Silicon Valley, then went for his master's in Harvard. We have brought him to the country and said, "We must create truly a Savannah innovation center." He's the one who is running that program. We have given him 600,000 licenses so that he can reach 600,000 people. What we want to do is set Africa's innovation and acceleration hub. Because young people, we have heard a lot about innovation in Kenya, but we don't have unicorns like we have in Nigeria.
We've challenged that team to do whatever it takes. Why? Because they will create enormous value and they will give enormous investment into our country. That is how to lift the country. Ultimately, the shame and indignity of hunger must be dealt with. Our biggest program is on food and agriculture. Where is Harold? Harold joined us recently. You can go there. I would ask you a question recently and said, "Can you crowd in all the donors?" Because you have been in the donor world and focus on agriculture. We have exclusive partnership with World Food Programme, IFAD, and FAO and said, "Let's focus on agriculture." If you look, we were 3% of our loans in agriculture 5 years ago. In Kenya, 16% of the entire loan book is now in agriculture. 5 times in 5 years. The challenge has been the subsidiaries.
At group level, we are at 8%. We have given them ultimatum. By 2030, 30% of our loan book must be in agriculture. We can transform agriculture. By 2050, 2.6 billion people will be living in Africa. If we import almost 85% of our food, how will we feed a population that will be more than double what we have? To avert that disaster, because that will be the worst calamity of all times, not because of lack of land, not because of lack of labor, but because agriculture is rudimentary. We have chosen to lead the continent in transforming agriculture, forming value chain, connecting them globally. We have done that in tea. We have done that in leather. We are focusing on grains. Brent is leading us in that initiative. We have equated transformation agriculture to transformation of the African continent.
If you look at the Africa Recovery and Resilience Plan, it is agriculture pillar one. Can we increase productivity in agriculture six times? Can we do agroprocessing to feed the urban population to export the balance? I'm very confident that we are on track. Brent, do you want to talk a little bit about agriculture and in addition to Africa Recovery and Resilience Plan?
Equity Group has a stated target by 2030, we'll have 30% of our loan book in food and agriculture from the current 10%. Bear in mind, our loan book is around $7 billion-$8 billion. We've come to appreciate that at the end of the day, our economies are largely driven by agriculture and a lot of the jobs that are going to be created, and we have a stated target of creating or helping create direct jobs as well. A lot of this will come across the agricultural value chains. The whole essence of what Equity Group is doing with all these banking businesses, insurance, technology, and how we use the foundation in terms of capacity building. The objective of Equity Group is ultimately to develop value chains. In the agricultural space, we have a holistic approach where we are supporting farmers.
Part of the reason our loan book has not grown to the extent that you've observed is because a lot of our loans currently is very short-dated working capital loans, including to the agricultural sector. As we give working capital to the farmers, as we help connect and build the value chain into agro processing value addition, at least in the agricultural loan book, you'll see the tenor of the loans increase and therefore the loan book building up as you see on our quarterly results. We have an initiative to drive productivity at the farm level, to mechanize farms and also to drive value addition. We have initiatives also all the way to support businesses in the agricultural space to export as well.
We have a big initiative, to put a case in point, around leather and livestock, where we're working with the Italians to essentially import more leather from Kenya. We are essentially positioning Kenya as a quality leather processing hub. This same principles and philosophy of having an integrated approach in leather and livestock from improving productivity all the way to value addition to export markets. We are doing this across other value chains, including tea, coffee, cereals. We're looking to do something in aquaculture as well. Because we operate in the DRC, Tanzania, we also have initiatives around mining as well because of the natural endowments of Africa. What you can maybe get a sense of is we have gone beyond just becoming or just being or playing a commercial bank where we just intermediate financial resources to those that require it.
We're also helping connect, capacitate fragmented value chains and help build and drive more value addition so that Africa's portion of GDP, which is currently 3%, we equate it closer to the population contribution of 19%. Thank you.
