The Kwara is a software company that helps credit unions in the East African country shift to digital platforms by providing them with its proprietary Back-end-as-a-service software.
The startup's clientele went from two to 50 in two years. It became clear to the country's cooperative credit-unions that they needed more technology to remain competitive.
The start-up is moving to offer end-to-end solutions to its clients as it builds the next-generation neobank that will give credit-union members access to instant loans and third-party services.
The startup raised $4 million in a seed round to build a neobank app that will allow people to sign up with their preferred credit unions.
Kwara co-founder and CEO, Cynthia Wandia, said they want to make credit unions as efficient as they can be by giving their members the kind of neobank experiences they want to have.
It is expected that this will open up new borderless avenues for the lending institutions to sign up new members and help credit-unions shift away from tedious paper-based systems. The app will allow members to track their personal financial flows from the app.
David Hwan, Kwara co-founder and COO, said that the app has been tested for feasibility and that it can be taken up by between 60% and 90%.
The app gives power to the members, who have the ability to view and download their financial statements, apply for loans and make repayments. Hwan said that by giving power to the members, they are extending the freedom that credit unions need to focus on their core business or more value-added tasks.
Kwara is building a neobank.
The loan base of credit unions using Kwara's technologies went up 46%, five times the national average, as the company's existing clients experienced a membership growth of over 19% year on year. Kwara supported tens of millions of dollars in transactions between credit unions and their members.
Credit unions that use technology have member confidence and trust, which leads to new sign-ups. Kwara is helping them run a modern banking business since they are waiting for the right support.
We decided to give our clients something that they could use to start a bank.
It took us a short time to build up the credibility on the product side because we were able to come to the table with a product that just out of the gate could run a bank.
The demand for Kwara's services grew beyond its borders, as it entered South Africa and the Philippines. It wants to triple the number of credit unions using its software by the end of the century. The startup currently serves 60,000 members but is hoping to serve 100,000 by the end of next year. The startup wants to serve 1 billion people.
It was clear from the beginning that Kwara would expand beyond Kenya as they quickly realized that most credit unions in emerging markets had not caught on to technology.
Kwara is forging alliances with companies to offer third party services on its app. The startup and Lami Technologies, a digital insurance company based in Africa, have collaborated to make it easier for people to find insurance products on the app. The startup continues to perfect its app and is ready for a full launch next year.
The seed round was led by a firm called Breega VC. Other investors include Rabacap, Launch Africa, Norrsken Impact Accelerator, Future Africa, Samurai Incubate, DOB Equity and fintech angels.
A shift in consumer preferences towards digital-first banking and an increasing interest in how to build wealth through community are some of the trends we have seen over the years. Ben Marrel said that Kwara's unique approach is a catalyst for a new way of retail banking through digital-first credit unions.
Credit unions are usually formed by people with a common interest, like farmers or teachers, who save money and take loans. They have low interest rate loans and are popular in Kenya. A vast majority of credit unions in the country are unlicensed.
The total assets of licensed credit unions grew by 13.5% last year to reach $5.6 billion according to the CBK. Due to their weak technology, member deposits and loans became vulnerable to cyber attacks. Kwara is now providing solutions that the regulator recommended that they shift to better technologies to protect member deposits.
Hwan said that they are building the infrastructure and rails for the credit unions.
