Kwara, a Kenyan fintech that helps credit unions (savings and credit cooperative societies, or SACCOs) migrate to digital platforms by providing them with its proprietary Back-end-as-a-service (BaaS) software, has raised $4 million in a seed round to develop a neobank app that will allow people to sign up with their preferred credit unions to access various financial services.
SoftBank Vision Fund Emerge, Finca Ventures, New General Market Partners, Globivest, and Do Good Invest all participated in the seed round, which was led by Breega VC. Rabacap, Launch Africa, Norrsken Impact Accelerator, Future Africa, Samurai Incubate, DOB Equity, and fintech angels are among the other investors.
“We want to make credit unions as efficient as they can be by giving their members the kind of neobank experiences they wish to have,” Kwara co-founder and CEO, Cynthia Wandia said.
Why The Investors Invested
The startup has gained substantial traction since it was founded in 2019. It currently serves 60,000 Sacco members but is also looking to cross the 100,000 mark by the end of next year. The startup’s goal is to serve 1 billion people by 2030. Kwara has over the last year, also, entered South Africa and Philippines, as the demand for its services grew beyond Kenya. It hopes to triple the number of credit unions using its software to 150 by the end of 2022. Kwara further claims that its existing clients’ membership has increased by more than 19 percent year over year, which is three times the worldwide average, and that the loan base of credit unions utilizing its technology has increased by 46 percent, which is five times the national norm. Kwara enabled $40 million in transactions between credit unions and their members on its platform.
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There is also a large market for credit unions in the East African nation. Credit unions or SACCOs are popular in Kenya when compared to traditional banks, because of their low-interest loans and simplicity of credit availability. In Kenya, approximately 175 credit unions are licensed to service almost 4.1 million members, with the great majority remaining unregulated. The overall assets of regulated credit unions increased 13.5 percent last year to $5.6 billion, according to Kenya’s monetary regulator, the Central Bank of Kenya (CBK). Member deposits and loan appetites grew as well, but owing to their outdated technology, they became exposed to cyber attacks. The regulator advised them to switch to more advanced methods to secure member deposits, which Kwara is already offering.
“Over the years, we’ve seen an increasing interest in how to build wealth through community, as well as a shift in consumer preferences towards digital-first banking. Kwara’s unique approach is a catalyst for a new way of retail banking through digital-first credit unions,” said Breega’s founding partner, Ben Marrel.
A Look At What The Startup Does
Founded in 2019 by Cynthia Wandia and David Hwan, Kwara is Kenya’s first shared digital banking platform for credit unions (SACCOs).
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However, as Kwara aims to offer end-to-end solutions to its clients, it is now taking a step further to establish a next-generation neobank that will give credit-union members access to fast loans and third-party services such as insurance.
This is intended to provide new borderless avenues for lending institutions to sign up new members, as well as assist credit unions in moving away from cumbersome paper-based processes and the requirement for costly brick-and-mortar branches. Members who download the app, which will be available in the middle of next year, will be able to track their personal cash flows as well.
According to David Hwan, co-founder and COO of Kwara, the beta version of the app was tested for practicality with a 60 percent to 90 percent uptake.
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The startup has teamed with Lami Technologies, a Kenyan digital insurance company, to offer a wide range of insurance products available on the app, including health, property, business, and life insurance. This is as the company works to refine its software ahead of a formal launch next year.
Kwara SACCOs Kwara SACCOs
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer