Kenyan startup Kwara raises US$3 million in funding, to acquire Kussco subsidiary

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  • Kwara has raised a US$3 million seed extension and signed an agreement to acquire a subsidiary of the Kenyan Union Of Savings and Credit Cooperatives (Kuscco)
  • Kwara also announced the acquisition of IRNET, a software provider owned Kuscco
  • Investors in the round include existing backers DOB Equity, Globivest and One Day Yes and Base Capital

Kenyan startup Kwara has raised a US$3 million seed extension and signed an agreement to acquire a subsidiary of the Kenyan Union Of Savings and Credit Cooperatives (Kuscco).

On January 13, 2022, Kwara announced the acquisition of IRNET, a software provider owned by the national body of credit unions in Kenya – Kuscco.

Investors in the round include existing backers DOB Equity, Globivest and the founder of Kobalt Music. New investors, mainly African VCs, participated as well. They include One Day Yes and Base Capital and fintech executives including Mikko Salovaara, CFO of Revolut.

Kwara CEO, Cynthia Wandia, said they had spent the last three years uplifting the credit union sector to become Kenya’s leading core banking provider.

“Our clients grow up to 4 times faster than other credit unions and serve members up to 100 times more efficiently. This acquisition enables us to place a digital banking experience in the hands of every credit union in Kenya, together with the most established credit union partner in Kenya.”

Following the seed extension, Kwara’s seed investment has now hit $7 million, following a US$4 million seed funding led by Breega and Softbank thirteen months ago.

According to Kwara, its neo bank user base has grown thirty-five times over the last year. The startup has also seen a one hundred and twenty jump in its monthly app transactions. It has surpassed over KSh 120 billion in cumulative transactions processed on its core banking platform. Additionally, Kwara now serves more than 120 credit unions.

Kwara co-founders Cynthia Wandia and David Hwan. Photo: Kwara.

Over KSh 25 billion have been securely and rapidly disbursed in fair loans using the Kwara platform, leading some of Kwara’s credit union clients to triple their membership base and win awards like the Most Improved Nationwide.

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At the same time, Kwara has entered into an exclusive digital solutions partnership agreement with Kuscco whereby Kwara will offer its Banking-as-a-service solution and neo-banking experience to Kuscco’s 4000+ credit unions to consolidate credit union banking as the preferred retail banking method in Kenya.

The IRNET team will join forces with Kwara to ensure a seamless transition and embed the Kuscco regional network of 16 branch offices and several hundred marketers and marketing expertise into Kwara.

In a related story, startups in East Africa raised $1.2 billion in 2022, a 115 per cent increase compared to 2021, where startups raised $600 million. 

The latest data from The Big Deal indicate that this is a huge milestone as the region reached the $1 billion mark for the first time, resulting in its revenue share for continental funding doubling from 12 per cent in 2021 to 26 per cent in 2022. 

According to the report, Western Africa, despite a slight decrease in funding in the period under review, remains firmly in the lead on the continent. The region’s startups received funding worth $1.8 billion in 2022 from $2 billion in 2021. 

Northern Africa had the highest increase in the period under review, receiving $1.1 billion in startup funding, crossing the $1 billion mark for the first time. This represents a 62 per cent increase from the previous year, where startups got $700 million in funding in 2021. Its share of funding raised on the continent grew from 15 per cent to 23 per cent. 

“Southern Africa, however, is the region suffering the biggest loss with a 44 per cent decrease from $1.1bn in 2021 to just over $600m in 2022. As a result, its share of the total funding was also about halved: 12 per cent, down from 23 per cent,” the report states. 

Central Africa remains miles behind its neighbours with ~$50m raised – more than double the 2021 number –  and a total share of funding that surpassed 1 per cent for the first time. 

“A caveat of course is that in each of the regions – save for Central Africa -, a ‘Big Four’ dominates. Their weight ranges from Nigeria’s 68% of Western African funding to South Africa’s 92% in Southern Africa,” the report said. 

It further noted that the Nigerian giant ($1.2bn) weighs as much as an entire region.

“Interestingly though, the relative weight of the Big Four in their respective regions has been decreasing between 2021 and 2022 in Western Africa (-17pp YoY), Northern Africa (-14pp YoY) and Southern Africa (-6pp YoY); Eastern Africa is the only exception with Kenya’s share of East Africa funding growing +14 percentage points, year on year,” the report explained. 

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Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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