building a Kingdom - Case Study of Kingdom Financial Holdings little

This article presents a case study of sustained entrepreneurial growth of Kingdom Financial Holdings. It is one of the entrepreneurial banks which survived the financial accident that started in Zimbabwe in 2003. The bank was established in 1994 by four entrepreneurial young bankers. It has grown substantially over the years. The case examines the origins, growth and expansion of the bank. It concludes by summarizing lessons or ideas that can be derived from this case that maybe applicable to entrepreneurs.

Profile of an Entrepreneur: Nigel Chanakira

Barclays Home Insurance

Nigel Chanakira was raised in the Highfield suburb of Harare in an entrepreneurial family. His father and uncle operated a communal transport firm modern Express and later diversified into sell shops. Nigel's father later exited the family business. He bought out one of the shops and vast it. While school holidays young Nigel, as the first born, would work in the shops. His parents, particularly his mother, insisted that he fetch an study first.

On completion of high school, Nigel failed to enter dental or healing school, which were his first passions. In fact his grades could only qualify him for the Bachelor of Arts degree programme at the University of Zimbabwe. However, he "sweet-talked his way into a transfer" to the Bachelor in Economics degree programme. Academically he worked hard, exploiting his strong contentious character that was developed While his sporting days. Nigel rigorously applied himself to his academic pursuits and passed his studies with excellent grades, which opened the door to employment as an economist with the sustain Bank of Zimbabwe (Rbz).

During his stint with the sustain Bank, his economic mindset indicated to him that wealth creation was happening in the banking sector therefore he carefully to understand banking and financial markets. While employed at Rbz, he read for a Master's degree in Financial Economics and Financial Markets as establishment for his debut into banking. At the sustain Bank under Dr Moyana, he was part of the investigate team that put together the policy framework for the liberalization of the financial services within the Economic Structural Adjustment Programme. Being at the right place at the right time, he became aware of the opportunities which were opportunity up. Nigel exploited his position to identify the most profitable banking institution to work for as establishment for his future. He headed to Bard reduction House and worked for five years under Charles Gurney.

A short while later the two black executives at Bard, Nick Vingirayi and Gibson Muringai, left to form Intermarket reduction House. Their departure inspired the young Nigel. If these two could create a banking institution of their own so could he, given time. The departure also created an opportunity for him to rise to fill the vacancy. This gave the aspiring banker essential managerial experience. Subsequently he became a director for Bard speculation Services where he gained essential experience in folder management, client relationships and dealing within the dealing department. While there he met Franky Kufa, a young dealer who was making waves, who would later become a key co-entrepreneur with him.

Despite his expert firm engagement his father enrolled Nigel in the Barclays Bank "Start Your Own Business" Programme. Any way what assuredly made an impact on the young entrepreneur was the Empretec Entrepreneur Training programme (May 1994), to which he was introduced by Mrs Tsitsi Masiyiwa. The policy demonstrated that he had the essential entrepreneurial competences.

Nigel talked Charles Gurney into an attempted supervision buy-out of Bard from Anglo -American. This failed and the increasingly frustrated aspiring entrepreneur carefully employment opportunities with Nick Vingirai's Intermarket and Never Mhlanga's National reduction House which was on the verge of being formed - hoping to join as a shareholder since he was acquainted with the promoters. He was denied this opportunity.

Being frustrated at Bard and having been denied entry into the club by pioneers, he resigned in October 1994 with the encouragement of Mrs Masiyiwa to pursue his entrepreneurial dream.

The Dream

Inspired by the messages of his pastor, Rev. Tom Deuschle, and frustrated at his inability to participate in the church's huge building project, Nigel sought a way of generating huge financial resources. While a time of prayer he claims that he had a divine encounter where he obtained a mandate from God to start Kingdom Bank. He visited his pastor and told him of this encounter and the subsequent desire to start a bank. The godly pastor was amazed at the 26 year old with "big spectacles and wearing tennis shoes" who wanted to start a bank. The pastor prayed before counselling the young man. Having been convinced of the genuineness of Nigel's dream, the pastor did something unusual. He asked him to give a testimony to the congregation of how God was foremost him to start a bank. Though timid, the young man complied. That experience was a suited vote of confidence from the godly pastor. It demonstrates the power of mentors to build a protégé.

