Kwaraa Kenyan fintech digitizing credit unions (saccos) more than doubled its customer base last year and sees tremendous growth in the coming years after securing a $3 million seed extension and signing an exclusive digital solutions distribution deal with the 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 more than 4,000 saccos for its banking-as-a-service offering. As part of the exclusive deal, Kwara also plans to acquire Kuscco’s subsidiary IRNET, a software company and provider of saccos, for an undisclosed sum.
Kwara says the Kuscco deal comes at the right time in her plan to double Kenya.
“We think we are just surfacing in the Kenyan market. And so we’re just really going to invest in products and services that deepen our relationship here,” Kwara co-founder and CEO, Cynthia Wandia told australiabusinessblog.com.
“The rationale (of the deal) is clear, firstly it is an opportunity to generate leads and distribute our core product as quickly as possible, and to deepen our competitiveness. We are entering into an exclusive partnership, which also means that no other technology company can enter the market with Kuscco. They put their bets 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 renewal round had the participation of existing investors DOB Equity, Globivest and Willard Ahdritz, the founder of Kobalt Music. New financiers One Day Yes, Base Capital and fintech executives, including Mikko Salovaara, Revolut’s CFO, also joined the round. The new funding brings the total seed amount raised by the startup to $7 million. Several investors participated in the first round, 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, maintaining 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 improves the back-office operations of credit unions and helps them move away from tedious, paper-based processes and physical branches, opening up new avenues for them to sign up 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 their finances and payments, has grown 35 times since its launch last year.
The fintech plans to add more features to cater to the saccos, as well as additional products for the users of the neobank app.
“We continue to provide more or less enterprise-grade features for the big saccos that are well-capitalized, the ones that are the same size and level as some banks. There are specific features they need and specific ways they need to be taken care of, so we will continue to invest in that,” said Wandia, adding that Kwara is also investing in improving the neo banking experience. They plan to add more features that will help members “build a personal picture of their own goals and really get started on achieving them.” They will also sign more partnerships with third parties to add more value to the app users.
“We believe that any time a sacco member leaves their sacco to get another service just because the sacco isn’t delivering, it’s a missed opportunity for that member to actually benefit from that product’s revenue. All income earned on those products essentially flows back to members as 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 especially popular in developing regions because of their low-interest loans and easy access to credit compared to conventional banks. In Kenya, only 175 deposit saccos are licensed as the vast majority remain unregulated.