Kenyan fintech company Kwara raises US$3 million for initial expansion, signs deal to reach over 4,000 credit unions.
Kwara a Kenyan fintech company dedicated to digitizing credit unions (saccos), more than doubled its customer base last year and plans massive growth in the coming years after raising $3 million in seed funding and signing an exclusive digital distribution deal with Kenya Union – Savings and Credit Cooperatives (Kuscco), a national the umbrella body that represents the saccos.
After partnering with Kuscco, Kwara said it has secured connections to a pool of over 4,000 saccos for its banking-as-a-service offering. As part of the exclusive deal, Kwara also intends to acquire Kuscco subsidiary IRNET, a software company and supplier to saccos, for an undisclosed sum.
Kwara says the deal with Kuscco comes at an opportune time in the plan to double Kenya.
“We think we have barely scratched the surface of the Kenyan market. And so we’re just going to invest in products and services that deepen our relationship here,” the co-founder and CEO told TechCrunch Kwara Cynthia Wandia .
“The rationale (of the deal) is clear: first, it is an opportunity to attract potential customers and distribute our core product as quickly as possible, as well as to deepen our competitiveness. We enter into an exclusive partnership, which also means that no other technology company will be able to market with Kuscco. They’re betting on us, but we’ve been able to prove that we can do it as we continue to grow,” said Wandia, who along with David Hwanom (COO) founded the fintech in 2019.
Existing investors DOB Equity, Globivest and Willard Adritz, founder of Kobalt Music, participated in the initial expansion round. New backers One Day Yes, Base Capital, as well as fintech executives including Mikko Salovaara, CFO of Revolut, also joined the round. Thanks to the new funding, the total seed amount raised by the startup is reached 7 million dollars. Several investors participated in the first round, including Breega, SoftBank Vision Fund Emerge, Finca Ventures, New General Market Partners.
Kwara, which also has a presence in South Africa and the Philippines, has grown its customer base to 120 from 50 at the end of 2021, maintaining 100% customer retention — a testament to the value it provides to its customers. According to the startup, the automated onboarding process has ensured success and growth for customers.
Kwara’s product improves credit union back offices by helping them move away from tedious paper processes and brick-and-mortar locations, opening up new opportunities to enroll new members and create new products.
The company also has a next-generation neobank app that gives members of partner credit unions access to additional services such as instant loans and third-party services such as insurance. The user base of the neobank app, which also allows users to deposit money directly into their Sacco accounts and track their finances and payments, is said to have grown 35-fold since its launch last year.
Fintech plans to add more features to cater to saccos as well as additional products for neobank app users.
“We continue to provide enterprise level functions for large saccos that are well capitalized, those that are of the same size and level as some of the banks. There are specific features that they need and certain ways that they need to be looked after, so we will continue to invest in that,” Wandia said, adding that Kwara is also investing in improving the neobanking experience. They’re set to add more features to help members create a “personalized view of their goals and really start working toward them.” They will also sign other third-party partnerships to add value to the app’s users.
“We believe that every time a sacco member leaves their sacco for another service just because the sacco does not provide it, it is a lost opportunity for that member to actually profit from the return of that product. All revenue generated from these products is effectively returned to members in the form of dividends,” she added.
Credit unions are formed by people with a common interest or members of an industry, such as farmers or teachers, who buy stock in the institution, save money and take out loans. They are popular, especially in developing regions, due to their low interest rates and ease of access to credit compared to conventional banks. There are only 175 licensed depositories in Kenya, as the vast majority remain unregulated.