Nigel teamed up with young Franky Kufa. Nigel Chanakira left Bard at the position of Chief Economist. They would build their own entrepreneurial venture. Their idea was to identify players who had specific competences and would each be able to originate financial resources from his activity. Their vision was to originate a one - stop financial institution gift a reduction house, an asset supervision firm and a merchant bank. Nigel used his Empretec model to create a firm plan for their venture. They headhunted Solomon Mugavazi, a stockbroker from Edwards and firm and B. R. Purohit, a corporate banker from Stanbic. Kufa would furnish money market expertise while Nigel in case,granted wage from government bond dealings as well as total supervision of the team.

Each of the budding partners brought in an equal quantum of the Z0,000 as start-up capital. Nigel talked to his wife and they sold their recently acquired Eastlea home and vehicles to raise the equivalent of Us,000 as their introductory capital. Nigel, his wife and three kids headed back to Highfield to live in with his parents. The partners established Garmony Investments which started trading as an unregistered financial institution. The entrepreneurs agreed not to draw a salary in their first year of operations as a bootstrapping strategy.

Mugavazi introduced and recommended Lysias Sibanda, a chartered accountant, to join the team. Nigel was initially reluctant as each someone had to bring in an earning capacity and it was not clear how an accountant would originate wage at start up in a financial institution. Nigel initially retained a 26% share which assured him a blocking vote as well as giving him the position of controlling shareholder.

Nigel earnings the Success Motivation create (Smi) policy "The Dynamics of prosperous Management" as the lethal weapon that enabled him to fetch managerial competences. Initially he insisted that all his key executives undertake this training programme.

Birth of the Kingdom

Kingdom Securities P/L commenced operations in November 1994 as a fully owned subsidiary of Garmony Investments (Pvt) Ltd. It traded as a broker on both money and stock markets.

On 24th February 1995 Kingdom Securities keeping was born with the following subsidiaries: Kingdom Securities Ltd, Kingdom Stockbrokers (Pvt) Ltd and Kingdom Asset Managers (Pvt) Ltd. The flagship Kingdom Securities Ltd was registered as a reduction House under Banking Act part 188 on 25th July 1995. Kingdom Stockbrokers was registered with the Zimbabwe Stock replacement under Zse part 195 on 1st August 1995. The pre-licensing trading had generated good wage but they still had a 20% deficit of the required capital. Most institutional investors turned them down as they were a greenfield firm promoted by people perceived to be "too young". At this stage National Merchant Bank, Intermarket and others were on the market raising equity and these were run by seasoned and mature promoters. Any way Rachel Kupara, then Md for Zimnat, believed in the young entrepreneurs and took up the first equity quantum for Zimnat at 5%.

Norman Sachikonye, then Financial Director and Investments boss at First Mutual followed suit, taking up an equity share of 15%. These two institutional investors were inducted as shareholders of Kingdom Securities Holdings on 1st August 1995. Garmony Investments ceased operations and reversed itself into Kingdom Securities on 31st July 1995, thereby becoming an 80% shareholder.

The first year of operations was marked by intense competition as well as discrimination against new financial institutions by communal organisations. All the other operating units performed well except for the corporate finance group with Kingdom Securities, led by Purohit. This monetary loss, differing spiritual and ethical values led to the forced departure of Purohit as an administrative director and shareholder on 31st December 1995. From then the Kingdom started to grow exponentially.

Structural Growth

Nigel and his team pursued an aggressive growth strategy with the intention of addition market share, profitability, and geographic spread while developing a strong brand. The growth strategy was built nearby a firm doctrine of simplifying financial services and making them assuredly accessible to the general public. An It strategy that created a low cost delivery channel exploiting Atms and Pos while providing a platform that was ready for Internet and web-based applications, was espoused.

