Building a Kingdom – Case Study of Kingdom Financial Holdings Limited

This article presents a case study of sustained entrepreneurial growth by Kingdom Financial Holdings. It is one of the entrepreneurial banks that survived the financial crisis that started in Zimbabwe in 2003. The bank was established in 1994 by four entrepreneurial young bankers. It has grown significantly over the years. The case investigates the bank’s origin, growth and expansion. It concludes by summarizing lessons or principles that can be deduced from this case that may be applicable to entrepreneurs.

Profile of an entrepreneur: Nigel Chanakira

Nigel Chanakira was raised in the Highfield suburb of Harare in an entrepreneurial family. His father and uncle ran a public transport company Modern Express and later diversified into retail outlets. Nigel’s father later left the family business. I bought one of the stores and expanded it. During the school holidays, young Nigel, like the firstborn, would work in the stores. His parents, especially his mother, insisted that he should have an education first.

After completing high school, Nigel failed to enter a dentist or medical school, which were his first passions. In fact, his grades could only qualify him for the Bachelor of Arts degree at the University of Zimbabwe. However, I “sweet talked his way into a transfer” to the bachelor’s degree in economics. Academically, I have worked hard and utilized his strong competitiveness that developed in his sporting days. Nigel applied rigorously to his academic activities and passed his studies with outstanding grades, which opened the door to employment as an economist at the Reserve Bank of Zimbabwe (RBZ).

During his work with the Reserve Bank, his economic thinking indicated to him that wealth creation was taking place in the banking sector, which is why I decided to understand banking and financial markets. While employed at RBZ, I read for a Masters Degree in Financial Economics and Financial Markets in preparation for his debut in Banking. At Reserve Bank under Dr. Moyana was part of the research team that put together the policy framework for liberalizing financial services within the Economic Structural Adjustment Program. When I was in the right place at the right time, I became aware of the opportunities that opened up. Nigel utilized his position to identify the most profitable banking institution to work for in preparation for his future. He went to the Bard Discount House and worked for five years under Charles Gurney.

A short time later, the two black executives at Bard, Nick Vingirayi and Gibson Muringai, left to form the Intermarket Discount House. Their departure inspired the young Nigel. If these two could set up their own banking institution, then he could, given the time. The departure also created an opportunity for him to rise to fill the vacancy. This provided the hopeful banker with critical management experience. Subsequently, I became director of Bard Investment Services, where I gained critical experience in portfolio management, client relations and dealership trading. While there, he met Franky Kufa, a young dealership in waves who would later become an important partner with him.

Despite his professional business commitment, his father Nigel enrolled in Barclays Bank’s “Start Your Own Business” program. But what really influenced the young entrepreneur was the Empretec Entrepreneur Training program (May 1994), which he introduced by Ms. Tsitsi Masiyiwa. The course demonstrated that he had the necessary entrepreneurial skills.

Nigel spoke to Charles Gurney in a bid for Anglo-American leadership acquisition by Bard. This failed, and the still frustrated hopeful entrepreneur considered employment opportunities with Nick Vingirai’s Intermarket and Never Mhlanga’s National Discount House, which was on the brink of being formed – hoping to become a shareholder since becoming acquainted with the promoters. I was denied this opportunity.

As I am frustrated with Bard and have been denied entry into the Club by Pioneers, I have resigned in October 1994 with the encouragement of Ms. Masiyiwa to pursue his entrepreneurial dream.

The dream

Inspired by the messages of his pastor, Pastor Tom Deuschle, and frustrated by his inability to participate in the church’s massive construction project, Nigel sought a way to create enormous financial resources. In a prayer time, he claims he had a divine meeting where I got a mandate from God to start Kingdom Bank. I have visited his pastor and told him about this meeting and the subsequent desire to start a bank. The godly priest was amazed at the 26-year-old with “big glasses and wearing tennis shoes” who would start a bank. The priest prayed before counseling the young man. After being convinced of the authenticity of Nigel’s dream, the priest did something unusual. I asked him to give testimony to the congregation about how God led him to start a bank. Although shy, the young man followed. This experience was a powerful poll from the godly priest. It demonstrates the strength of mentors to build a protégé.

Nigel collaborated with the young Franky Kufa. Nigel Chanakira left Bard in the post of chief economist. They would build their own entrepreneurial venture. Their idea was to identify players who had specific skills and could each generate financial resources from their activity. Their vision was to create a one-stop financial institution that offers a low-cost house, an asset management company and a commercial bank. Nigel used his Empretec model to develop a business plan for their efforts. They headhunted Solomon Mugavazi, an Edwards and Company broker and B. R. Purohit, a Stanbic business banker. Kufa would provide money market expertise while Nigel provided government bond revenue as well as overall team monitoring.

