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James Mugambi, the man who sold Sh. 1.8 billion business to Equity Bank

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The 2008 acquisition of a Uganda-based micro-lender by Equity Bank was a dream come true for serial entrepreneur James Mugambi.

He was among the top owners of the micro finance and took a huge again when Equity Bank acquired the small lender for Sh. 1.8 billion.

The acquisition came in the form of a share swap. According to a reports, Mugambi and his business partner, Tim Carson, the founders of Micro Kenya, which rebranded to Micro Africa and later bought Uganda Microfinance, had left Nairobi in 2000 to start a micro lender offering loans to private sector employees through a check-off system.

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“Upon setting shop in Uganda, we realized that there were investment opportunities and diversified into business lending,” James Mugambi told a local daily. He had started Micro-Kenya as a part-time job while working in Uganda before resigning to concentrate on the growing business. The two partners later rebranded it Micro Africa, to reflect its regional presence after expanding to Rwanda and Tanzania in 2004.

“We had a five-year investment plan. We identified our weaknesses and learnt from other successful financial institutions that sold the brand first rather than personality,” he said.

Further details in the press said that in Rwanda, the firm operated under the name Rwanda Micro-finance offering loans to private sector employees and entrepreneurs, riding on the growing appetite for cash as Rwandese rebuilt their lives after the 1994 genocide. Its regional presence attracted humanitarian aid agencies in search of partnerships to improve service delivery and reach more poor households.

In 2006, Micro-Africa took over a micro-finance programme in South Sudan from American Refugee Committee and named it Finance South Sudan (FSS). The firm offered loans to groups and individuals to reduce poverty levels in the region.

In 2006, Micro-Africa moved into Tanzania, acquiring a 25 per cent stake in micro-lender Tujijenge Tanzania. Seven years later, Mr Mugambi and Mr Carson sold their entire stake in Micro Africa Group that included Micro Kenya, Micro Uganda, Rwanda Micro Finance, Tujijenge Tanzania and Finance South Sudan to Letshego Holding Ltd, a listed company in Botswana in a multi-billion shilling deal.

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The serial entrepreneurs took on a new business challenge in 2014 and established Premier Credit Limited — a micro-finance company that targets small and medium-sized enterprises. It was a huge investment that needed a lot of capital forcing them to invite deep-pocketed institutions like Platcorp Holdings (a company associated with investment firm Centum) for Sh. 500 million working capital to bankroll their plan.

Although their first business, Micro Kenya took seven years before posting profit due to stiff competition from banks, Premier Credit turned into a success by the end of its first year. A year on, it has nine branches with a portfolio of Sh. 680 million and 120 staff members.

“Even in failures there are successes. Success in the sense that you learn from mistakes and avoid them next time you are into something similar,” said Mugambi. Premier Credit opened branches in Nairobi, Nakuru and Eldoret. The micro-finance institution offered loans to individuals or groups.

“We noticed that collateral remains a big issue that dampen the hopes of many potential borrowers and we worked on systematic measures that put more emphasis on the borrower’s background, their character and credit experience, including the nature of the business they are in or intend to do,” said James Mugambi. “We also noticed that medium and lower segment of market clients always pay their loans.”

Mugambi’s list of role models includes James Mwangi, the chief executive officer of Equity Group Holdings . “Here is a man who turned a building society into one of the biggest banks in the region, attracting global recognition. He has taught me the wisdom of believing in your brand first and selling the brand rather than the personality behind it,” he said.

Parts of this feature were adapted from the Business Daily.

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