On 1st April 1997, Kingdom Financial Services was licensed as an accepting house focusing on trading and distributing foreign currency, treasury activities, corporate finance, speculation banking and advisory services. It was formed under the leadership of Victor Chando with the intention of becoming the merchant banking arm of the Group. In 1998, Kingdom Merchant Bank (Kmb) was licensed and it took over the assets and liabilities of Kingdom Securities Limited. Its main focus was treasury connected products, off-balance sheet finance, foreign currency and trade finance. Kingdom investigate create was established as a sustain aid to the other units.

The entrepreneurial bankers, cognisant of their limitations, sought to accomplish essential mass fast by actively seeking capital injection from equity investors. The aim was to broaden possession while lending strategic sustain in areas of mutual interest. An attempt at equity uptake from Global Emerging Markets from London failed. Any way in 1997 the efforts of the bankers were rewarded when the following organisations took up some equity, reducing the shareholding of administrative directors as shown below: ïEur Ipcorn 0.7%, ïEur Zambezi Fund Mauritius P/L 1.1%, ïEur Zambezi Fund P/L 0.7%. ïEur Kingdom laborer Share Trust 5%, ïEur Southern Africa firm amelioration Fund - 8% redeemable preference shares amounting to Us,5m as the first investee firm in Southern Africa from the Us Fund initiated by Us President Bill Clinton, ïEur Weiland Investments, a firm belonging to Mr Richard Muirimi, a long standing friend of Nigel and join together in the fund supervision firm took up 1.7%, Garmony Investments 71.7% -executive directors. ïEur After a possession issue Zimnat fell to 4.8% while Fml went down to 14.3%.

In 1998, Kingdom launched four Unit Trusts which proved very favorite with the market. Initially these products were focused at individual clients of the reduction house as well as private portfolios of Kingdom Stockbroking. Aggressive marketing and awareness campaigns established the Kingdom Unit Trust as the most favorite sell brand of the group. The Kingdom brand was thus born.

Acquisition of reduction firm of Zimbabwe (Dcz)

After a spurt of organic growth, the Kingdom entrepreneurs decided to compel the growth rate synergistically. They set out to fetch the oldest reduction house in the country and the world, The reduction firm of Zimbabwe, which was a listed entity. With this acquisition Kingdom would fetch essential competences as well as accomplish the much coveted Zse listing inexpensively straight through a reverse listing. introductory efforts at a negotiated merger with Dcz were rebuffed by its executives who could not countenance a forty year old institution being swallowed up by a four year old business. The entrepreneurs were not deterred. Nigel approached his friend Greg Brackenridge at Stanbic to finance and effect the acquisition of the sixty percent shares which were in the hands of about ten shareholders, on profit of Kingdom Financial Holdings but to be settled in the possession of Stanbic Nominees. This strategy masked the identity of the acquirer. Claud Chonzi, the National communal safety Authority (Nssa) Gm and a friend to Lysias Sibanda (a Kingdom administrative director), agreed to act as a front in the negotiations with the Dcz shareholders. Nssa is a well known institutional investor and hence these shareholders may have believed that they were dealing with an institutional investor. Once Kingdom controlled 60% of Dcz, it took over the firm and reverse listed itself onto the Stock replacement as Kingdom Financial Holdings exiguous (Kfhl). Because of the negative real interest rates, Kingdom successfully used debt finance to buildings the acquisition. This acquisition and the subsequent listing gave the once despised young entrepreneurs confidence and credibility on the market.