Each of the budding partners brought in an equal amount of $ 120,000 Z as a startup capital. Nigel spoke with his wife, and they sold their recently acquired Eastlea homes and vehicles to raise the equivalent of $ 17,000 as their original capital. Nigel, his wife and three children traveled back to Highfield to live with his parents. The partners established Garmony Investments, which began trading as an unregistered financial institution. Entrepreneurs agreed not to pull wages in their first year of operation as a bootstrapping strategy.

Mugavazi introduced and recommended Lysias Sibanda, a chartered accountant, to join the team. Nigel was initially reluctant as each person would have to make a profit, and it was not clear how an accountant would generate revenue on startup in a financial institution. Nigel initially retained a 26% stake, which secured him a blocking vote and gave him the position as controlling shareholder.

Nigel credits the Success Motivation Institute (SMI) course “The Dynamics of Successful Management” as the deadly weapon that enabled him to acquire managerial skills. For starters, I have insisted that all of his key leaders complete this training program.

Kingdom birth

Kingdom Securities P / L began in November 1994 as a wholly owned subsidiary of Garmony Investments (Pvt) Ltd. It acted as a broker in both money and stock markets.

On February 24, 1995, Kingdom Securities Holding was born with the following subsidiaries: Kingdom Securities Ltd, Kingdom Stockbrokers (Pvt) Ltd and Kingdom Asset Managers (Pvt) Ltd. The Kingdom Securities Ltd flagship was registered as a Discount House under Bank Act Chapter 188 on July 25, 1995. Kingdom Stockbrokers were registered on the Zimbabwe Stock Exchange under ZSE Chapter 195 on August 1, 1995. The pre-licensed trade had generated good revenue, but they still had a deficit of 20% of the required capital. Most institutional investors rejected them as they were a greenfield company promoted by people who were perceived as “too young”. At this time, National Merchant Bank, Intermarket and others in the market were raising equity, and these were run by experienced and mature promoters. However, Rachel Kupara, the then CEO of Zimnat, believed in the young entrepreneurs and took the first 5% stake in Zimnat.

Norman Sachikonye, ​​then CFO and investment manager at First Mutual followed suit, taking a 15% equity stake. These two institutional investors were incorporated as shareholders of Kingdom Securities Holdings on August 1, 1995. Garmony Investments ceased its operations and returned to Kingdom Securities on July 31, 1995, thus becoming 80% of the shareholders.

The first year of operation was characterized by intense competition as well as discrimination against new financial institutions from public organizations. All other operating units performed well except for the business administration department with Kingdom Securities, led by Purohit. This monetary loss, various spiritual and ethical values ​​led Purohit to resign as director and shareholder on December 31, 1995. From that point on, the Kingdom began to grow exponentially.

Structural growth

Nigel and his team pursued an aggressive growth strategy aimed at increasing market share, profitability and geographical spread while developing a strong brand. The growth strategy was built around a business philosophy of simplifying financial services and making them easily accessible to the public. An IT strategy that created a low-cost delivery channel that leveraged ATMs and POS while providing a platform that was ready for the Internet and web-based applications was spoiled.

On April 1, 1997, Kingdom Financial Services was licensed as an accepting house focusing on foreign exchange trading and distribution, treasury activities, business finance, investment banking and consulting. It was formed under the leadership of Victor Chando with the aim of becoming the Group’s commercial bank. In 1998, Kingdom Merchant Bank (KMB) was licensed and it took over assets and liabilities for Kingdom Securities Limited. Its main focus was finance-related products, off-balance-sheet financing, foreign exchange and trade financing. The Kingdom Research Institute was created as a support service for the other entities.

The entrepreneurs bankers, aware of their constraints, quickly sought to gain critical mass by actively seeking capital injections from stock investors. The goal was to expand ownership while lending strategic support in areas of mutual interest. An attempt to raise capital from Global Emerging Markets from London failed. However, the efforts of the banks in 1997 were rewarded when the following organizations raised some capital, reducing the shareholding of CEOs as shown below: ïEUR Ipcorn 0.7%, ïEUR Zambezi Fund Mauritius P / L 1.1%, ïEUR Zambezi Fund P / L 0.7%. ïEUR Kingdom Employee Share Trust 5%, ïEUR Southern Africa Enterprise Development Fund – 8% redeemable preference shares of USD 1.5 million as the first Southern African investment company from the US fund initiated by US President Bill Clinton, ïEUR Weiland Investments, a company belonging to Mr Richard Muirimi, a long-time friend of Nigel and associate in the fund management business, picked up 1.7% , Garmony Investments 71.7% Directors. After a rights issue, Zimnat fell to 4.8%, while FML fell to 14.3%.