I think the second area we indeed talked about is agriculture is very important. There is a bigger opportunity than agriculture, and that is opening up the continent to African Continental Free Trade Area. We have signed with the secretariat to be the facilitator. I'm sure you saw me in Ethiopia signing that we support all the embassies in Kenya to help Kenyans to export in their markets. We have created dashboards for them to be able to do. We have established an office in Dubai because it's a trade hub to help every African in the markets that we operate in to get to global markets. We took the former business development director of the Commonwealth to link us to the 56 Commonwealth countries business centers.
AQ, and maybe Joy, you can take a few minutes and explain about trade missions and how we are developing that capability to foster trade. Now, trade, we are now saying, even if we don't manufacture, let's start trade. If you look at what Kenya has done in the region, it's simply because of the trade mission, and I'm really glad that we have positioned our clients to drive this trade. There's a huge opportunity. Once trade is stabilized, what it does, it demands manufacturing, and that's why the next area is to build manufacturing. That's why I said it will be ecosystem development. Yes.
Thank you, James, and good morning, everyone. We are actively facilitating trade on the continent, not as a policy, but as an actual initiative. James mentioned that we've actually signed an agreement with the AfCFTA, but we've also signed an agreement with the Commonwealth. There are 22 Commonwealth countries in Africa. We're really trying to offer our clients the opportunity to do business in other markets. Once you've grown in one market, where are you going to grow? We want you to grow into the other markets as well. Since 2021, we've done about 60 trade missions. We do them between the East African countries, but we also do them with other African nations. This year, we're taking a group to the Chinese Canton Fair. We are taking people to London. We're taking people to the Caribbean. We're taking people to Turkey.
We're trying to offer our clients the opportunity to go to places where they're sourcing materials from, where they're buying equipment from. That's part of the work that we've been doing. We opened the office in Dubai. We'll see how it goes given everything that's happening right now, which should be short-term. We opened the office in Dubai because we see this corridor of trade really being built between South Asia through the Middle East into East Africa. If you know your history, you know that there are traditional ties between these regions, and those are now really building as trade corridors.
Thank you very much. Imagine when we open those corridors. We said we have 29,000 of our scholars in universities. You saw what we have done with those who did medicine. We have told them to disrupt the health sector. We saw they have built 150 hospitals. They're able to reach 4.6 million patients. Those who did business, we are now challenging them to enter into that space. We want to fund them, we want to take risk on them, because they have learned, and we'll soon start seeing significant value addition and manufacturing. I'm sure Joy didn't talk about your brand, but you can see we have finished research. We're now at policy level, regulation and law, to support GI so that we start making our products to only leave the country when they are finished products.
There's quite a bit that leadership development is all about. It's developing private sector leaders who could help. Again, we have tied those initiatives with health. We have realized the productivity of people is not just about education, it's also about the quality and access to health. By ensuring we are training them and we'll be able to do quite a lot. I have two questions that has come online. LinkedIn, we have Peter Wanga. With NPLs pressure, how is the bank thinking about balancing credit access and risk? I think that has been explained by Dr. John. The second question, how do you think incorporating alternative data sources like mobile money, transaction patterns, and that was what we have been using with Equitel. It's quite a lot to ensure that we're able to know the customer at the personal level, not at the class level.
From Facebook, Waithaka Wamuti, what are your plans for Ethiopia? Yes, Ethiopia, we have an EP office. It has been there for seven years. Ethiopia has talked about opening. We are looking at the legal framework that have been set. We are seeking clarifications. We are looking at that opportunity and it's no secret that Ethiopia is one of the countries that will make us reach 15 countries by 2030. How well are you positioned to compete with the South African banks? Of course, we said the banks that are bigger than us and which are really significant, they're efficient, they have developed their capital, are in South Africa.
The way to compete with them is to borrow from them, their human capital, and tell them, "Do what you did in South Africa for us." If you look at the DRC, Timor, you were trained in South Africa. No, you start. That is our Deputy MD for corporates in DRC. He's live. We brought him from DRC. Eve, the Deputy MD in charge of the southern region, the Katanga, Lualaba, was trained in South Africa. Brent. You start. Brent, our chief strategist, was not only trained in South Africa, he's South African. Brendan. Brendan is South African and manage the trade finance of the largest bank on the continent. There he is. You can see they are sitting together. Those are South Africans. If you want to beat them, work like them.