Other Strategic Acquisitions

Within the same year Kingdom Merchant Bank acquired a strategic stake in Cfx Bureau de turn owned by Sean Maloney as well as other stake in a greenfield microlending franchise, Pfihwa P/L. Cfx was changed into Kfx and used in most foreign currency trading activities. Kfhl set as a strategic intention the acquisition of an further 24.9% stake in Cfx Holdings to safeguard the introductory speculation and ensure supervision control. This did not work out. Instead, Sean Maloney opted out and took over the failed Universal Merchant Bank licence to form Cfx Merchant Bank. Although Kingdom executives speak that the alliance failed due to the abolition of bureau de turn by government, it appears that Sean Maloney refused to give up operate of the extra shareholding sought by Kingdom. It therefore would be reasonable that once Kingdom could not operate Kfx, a fall out ensued. The liquidation of this speculation in 2002 resulted in a loss of Z3 million on that investment. Any way this was manageable in light of the strong group profitability.

Pfihwa P/L financed the informal sector as a form of corporate communal responsibility. Any way when the hyperinflationary environment and stringent regulatory environment encroached on the viability of the project, it was wound up in early 2004. Kingdom pursued its financing of the informal sector straight through MicroKing, which was established with international assistance. By 2002 MicroKing had eight branches settled in the midst of, or near, micro-enterprise clusters.

In 2000, due to increased performance on the foreign currency front within the banking sector, Kingdom opened a private banking facility straight through the reduction house to exploit wage streams from this market. Following market trends, it engaged the assurance firm Aig to enter the bancassurance market in 2003.

Meikles Strategic Alliance

In 1999 the entrepreneurial Chanakira on advice from his executives and the legendary corporate finance team from Barclays bank led by the affable Hugh Van Hoffen entered into a strategic alliance with Meikles Africa whereby it injected some Z2 million into Kingdom for an equity shareholding of 25%. Interestingly, the deal nearly collapsed on pricing as Meikles only wanted to pay 0 million whilst Kfhl valued themselves at Z2 million which in real terms was the largest private sector deal done between an indigenous bank and a listed corporate. Nigel testifies that it was a walk straight through the incomplete Celebration Church site on the Saturday preceding the signing of the Meikles deal that led him to sign the deal which he saw as a means for him to sow a whopping seed into the church to boost the building Fund. God was faithful! Kingdom's share price shot up dramatically from ,15 at the time he made the commitment to the Pastor all the way to 2,00 by the following October!

In return Kingdom acquired a suited cash-rich shareholder that allowed it entrance into sell banking straight through an innovative in-store banking strategy. Meikles Africa opened its sell branches, namely Tm Supermarkets, Clicks, Barbours, Medix Pharmacies and Greatermans, as distribution channels for Kingdom commercial bank or as catalogue holders providing deposits and requiring banking services. This was a cheaper way of entering sell banking. It proved beneficial While the 2003 cash accident because Meikles with its huge cash resources within its firm units assisted Kingdom Bank, thus cushioning it from a liquidity crisis. The alliance also raised the prestige and credibility of Kingdom Bank and created an opportunity for Kingdom to finance Meikles Africa's customers straight through the jointly owned Meikles Financial Services. Kingdom in case,granted the funding for all lease and hire purchases from Meikles' subsidiaries, thus driving sales for Meikles while providing easy lending opportunities for Kingdom. Meikles managed the relationship with the client.

Meikles Africa as a strategic shareholder assured Kingdom of success when recapitalisation was required and has enhanced Kingdom's brand image. This strategic relationship has created suited synergies for mutual benefit.

Commercial Banking

Exploiting the opportunities arising from the strategic relationship with Meikles Africa, Kingdom made its debut into sell banking in January 2001 with in-store branches at High Glen and Chitungwiza Tm supermarkets. The target was principally the mass market. This rode on the strong brand Kingdom had created straight through the Unit Trusts. In-store banking offered low cost delivery channels with minimal speculation in brick and mortar. By the end of 2001, thirteen branches were operational over the country. This followed a deliberate strategy for aggressive roll-out of the branches with two flagship branches ïEur­ïEur one in Bulawayo and the other in Harare. There was a huge emphasis on an It driven strategy with essential cross-selling between the commercial bank and other Sbus.