In 1998, Kingdom launched Fire Unit Trusts, which proved to be very popular in the market. Initially, these products were focused on individual customers in the discount house as well as private portfolios of Kingdom Stockbroking. Aggressive marketing and awareness campaigns established the Kingdom Unit Trust as the most popular retail brand in the group. The Kingdom brand was thus born.

Acquisition of Discount Company in Zimbabwe (DCZ)

After tremendous organic growth, the Kingdom entrepreneurs decided to have the growth rate synergistic. They set out to acquire the oldest discount house in the country and the world, The Discount Company of Zimbabwe, which was a listed entity. With this acquisition, the Kingdom would acquire critical skills as well as obtain the highly sought after ZSE list cheaply through a reverse listing. The initial effort for a negotiated merger with DCZ was rejected by its executives, unable to face a forty-year-old institution turned off by a four-year-old company. The entrepreneurs were not deterred. Nigel turned to Stanbic’s friend Greg Brackenridge to finance and complete the acquisition of the sixty percent stake held by about ten shareholders on behalf of Kingdom Financial Holdings, but to be placed in Stanbic Nominee’s ownership. This strategy masked the identity of the acquirer. Claud Chonzi, National Social Security Authority (NSSA) GM and a friend of Lysias Sibanda (a Kingdom executive), agreed to act as the front in negotiations with DCZ shareholders. NSSA is a well-known institutional investor and therefore these shareholders may have thought that they were dealing with an institutional investor. When Kingdom controlled 60% of DCZ, it took over the company and turned on the stock exchange as Kingdom Financial Holdings Limited (KFHL). Due to the negative real interest rates, the Kingdom successfully used debt financing to structure the acquisition. This acquisition and subsequent listing gave the once despised young entrepreneurs confidence and credibility in the market.

Other strategic acquisitions

Within the same year, Kingdom Merchant Bank acquired a strategic stake in the CFX Bureau de Change, owned by Sean Maloney, as well as another stake in a greenfield micro-loan franchise, Pfihwa P / L. CFX was changed to KFX and used in most activities in foreign currency. KFHL’s strategic intent was to acquire an additional 24.9% stake in CFX Holdings to secure the initial investment and secure management control. This did not work. Instead, Sean Maloney opted out and took over the failed Universal Merchant Bank license to form CFX Merchant Bank. Although Kingdom leaders claim that the alliance failed due to the abolition of government change agencies, it appears that Sean Maloney refused to give up control of the extra shareholding the Kingdom had sought. It would therefore be reasonable that when the Kingdom could not even control the KFX, a fall occurred. The liquidation of this investment in 2002 resulted in a loss of Z $ 403 million on that investment. However, this was manageable in light of the strong group’s profitability.

Pfihwa P / L funded the informal sector as a form of corporate social responsibility. However, when the hyperinflationary environment and the strict regulatory environment included the project’s viability, it was liquidated in early 2004. The Kingdom pursued its financing of the informal sector through MicroKing, set up with international assistance. In 2002, MicroKing had eight branches located in or near micro-enterprise clusters.

In 2000, due to increased foreign currency activity in the banking sector, the Kingdom opened a private banking facility through the discount house to capitalize on revenue streams from this market. Following market developments, it engaged AIG insurer to enter the bank assurance market in 2003.

Meikles Strategic Alliance

In 1999, entrepreneur Chanakira, on the advice of its executives and the legendary corporate finance team from Barclays Bank led by beloved Hugh Van Hoffen formed a strategic alliance with Meikles Africa, thereby injecting approx. $ 322 million in the Kingdom for a 25% stake. Interestingly, the deal almost coincided with pricing, as Meikles would pay only $ 250 million, while KFHL valued at $ 322 million, which was, in fact, the largest private sector deal done between an original bank and a listed company. Nigel testifies that it was a walk through the incomplete Celebration Church site the Saturday before the signing of the Meikles deal that led to him signing the agreement, which he saw as a means for him to sow a giant seed in church to strengthen the building fund. God was faithful! Kingdom’s share price rose dramatically from $ 2.15 at the time he committed to the priest all the way to $ 112.00 in October after!