The most important, the second one is investment in technology. South Africa is very advanced. Is there another South African I've not. There is another one. There's another South African there. I can see a Zimbabwean. Where are the Zimbabweans? Zambians can start with Zimbabweans. Now you can see. Botswana. Essentially, the group is going south. The best way to go south is understand the South. We are tapping into that experience and knowledge so that we are able to improve ourselves. Is there any other question I've answered? Hello. Seeing the mic is with you.
I just want to take you back to your financials, yeah? A few curious things for me. The first is your interest expense going down by 24%, yeah. Of course, having the impact of making your net interest income also go up by 17%. I want to find out how did this happen because, what happened to the interest expense that made it go down this much? Your loan loss provisions down by 28%, could that be as a result of the recoveries? Because generally when you look at your performance, the drive really comes from the reduction in your interest expense, your loan loss provisions, and of course, the drop on your other operating expenses. Non-funded income, when I look at it, that grew only by 7%. Please just explain to me how especially you're able to reduce interest expense by 24%.
Thank you very much. Let me start with the question of interest expense. Interest offered by banks is not determined by an individual bank, it's determined by market. The biggest player in the market when it comes to funding is government. Nobody will give a bank a deposit at a lower rate than they're able to get from treasury bills. Treasury bills earlier on were at 18%. They are now at sub 8%. As you can see, they have reduced from 18 to 8. Consequently, the interest rates we are offering is what people can get from treasury bills. You can see it will even go further down because we eventually realize the full. In terms of NPLs, Alex, if you can project the NPLs, the reason why we didn't need to make provisions is because we were holding high coverage.
Essentially, what you're saying is that if you look at, we didn't reduce, the provisions we were holding. We kept it so as to maintain coverage, as you can see. What we reduced is suspended interest, which was interest. As you can see, interest income didn't grow. It's only 2%. Broadly, our loan was not growing, so we didn't anticipate interest growth. What was reduced was provisions, because NPLs has improved. It's not that it has improved. As you can see in our projection, Alex, now go to projection. If you look at that number we have given, forecast, Alex. If you look at the forecast, we have said, cost of risk. Yeah, let's look at cost of risk, because that's what would tell you provisions. 2025, we had given a guidance of 1.8%-2%.
Look at what we delivered, 1.7%, much lower than even our projection. What it means is that it created a trend, and we started looking at that trend, that the improvement of our loan book recovery, and we said it's because it's corporates, was much better than we could. Look at what we are planning. We are now giving a guidance that cost of risk can come even down to 1.5%. If you think we have reduced provisions by 28%, if it comes to 1.5%, we will reduce even provision by over 30%. Why? Because there is no risk to be provided for. It is the quality improvement of the loan book that we can expect even a further reduction. This is also happening because we had very good coverage. Alex, we go back to coverage. We have a coverage of 111%.
We said it's not necessarily the cash-based coverage because the bulk of our loan, the IFRS coverage, it is up to 111%. Any potential loss on the existing NPLs have already been put in place. We don't need to put more. The last one is trend. What trend are we seeing? We are seeing NPLs coming significantly lower. We have said the NPLs can be as low as 7% this year. That will be another 300 basis point that we'll be reducing. Why is it jumping? Acheng, look at the first slide, NPL ratio by segment. It's because where we had the problem was corporate. Look at corporate, it has moved from 22.4% to 13%. We are thinking this year, corporates, Christine, will close at around what? 9%. 9%. That will be another 400 basis point.
Remember, we have told you repeatedly that we don't have new NPLs in corporate. Any loan that is in that segment is more than five years old. That is why you see them, they are the ones that have been in court. All of them are now in the tailored, and that's why she can say with confidence that corporates will be below 8%, because she knows where they are in court. I hope, Acheng, very good. Last question. Thank you, Kimoba.
