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Mali: Small Loans, Big Impact

In the middle of a global recession, Kenya's Equity Bank is booming. Microloans as small as $10 are helping the country's budding business people. Can Wall Street learn a lesson from these rural entrepreneurs?

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Segment 1

TITLE
Mini Moguls
VOICEOVER
It's dawn, and Phillip Ndungu has already been to market. It's only the start of what will be a long day. Every morning Phillip prepares hard-boiled eggs, salsa, and fried sausages. It's his micro-business: taking and selling a hot breakfast to his entire neighborhood.
PHILLIP NDUNGU
Often I start my day at 6 a.m. I sell to about 700 people a day before I go to school.
VOICEOVER
Phillip's patch is the suburb of Kawangware, one of the poorest in Nairobi. His small business has earned him respect in what can be a tough place.
PAUL GANDO
Hey, how are you doing?
PHILLIP NDUNGU
Very well.
VOICEOVER
Paul Gando is one of his loyal customers.
PAUL GANDO
What do you have? Let me see.
PHILLIP NDUNGU
I have things for 15 shillings, some for 10, and sausages.
PAUL GANDO
You have smokies. I think this is a very good idea because many boys like that guy wouldn't do such a job. They are scared that girls would look down on them or things like that. But I am impressed by that guy because he's really committed to the job he does, instead of getting involved in drugs.
VOICEOVER
A year ago, Phillip had dropped out of school. He had no money to pay the fees and no way to get a loan.
PHILLIP NDUNGU
Yes, I had a problem paying my school fees, because my job was bringing in less and less money.
VOICEOVER
Then a microlender called Equity Bank opened up in his neighborhood.
PHILLIP NDUNGU
I went and spoke to the bank and they were able to help me out with money for my fees.
VOICEOVER
Phillip was granted a USD$100 loan to start his business. That was enough for Phillip to nurture his microenterprise, take on an assistant, and return to finish his last year of school, paying his own way.
PHILLIP NDUNGU
My life is going well because I'm not having to argue with anyone about taking time off to go to school. Things are going well because I'm self-reliant.
VOICEOVER
Microloans, sometimes for as little as USD$10, are Equity Bank's mainstay. Today, Dr. James Mwangi, the bank's founder and CEO, is opening a new branch in a rural, low-income area that all major banks have avoided.
DR. JAMES MWANGI [CEO, Equity Bank]
We are happy to declare this branch of Equity Bank officially open.
VOICEOVER
Equity's business is booming, while the major international banks are being battered. Mwangi has a very clear view of what created the current financial crisis.
DR. JAMES MWANGI
That was driven by greed as opposed to a need to serve. So it was not the basic tenets of banking; it was more about satisfying human greed.
VOICEOVER
Bringing Kenya's poorest entrepreneurs, people like Phillip, out from the underground economy and into the mainstream has been the secret of Equity's microbanking success.
DR. JAMES MWANGI
Equity has developed a model that has incorporated them, made banking inclusive, and done not only good but also done very well in terms of performance. For the last 10 years, Equity has kept a pace of growth in excess of 100 percent, year in year out. Last year, despite the financial turmoil, Equity was still able to register 110 percent growth in profitability.
VOICEOVER
Equity's success has also been due to its efforts to bring women into Kenya's banking culture. Monica Weaver was working as an underpaid seamstress when an Equity employee came by to talk.
MONICA WEAVER
They were just marketing Equity, telling us how it can empower women. I got a chance to be one of the women who were empowered by the Equity Bank.
VOICEOVER
Monica opened her own account with Equity, and started saving for her own business. The bank charges nothing to open an account and encourages its clients to deposit as little as AUD$1.
MONICA WEAVER
Even to open an account with another bank other than Equity was difficult. For them ...
INTERVIEWER
You tried?
MONICA WEAVER
I tried but it was difficult for me. Because maybe I had 2 shillings with me or 100: to take them to that big bank, it was a shame. But with Equity, even if I only have 50, I'm very comfortable to go and save my 50 shillings. I also gave them the television set if I was unable to pay the loan back.
VOICEOVER
Monica had very little to use as collateral but Equity accepted her small table and television as security. James Mwangi says the bank accepts all kinds of interesting items as loan guarantees.
DR. JAMES MWANGI
I think that a common but strange collateral is the matrimonial bed. We see with married women just a commitment that they will sign off their matrimonial bed. If you look at the level, the volume, in terms of the size of the loans, you can't go beyond what they have, that is the assets that they have, and that is what they value most.
VOICEOVER
Until now, the majority of microbusinesses in Kenya have stayed out of the banking system, using cash instead. For years, the major banks believed that these people were not to be trusted to repay even the smallest loans. James Mwangi has proved that the truth is exactly the opposite: the most poor are, in fact, the most reliable. The default rate on Equity's microloans are the lowest in the banking industry: less than 6 percent. David Mataen is an investment adviser and he's been following Equity Bank's microfinance initiatives.
DAVID MATAEN [Investment Advisor]
If you get to look at the books of micro-institutions, those which got microlendings, their rates of delinquencies is so minimal, is so unbelievable, and that's because of the financial and fiscal responsibility of the individuals who are running these organizations. Some of them have nothing else to turn to. That is the be-all and end-all of their economic wellbeing. They depend on it. They are so emotionally invested in it that they could not let it die.
VOICEOVER
Lillian Macharia built this small hotel and pub with Equity money, but a large part of it burned down recently. Never having been able to afford insurance, Lillian went back to the bank, and without even additional collateral, they gave her a second loan to help rebuild.
LILLIAN MACHARIA
I have noticed that Equity Bank, helps people who can't help themselves. You just have to make an effort to pay them back. When you pay it back they'll give you another loan. I've seen how Equity Bank has helped me and I thank God because, if not for them, someone like me wouldn't be able to do anything else.
VOICEOVER
Mwangi says that this isn't charity, it's good business. He claims that clients like Lillian are the safest bet in banking.
DR. JAMES MWANGI
They are very responsible people, they are people who have been responsible for their lives. It's only that they have never been understood. It's only that they've been measured through other people's lenses and standards. And that's why they fall short. Also, it's a very parochial perception that is upheld. But if you bother to do a lot of groundwork on those types of people, you realize, one, they are very reliable and trustworthy, and that they are committed.
VOICEOVER
James Mwangi still criss-crosses all of Kenya, pushing his Equity Bank into remote areas. When he arrives in the rural town of Thala, he's greeted by a crowd of thousands.
DR. JAMES MWANGI
This is a bank that is a product of the sweat of the Kenyan people, owned by Kenyans, managed by Kenyans, and committed through financial services to transform the lives of our people.
VOICEOVER
Equity has shown that, without a doubt, the farmers, the weavers, and the hawkers in this rural crowd have something to teach the bigger players.
REPORTER
What do you think that a small businessman in Kenya has to teach a Wall Street banker?
DAVID MATAEN
If nothing else, honesty.
PHILLIP NDUNGU
In the next five years I would like to continue doing business and hopefully to study business. Study business so that my business can grow so that I can help the rest of my family.
TITLE
[end credits]