Kenyan fintech Kwara raises $3M seed round, signs deal to reach over 4,000 credit unions • TechCrunch

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Kwara, a Kenyan fintech digitizing credit unions (Saccos), more than doubled its customer base last year and sees massive growth in the coming years after raising a $3 million seed round and signing an exclusive digital solutions distribution deal with Kenya Union of Savings & Credit Cooperatives (Kuscco), the national umbrella body representing Saccos.

Following the Kuscco partnership, Kwara said it has gained connections to a pool of over 4,000 Saccos for its bank-as-a-service offering. As part of the exclusive deal, Kwara is also set to acquire Kuscco’s subsidiary IRNET, a software company and supplier for Saccos, for an undisclosed amount.

Kwara says the Kuscco deal comes at the right time in the plan to double Kenya.

“We believe we have barely scratched the surface of the Kenyan market. And so, we’re just going to really invest in products and services that deepen our relationship here,” Kwara founder and CEO Cynthia Wandia told TechCrunch.

“The rationale (of the deal) is clear, firstly, it is an opportunity to generate leads and deploy our core product so quickly, and to deepen our competitive moat. We are entering 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 we can do it as we continue to grow,” said Wandia, who co-founded the fintech with David Hwan (COO) in 2019.

The seed expansion round had participation from existing investors DOB Equity, Globivest and Willard Ahdritz, the founder of Kobalt Music. New backers One Day Yes, Base Capital, as well as fintech leaders, including Mikko Salovaara, CFO of Revolut, also joined the round. The new funding brings the total seed amount raised by the startup to $7 million. In the first round, several investors participated, including Breega, SoftBank Vision Fund Emerge, Finca Ventures and 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 by the end of 2021, and maintains a 100% customer retention rate – a testament to the value it delivers to its customers. The automated onboarding process, the startup says, has ensured customer success and growth.

Kwara’s product upgrades the back-office operations of credit unions and helps them shift away from tedious paper-based processes and physical branches, opening new avenues for them 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. It said the user base of the neobank app, which also allows users to deposit money directly into their Sacco accounts, and track finances and payments, has grown 35 times since its launch last year.

Fintech plans to add more features to cater to Saccos, and additional products for users of the neobank app as well.

“We continue to send more or less enterprise-grade features for the big saccos that are well capitalized, those that are at the same size and level as some of the banks. There are specific features that they need and specific ways that they need to be looked after, so we will continue to invest in it,” Wandia said, adding that Kwara is also investing in improving the new banking experience. They are set to add more features that will help members build “a personalized view of their own goals and really start to work to reach them.” They will also sign more third-party partnerships to add more value to app users.

“We believe that every time a sacco member leaves their sacco to get another service just because the sacco doesn’t provide, it’s a lost opportunity for that member to actually profit from the return of that product. All the income earned on those products actually flows back to the members as dividends,” she added.

Credit unions are formed by people with common interests or members of an industry, such as farmers or teachers, who buy shares in the institution, save money and take out loans. They are popular especially in developing regions due to their low interest loans and ease of access to credit compared to conventional banks. In Kenya, only 175 deposit shops are licensed, as a large majority remain unregulated.