Thank you very much, Daktari. I think on behalf of the other shareholders, we are very grateful for
Such a generous dividend and what the group has been able to do within the course of the year. I know it has taken a lot of work from you, your management, your board, and thank you. We can only expect higher this year. Having said that, let me ask maybe one question, and that is about the Equity Life Assurance. According to what you have given us, you have said in terms of return on assets, it was number 3, profitability number 5, and premium number 6. I may want to know, because I didn't see you giving the figures, as at 31st December, how many customers did you have? And how many customers are you expecting to have?
Because if they have been in operation for 3 or so years, and it is number 5 in terms of profitability, and as you have told us, if you want to go far, go with people, I'm sure that the more the number of the people, the more the profitability will be. I may want to know the numbers and how you are expecting the numbers to be in this year or up to 2030. You have been mentioning 2030. By 2030, how many of your customers do you expect to have? Number 2, I have not heard you mention anything about South Sudan since I sat here. I don't know whether you have decided to do away with that market.
Maybe tell us, even if the situation is how, tell us how it is, because I know it doesn't matter the turbulence, with you there on the board and the driving seat, I know something can be done. Those are my two questions, and thank you very much for your good work.
Thank you very much, Joseph Kimotho, for your very kind words. Hadara, all the questions on insurance.
Thank you, Dr. James, and good morning to our investors and colleagues. On the question with respect to number of customers, as at 31st December, we had unique customers, 6.9 million customers, who had consumed insurance from Equity Life, and those are individual customers. With respect to MSMEs, we had about 680 MSMEs consuming insurance solutions. In terms of active policies, we are currently sitting at about 1.2 million policies because some of the policies are short-term in nature, so the customers take them for a short period of time. Now, with respect to where do we see ourselves, that's a.
Now, how many policies have you issued in total?
Oh, we've issued 19.
You gave point in time.
Oh, 19.2 million policies.
19.2 million policies. How many did you issue last year alone?
Last year alone, we issued 5 million policies.
5 million. How many did the industry issue?
Just under 1 million policies.
The rest of the industry issued 1 million, we issued 5 million. That gives you an aspect of where we are going. I didn't focus much on insurance because it's a baby. I want to protect it, not expose it too much. It's the most promising in insurance. 2030. I got stuck in 2030. Remember, I was chairman of Vision 2030 for 15 years, and it was about 2030. Everything for me is where shall we be? That's why wherever we see a gap, we fill the gap. Whether it's health, we fill, whether it's education, we fill gap so that we can get it. Where will we be by 2030? This year, you have only delivered 2.2% of the group profit. How much will the insurance group deliver this year?
Thank you, Dr. James, for that question. We expect to have a more meaningful contribution this year. We're looking at crossing 5%. We know the expectation is for us to be at double digits. Together with the other subsidiaries, we'll work hard to at least surpass 5%. With respect of number of customers, this year, across the insurance group, we're looking at onboarding unique customers, an additional about 1.4 million unique customers distributed between life, general, and health. We are expecting that by 2030, we should be able to be distributing our solutions to about 40% of the group's customers. At 100 million, we'll be targeting 25 million customers by 2030.
Very good. Our focus is that the non-banking group will grow very fast. As you have heard, she has said, "I want to cross-sell. I want to have sold to 40% of the 100 million bank customers." That is why she's very profitable, because she doesn't need brokers or agents. She is being distributed by the banks and online. Our insurances are digital first, so they are online insurance. I'm surprised that the three insurance companies are being loved by how many people?
108
108. Launching three insurance companies. 108 people putting on the table at the end of the year KES 2 billion profit. It tells you the model of the businesses of Equity, and I hope investors have understood that last conversation. I want to take this opportunity to thank you most sincerely, but given that the chairman of the board is in the room, I will call upon him maybe to push the vote of appreciation. Professor Macharia. Those who don't know Professor Macharia, he's a professor of medicine. Any doctor practicing in Kenya went through him. He has been at the University of Nairobi for 35 years. If you have an ENT challenge, he's the best ENT surgeon in Eastern Central Africa, and his clinic is in the Nairobi Hospital space. I will send you an invoice for advertising.