However, it was further discovered that there was a market for the upmarket clients and hence Crown banking outlets were established to diversify the target market. In 2004, after closing three in-store branches in a rationalization exercise, there were 16 in-store branches and 9 Crown banking outlets.

The entrance into commercial banking was probably held at the wrong time, considering the imminent changes in the banking industry. commercial banking does furnish cheap deposits, Any way at the price of huge staff costs and human resource supervision complications. Nigel concedes that, with hindsight, this could have been delayed or done at a slower pace. However, the need for increased market share in a fiercely contentious industry necessitated this. other imagine for chronic with the commercial banking project was that of prior agreements with Meikles Africa. It is potential that Meikles Africa had been sold on the equity take-up deal on the back of promises to engage in in-store banking, which would growth wage for its subsidiaries.

Innovative Products and Services

Kfhl prolonged its aggressive pursuit of product innovation. After the failure of the Kfx project, CurrencyKing was established to continue the work. Any way this was abolished in November 2002 by government ministerial intervention when bureau de turn were prohibited in an attempt to stamp out parallel market foreign currency trading.

Sadly this governmental decision was misguided for not only did it fail to banish foreign currency parallel trading but it drove underground, made it more lucrative and subsequently the government lost all operate of the supervision of the replacement rate.

In October 2002, Kfhl established Kingdom Leasing after being granted a finance house licence. Its mandate was to exploit opportunities to trade in financial leases, lease hire and short term financial products.

Regional Expansion

Around 2000 it became obvious that the domestic market was highly competitive, with exiguous prospects of time to come growth. A decision was made to diversify wage streams and cut country risk straight through penetration into the regional markets. This strategy would exploit the proven competences in securities trading, asset supervision and corporate advisory services from a small capital base. Therefore the entrance had low risk in terms of capital injection. considering the foreign replacement operate limitations and shortage of foreign currency in Zimbabwe, this was a prudent strategy but not without its downside, as will be seen in the Botswana venture.

In 2001, Kfhl acquired a 25.1% stake in a greenfield banking firm in Malawi, First reduction House Ltd. To safeguard its speculation and ensure managerial control, an administrative director and dealer were seconded to the Malawi speculation while Nigel Chanakira chaired the Board. This speculation has prolonged to grow and yield definite returns. As of July 2006 Kingdom had ultimately managed to up its stake from 25,1% to 40% in this speculation and may ultimately operate it to the point of seeking a conversion of the license to a commercial bank.

Kfhl also took up a 25% equity stake in Investrust Merchant Bank Zambia. Franky Kufa was seconded to it as an administrative director while Nigel took a seat on the Board.

Kfhl had been promised an selection to gain a controlling stake. Any way when the bank stabilized, the Zambian shareholders entered into some questionable transactions and were not prepared to allow Kfhl to up it's stake and so Kfhl decided to pull out as relationships turned frosty. The Zambian Central Bank intervened with a promise to grant Kfhl its own banking license. This did not materialize as the Zambian Central Bank exploited the banking accident in Zimbabwe to deny Khfl a licence. A reasonable premium of Z.5 billion was obtained at disinvestment.

In Botswana, a subsidiary called Kingdom Bank Africa Ltd (Kbal) was established as an offshore bank in the International Finance Centre. Kbal was intended to spearhead and conduct regional initiatives for Kingdom. It was headed by Mrs Irene Chamney, seconded by Lysias Sibanda with the concurrence of Nigel after managerial challenges in Zimbabwe. Two other senior executives were seconded there. She successfully set up the Kbal's banking infrastructure and had good relations with the Botswana authorities.

However, the firm model chosen of an offshore bank ahead of a domestic Botswana merchant bank license turned out to be the Achilles heel of the bank more so when the Zimbabwe banking accident set in between 2003 and 2005. There were underlying differences in how Mrs Chamney and Chanakira saw the bank surviving and going forward.

