Equity Bank is now a major United Nations (UN) banker in South Sudan, a move that could help it revamp operations in the young democracy.
The bank said it will host accounts for 41 humanitarian agencies run under the UN umbrella body which are major beneficiaries of donor and international funding in a country rebuilding after decades of war.
“We won the tender to bank the UN humanitarian agencies, 41 of them,” said James Mwangi, the chief executive of the bank.
“While the commercial sector may not be performing so well, the humanitarian economy which banks in international currencies and pays out in South Sudanese pounds will be very profitable,” he added.
In the first three months of the year Equity Bank posted a 95 per cent drop in earnings from the South Sudan subsidiary to Sh20 million. Deposits with the bank shrunk by 61 per cent to Sh10.5 billion while loans contracted by 89 per cent to Sh400 million.
The subsidiary had previously been a well-oiled profit-churning machine exceeding the Sh1 billion mark in 2012 before a turn in fortunes following collapse of the government in 2013 and subsequent devaluation of the South Sudanese pound by 84 per cent last year.
Foreign exchange earnings were the key profit drivers in the country given most of the populace does not have assets to offer as security for loans.
The banks forex earnings dropped by 27 per cent due to the loss of business in South Sudan.
The new business line with UN will also drive transaction income for the bank as the donor funds flow into the economy.
Equity also banks several embassies with residence in South Sudan.
The recent signing of a peace agreement between President Silva Kiir and his rival Riek Machar is expected to stir economic development.
Oil drilling in the country came to a stop during the conflict, depriving the economy its key driver resulting in a cash crunch.
The devaluation of the South Sudan pound last year also resulted in agitation for higher salaries to cover for the sudden fall in the level of income.
Source: Business Daily