In return, Kingdom acquired a powerful cash-rich shareholder that enabled retail banking access through an innovative in-store banking strategy. Meikles Africa opened its retail branches, namely TM Supermarkets, Clicks, Barbours, Medix Pharmacies and Greatermans, as distribution channels for the Kingdom’s commercial bank or as account holders providing deposits and requiring banking services. This was a cheaper way to get into retail banks. It proved to be useful during the cash crisis of 2003 because Meikles, with its massive cash resources within its business units, helped Kingdom Bank and thus dampened it for a liquidity crisis. The alliance also raised the reputation and credibility of the Kingdom Bank and created an opportunity for the Kingdom to fund Meikles Africa’s customers through the jointly owned Meikles Financial Services. Kingdom provided the financing for all the rent and lease purchases from Meikles subsidiaries, which drove sales for Meikles while also providing easy lending opportunities for Kingdom. Meikles managed the relationship with the client.

Meikles Africa as a strategic shareholder assured the Kingdom of success as recapitalization was required and has improved the Kingdom’s brand image. This strategic relationship has created powerful synergies for mutual benefit.

Commercial banking

The Kingdom took advantage of its strategic relationship with Meikles Africa and debuted in retail banking in January 2001 with branches in High Glen and ChitungwizaTM supermarkets. The target was mainly the mass market. This rode on the strong brand that the Kingdom had created through Unit Trusts. In-store banking offered low cost delivery channels with minimal investment in bricks and mortar. At the end of 2001, 13 branches were operational across the country. This followed a deliberate strategy of aggressively rolling out the branches with two flagship branches ïEURïEUR one in Bulawayo and the other in Harare. Emphasis was placed on an IT-driven strategy with significant cross-selling between the commercial bank and other SBUs.

However, it was further discovered that there was a market for the high-end customers, which is why Crown banking sites were established to diversify the target market. In 2004, after closing three store branches in a rationalization exercise, there were 16 branches in the store and 9 Crown banking locations.

The entry into commercial banking was probably held at the wrong time given the impending changes in the banking sector. Commercial banking provides cheap deposits, however, at the cost of huge staff costs and human resource management complications. Nigel admits that this from behind could have been delayed or done at a slower pace. However, the need for increased market share in a fiercely competitive industry necessitated this. Another reason to continue with the commercial banking project was the prior agreement with Meikles Africa. It is possible that Meikles Africa had been sold on the capital raising agreement on the basis of promises to engage in retail banking, which would increase revenue for its subsidiaries.

Innovative products and services

KFHL continued its aggressive pursuit of product innovation. Following the failure of the KFX project, CurrencyKing was created to continue its work. However, this was abolished in November 2002 by the government’s intervention intervention, as the office’s change was prohibited in an attempt to wipe out parallel foreign exchange market trading.

Unfortunately, this government decision was misled because it not only failed to prohibit parallel foreign exchange trading, but it ran underground, made it more lucrative, and then the government lost all control over the exchange rate control.

In October 2002, KFHL established Kingdom Leasing after obtaining a financing house license. Its mandate was to exploit the opportunities for trading in financial leases, leasehold rentals and financial products in the short term.

Regional expansion

Around 2000, the domestic market proved to be very competitive, with limited prospects for future growth. A decision was made to diversify revenue streams and reduce countries’ risk through penetration into regional markets. This strategy will leverage the proven expertise in securities trading, asset management and corporate advisory services from a small capital base. The entrance was therefore low risk in terms of capital injection. Given the currency control constraints and the lack of foreign currency in Zimbabwe, this was a cautious strategy, but not without its disadvantage, as will be seen in the Botswana venture.

In 2001, KFHL acquired a 25.1% stake in a greenfield banking business in Malawi, First Discount House Ltd. To secure his investments and secure management control, an executive director and negotiator was posted to the Malawi company, while Nigel Chanakira chaired the board. This investment has continued to grow and yield positive returns. From July 2006, the Kingdom finally managed to increase its share from 25.1% to 40% in this investment and can ultimately control it to the point of seeking a conversion of the license to a commercial bank.

KFHL also took a 25% stake in Investrust Merchant Bank Zambia. Franky Kufa was posted as CEO while Nigel took up the board.

KFHL was promised an opportunity to get a controlling stake. However, as the bank stabilized, the Zambian shareholders entered into some questionable transactions and were not prepared to allow KFHL to raise its stake, which is why KFHL decided to withdraw as conditions became frosty. The Zambian central bank intervened with a promise to grant KFHL its own banking license. This was not realized when the Zambian central bank exploited the banking crisis in Zimbabwe to deny the KHFL a license. A reasonable $ 2.5 billion prize was earned by divestment.

