Why We Invested: Kwara
Credit unions exist in a multitude of forms throughout the world. Known as savings and credit co-operatives (SACCO’s) in East Africa, stokvel’s in South Africa, and esusu’s in West Africa, these organizations play a central role in unlocking opportunity to build wealth, access affordable credit, and achieve financial stability within communities. Member-owned credit unions provide responsible financial services to nearly 300 million individuals worldwide. In Africa alone, credit unions hold nearly $12Bin AUM, while on a global scale they manage more than $2.6Tn.
The Problem: Delayed Digitization Has Constrained Credit Unions
Credit unions in emerging markets that are looking to modernize have been left behind. Most rely on high-touch management systems, although informal operations and manual record-keeping can result in inefficient operations, unreliable data, and frequent occurrences of fraud. Alternative core banking software is often unsuited to local credit unions’ unique needs, however, presenting expensive and rigid solutions.
The COVID-19 pandemic has exerted further pressure on credit unions, causing crisis-related disruptions to management processes and service delivery. Digital-first lenders have become a mounting threat, despite a previous void in competition at the last mile. Although new market entrants provide a modern and compelling user interface, they often charge far higher rates for credit products and offer lower interest on savings.
The Solution: Kwara’s Digital Banking Software for Credit Unions
Founded in Kenya, Kwara allows credit unions to reach their full potential in an increasingly digitized financial services sector. Kwara is poised to create systemic change throughout the credit union ecosystem and brings together a stellar team to do so. Co-founders Cynthia Wandia, CEO, and David Hwan, COO, have built and scaled Kwara over the past three years, and the duo brings deep experience across traditional financial services, microfinance, and startup operation and acceleration.
The Kwara back-end-as-a-service (BaaS) software allows credit unions to navigate competition and effectively transform into digital banks. The platform is comprised of three products: Kwara Core, which facilitates back-office administration; Kwara Connect, which provides customers online and mobile banking services; and Kwara Open, which ensures ease of integration through RESTful APIs. With integration times as short as two weeks, credit unions can select from a range of offerings, encompassing predefined entry-level configurations to customized enterprise deployments. Kwara uses affordable, tiered pricing to provide each credit union with the features most relevant to their operations at prices up to three times cheaper than existing core banking software.
By connecting to the formal financial sector and digitizing manual processes, credit unions can supercharge their value propositions. Customers reap immediate benefits from increased transparency and security, trackable credit histories, and access to banks and ATM’s. Kwara also supports long-term success by driving down operational costs. The product is suited for forward-looking regulatory environments, which allows credit unions to keep up with increasingly stringent requirements by offering full General Data Protection Regulation (GDPR) compliance.
The Traction: Solutions Spanning Two Continents and Counting
Kwara has continued to scale rapidly throughout Kenya, South Africa, and the Philippines. The team has grown to 37 members across the three countries as they continue to build out Kwara’s solutions to improve financial health for credit unions and their members. As of December 2021, Kwara serves more than 50 credit unions, with customers numbering above 65,000. Kwara’s goal is to serve 1 billion customers by 2030. Already since Kwara and FINCA Ventures first established our partnership early in 2021, we have seen tremendous growth and success across both operations and investment.
We are thrilled to be a part of Kwara’s journey and are excited to support them on their mission to expand digital banking to credit unions worldwide.