Ultimately, it was deemed prudent for Mrs. Chamney to leave the bank in 2005. In 2001 Kfhl acquired the mandate as the sole seeder of the American Express card in the whole of Africa except for Rsa. This was handled straight through Kbal. Kingdom private Bank was transferred from the reduction house to become a subsidiary of Kbal due to the prevailing regulatory environment in Zimbabwe.

In 2004 Kbal was temporarily settled under curatorship due to undercapitalisation. At this stage the parent firm had regulatory constraints that prevented foreign currency capital injection.

A solution was found in the sourcing of local partners and the replacement of Us million previously realised from the proceeds of the Investrust liquidation to Botswana. Nigel Chanakira took a more active supervision role in Kbal because of its huge strategic importance to the time to come of Kfhl. Currently efforts are underway to fetch a local commercial bank licence in Botswana as well. Once this is acquired there are two potential scenarios, namely maintaining both licences or giving up the offshore licence.

The interviewees were divided in their understanding on this. Any way in my view, judging from the stakeholder power involved, Kfhl is likely to give up the off shore banking licence and use the local Kingdom Bank Botswana (Pula Bank) licence for regional and domestic expansion.

Human Resources

The staff complement grew from the introductory 23 in 1995 to more than 947 by 2003. The growth was consistent with the growing institution. It exploded, especially While the kick off and expansion of the commercial bank. Kingdom from inception had a strong human resourcing strategy which entailed essential training both internally and externally. Before the foreign currency crisis, employees were sent for training in such countries as Rsa, Sweden, India and the Usa. In the someone of Faith Ntabeni Bhebhe, Kingdom had an energetic Hr driver who created suited Hr systems for the emerging behemoth.

As a sign of its commitment to building the human resource capability, in 1998 Kingdom Financial Services entered a supervision bargain with Holland based Amsco for the provision of seasoned bankers. straight through this strategic alliance Kingdom strengthened its skills base and increased opportunities for skills replacement to locals. This helped the entrepreneurial bankers originate a solid managerial ideas for the bank while the seasoned bankers from Holland compensated for the youthfulness of the emerging bankers. What a foresight!

In-house self-paced interactive learning, team building exercises and mentoring were all part of the studying menu targeted at developing the human resource capacity of the group. Work and job profiling was introduced to best match employees to convenient posts. Work path and succession planning were embraced. Kingdom was the first entrepreneurial bank to have flat unforced Ceo transitions. The founding Ceo passed on the baton to Lysias Sibanda in 1999 as he stepped into the role of Group Ceo and board deputy chair. His role was now to pursue and spearhead global and regional niche financial markets. A few years later there was other turn of the guard as

Franky Kufa stepped in as Group Ceo to replace Sibanda, who resigned on healing grounds. One could argue that these flat transitions were due to the fact that the baton was passing to founding directors.

With the explosive growth in staff complement due to the commercial bank project, culture issues emerged. Consequently, Kfhl engaged in an enculturation programme resulting in a culture revolution dubbed "Team Kingdom". This culture had to be reinforced due to dilutions straight through essential mergers and acquisitions, essential staff turnover because of increased competition, emigration to greener pastures and the age profile of the staff increased the risk of high mobility and fraudulent activities in collusion with members of the public. Culture changes are difficult to effect and their effectiveness even harder to assess.

In 2004, with a high staff turnover of nearby 14%, a recompense strategy that ring fenced essential skills like It and treasury was implemented. Due to the low margins and the financial stress experienced in 2004, Kfhl lost more than 341 staff members due to retrenchment, natural attrition and emigration. This was standard as profitability fell while staff costs soared. At this stage, staff costs accounted for 58% of all expenses.

Despite the impressive growth, the financial doing when inflation adjusted was mediocre. assuredly a loss position was reported in 2004. This growth was severely compromised by the hyperinflationary conditions and the restrictive regulatory environment.

Conclusion

This article shows the measurement of entrepreneurs to push straight through to the realisation of their dreams despite essential odds. In a subsequent article we will tackle the challenges faced by Nigel Chanakira in solidifying his investments.

building a Kingdom - Case Study of Kingdom Financial Holdings little