In Botswana, a subsidiary called Kingdom Bank Africa Ltd (KBAL) was set up as an offshore bank in the International Finance Center. KBAL was intended to take the lead and direct regional initiatives for the Kingdom. It was led by Mrs Irene Chamney, seconded by Lysias Sibanda with Nigel’s consent following management challenges in Zimbabwe. Two other senior executives were posted there. She has successfully set up KBAL’s banking infrastructure and had good relations with the Botswana authorities.

However, the business model chosen by an offshore bank ahead of a domestic Botswana commercial banking license showed the bank’s Achilles heel more when the Zimbabwe banking crisis began between 2003 and 2005. There were fundamental differences in how Mrs Chamney and Chanakira saw the bank survive and go forward.

Ultimately, it was considered prudent for Ms. Chamney to leave the bank in 2005. In 2001, KFHL acquired the mandate as the sole distributor of the American Express card in all of Africa except the RSA. This was handled through KBAL. Kingdom Private Bank was transferred from the discount house to become a subsidiary of KBAL due to the prevailing regulatory environment in Zimbabwe.

In 2004, KBAL was temporarily placed under curatorship due to undercapitalization. At this time, the parent company had regulatory restrictions that prevented capital deposits in foreign currencies.

A solution was found in sourcing local partners and transferring a million dollars previously made from the proceeds from the Investrust liquidation to Botswana. Nigel Chanakira assumed a more active leadership role in KBAL because of its enormous strategic importance to the future of KFHL. Work is also underway on acquiring a local commercial banking license in Botswana. When this is acquired, there are two possible scenarios, namely maintaining both licenses or giving up the offshore license.

The respondents disagreed about their opinion on this. But in my opinion, KFHL will judge from the stakeholders power to give up the off shore banking license and use the local Kingdom Bank Botswana (Pula Bank) license for regional and domestic expansion.

Human Resources

The staffing subsidy grew from the original 23 in 1995 to more than 947 in 2003. The growth was in line with the growing institution. It exploded, especially during the launch and expansion of the commercial bank. From the outset, the Kingdom had a strong human resources strategy, which led to considerable training both internally and externally. Prior to the currency crisis, employees were sent to training in countries such as RSA, Sweden, India and the United States. In the belief Ntabeni Bhebhe person, the Kingdom had an energetic HR driver who created powerful HR systems for the new behemoth.

As a sign of its commitment to building human resources, in 1998, Kingdom Financial Services signed a management agreement with the Netherlands-based AMSCO to provide experienced bankers. Through this strategic alliance, the Kingdom strengthened its skills base and increased opportunities for skills transfer to the locals. This helped the entrepreneur bankers to create a solid management system for the bank, while the experienced bankers from the Netherlands compensated for the new banks’ youthfulness. What a foresight!

In-house, pace, interactive learning, team-building exercises and mentoring were all part of the learning menu, which was focused on developing the group’s human resource capacity. Work and job profiling was introduced to best match employees to appropriate positions. Career paths and succession planning were embraced. Kingdom was the first entrepreneurial bank to have smooth unforced CEO transitions. The founding CEO sent the baton to Lysias Sibanda in 1999, when he took up the role of CEO and Deputy Chairman. His role was now to pursue and lead global and regional niche financial markets. A few years later there was another change of guard like

Franky Kufa stepped in as CEO to replace Sibanda, who was retiring for medical reasons. It could be argued that these smooth transitions were due to the fact that the baton relay passed to founding directors.

With the explosive growth of staff complement due to the commercial banking project, culture issues arose. Consequently, KFHL engaged in a cultural program that resulted in a cultural revolution called “Team Kingdom”. This culture had to be strengthened due to dilutions through significant mergers and acquisitions, significant staff turnover due to increased competition, emigration to greener grasslands and the staff’s age profile increased the risk of high mobility and fraudulent activities in collaboration with the public. Cultural changes are difficult to implement and their effectiveness is even more difficult to assess.

In 2004, with a high staff turnover of around 14%, a compensation strategy was implemented that includes fenced critical skills such as IT and Treasury. Due to the low margins and financial stress experienced in 2004, KFHL lost more than 341 employees due to dismissal, natural attrition and emigration. This was acceptable as profitability declined while staff costs increased. At this time, staff costs accounted for 58% of all expenses.

Despite the impressive growth, the economic results when inflation adjusted were mediocre. In fact, a loss position was reported in 2004. This growth was severely compromised by the hyperinflationary conditions and restrictive regulatory environment.


This article shows the decision for entrepreneurs to push through to the realization of their dreams despite significant odds. In a subsequent article, we will tackle the challenges Nigel Chanakira faces in strengthening its investments.