Thank you very much, James, and to our customers, our shareholders, our partners, and our team at Equity Group, good morning. Thank you very much for attending our briefing and coming to celebrate with us the results of 2025. We could not have made those results without the collective effort of all of you and without your continued belief that we'll deliver and that we will continue to be your trusting, listening, and caring partner. I would like, on behalf of the group board, to thank our team throughout the group because it's their efforts that has delivered these results. The team has promised to continue growing the results, continue growing shareholder value, continue giving our clients the solutions that they need to transform their lives and create wealth. That is a commitment that we have had from the top to the bottom.
As you can see from these results, a lot of the improvement in results is because of the efficiencies that the group has created, and we are looking at the group leveraging on these efficiencies now to grow the business aspects of financial intermediation. As you have seen, we are expanding to become a fully integrated financial services group. As per our Africa Recovery and Resilience Plan, we intend to be the most impactful financial services group in this region. Our aim is to make sure that we have lifted our people from poverty through financial services. You've seen our commitment to being leaders in private sector financing for development. There are very few financial institutions, especially banks, that would say that is their focus, financing development by the private sector.
Through our Equity Group Foundation, we continue to impact on the lives of all the communities where we practice. Our operations have mainly been in Kenya, but as our subsidiaries mature and they are able to carry the load of the activities of the group, we are fanning out, starting operations in all the subsidiaries that we operate. So I just want to promise you, at the group board level, we will continue investing in people, we'll continue investing in systems that make us leading in this field, and we'll continue improving our processes so that we continue being the most efficient financial services group. Once again, thank you for spending the morning with us. Asanteni sana [Foreign language].
Thank you, Chairman. Thank you, Chairman, and thank you, Dr. Mwangi. We have come to the end of our Equity Group Holdings PLC full year 2025 investor briefing. We want to thank all of you for coming. As we leave, especially for our analysts and our friends from the Fourth Estate, kindly pick the investor booklet. It is ready together with a press statement as you leave, and the same has also been posted online and especially for analysts because of the investors call tomorrow. Allow me to invite Reverend Evans to close for us with a word of prayer and then we'll do the equity anthem and breakfast will continue to be served.
Thank you very much, Alex. To honor God, let us all stand. Let us pray. Father in heaven, this is the same place we stood last year, asking you of your guidance and blessing, even as we were trusting you for great performance. Lord, like Hannah, we come back to thank you and to honor you because, Lord, you have done it for us as Equity Group. It is indeed, Father, your doings, and so, Lord, we are grateful for every success and every achievement. Heavenly Father, we want to then commit ourselves to you, even for the year 2026. We want to pray, Father, that you'll go before us, helping us to grow even to great heights. Give us the vision to scale for what you have started in us, oh God, we know that you shall bring it to completion.
Expand our capacity to see beyond where we are now and give us faith to build on what You have placed within us. Strengthen us, O God. Lord, we pray that You indeed bless and enlarge our territory, expand our influence, our reach, and increase us in every measure, multiply our resources. Lord, our prayer is that let there be natural, supernatural increase that will come upon this business of our subsidiaries and upon all people who contribute their time, their talents in ensuring that this group continues to grow. Heavenly Father, we thank You for the leadership of our board. We thank You for the executive management. We thank You also for all staff. We thank You for our customers, shareholders, and investors. We thank You for all partners within this organization.
Father, we ask for the spirit of might and courage, just as Joshua received, to rise and take possession of the promised land. Help us to move forward with strength, to confront obstacles with faith, and to possess everything you have prepared for us. Lord, according to your word in Isaiah 60:11, we declare open gates in our lives, in our works, in our homes. Let doors of favor remain open and let opportunities flow without obstruction. Your word also reminds us that, Lord, nations and kings who bring wealth, we pray that Father through us, we'll be able to grow to great heights and that, Father, your hand will remain on us. Establish us, expand us, strengthen us, and guide us, oh God.
Most importantly, Lord, use us and let your hand rest mightily upon every one of us seated in this room and even for those following us, oh God. We declare that in the year 2026, you will make us great again, for what you have promised, you are faithful. Your word reminds us in Numbers that you are not like son of Adam, that you can lie. God, we commit ourselves to you praying for strength and health and that this year will be even better. This is our prayer of faith, and we pray this in the name of the Father, the Son, and the Holy Spirit. Amen.