Kwara, a Nairobi-based fintech, has raised $4 million seed capital to build a neobank app that will enable individuals to sign up with their preferred credit unions and access various financial services.

Kwara was launched in 2019 to aid credit unions, commonly known as SACCOs, in Kenya shift to digital platforms by providing them with its proprietary backend-as-a-service (BaaS) software.

The startup has come leaps and bounds since then, recording a 19 per cent year on year growth, three times the global average, triggered by a 46 per cent uptick in the loan base of credit unions using its technologies. The startup boasts over $40 million worth of transactions between credit unions and their members.

Breega Ventures led Kwara’s latest $4 million seed financing venture. Other participants included SoftBank Vision Fund, Emerge, Finca Ventures, New General Market Partners, Globivest, Do Good Invest, Rabacap, Launch Africa, Norrsken Impact Accelerator, Future Africa, Samurai Incubate, and DOB Equity.

Through its next generation neobank, Kwara wants to provide other services such as insurance and access to instant loans.

“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 told TechCrunch.

The new invention is also projected to fuel the shift away from tedious and quite unreliable paper-based systems. Members using the app, which is set for launch mid next year, will be able to track their personal financial flows from the app too.

The beta version of the app has been tested for feasibility, with an uptake of between 60% and 90%, Kwara co-founder and COO, David Hwan said.

“The app gives power to the members, who have the ability to view and download their financial statements, apply for loans and make repayments. By giving power to the members, we are extending the freedom that credit unions need to focus on their core business or more value-added tasks,” said Hwan.

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Credit unions are key players in Africa’s financial services sector, due to their low interest-rate loans and ease in accessing credit when compared to traditional banking systems.

Kenya leads the continent with over 174 registered credit unions and many more unregistered ones. SACCOs constitute a crucial part of the country’s financial system. They gained importance in the 1990s when they began operating in areas where banks had retreated during the banking sector crisis. According to the Central Bank of Kenya (CBK), the total assets of licensed credit unions grew 13.5% last year to reach $5.6 billion.

However, SACCOs face a significant threat in financial fraud, which has reduced confidence among members. Cyber attacks are also becoming increasingly common, as credit unions migrate from manual systems. 

Kwara has over the last year 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. The startup 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.

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