Digitizing Africa’s Community Banks — Quartz Africa Member Brief — Quartz

Dear members of Quartz Africa,

The impact of community banking in Africa cannot be underestimated.

Formal banking services have still not reached large numbers on the continent. It is estimated that approximately 360 million adults (pdf) in the region do not have access to any form of bank account.

Where traditional banking services have failed to reach the masses, groups of people have come together to form community banks – savings and credit cooperative organizations, or SACCOs – across Africa.

A SACCO is a member-based financial institution where communities pool their savings. These savings are used to provide loans to members, which are generally more affordable and attractive than those of traditional banks, since SACCOs are not-for-profit.

Governed, owned and managed by their members, SACCOs are one of the most trusted financial service providers, according to surveys. They have brought financial services to millions of homes where such services were previously unavailable.

While the SACCO market is already large in Africa, it continues to grow. As of 2020, the continent has over 40,000 registered SACCOs, with over 40 million members.

For a long time, these organizations operated analogically. Forms had to be filled out, physical records had to be kept, and communication was done in person at the office. The inefficiency of these operations resulted in higher overhead costs for members and also made it more difficult for people to access financial services.

In response, African entrepreneurs are jumping at opportunities to digitize the SACCO sector. Fintech companies enable SACCOs to offer faster, better and more secure services, being accessible 24/7 and facilitating paperless transactions. They also allow SACCOs to streamline operations, reduce costs and compete with digital lenders.

Going digital for SACCOs is crucial if they are to continue to grow across Africa.


💡 The Opportunity: With over 40 million members of savings and credit cooperatives (SACCOs) on the continent, fintech has a huge opportunity to digitize the industry.

🤔 The challenge: Technology comes at a cost, and smaller SACCOs may not be able to afford the high prices that cover the cost of cloud computing and real-time transactions.

🌍 The roadmap: Digitizing operations in the back office of SACCOs is the first step, followed by enabling 24/7 transactions for their members, wherever they are. This leads to digitized payments, remittances and investments, as well as faster loans with better credit scoring and better credit information sharing.

💰 The speakers: SACCOs themselves and their members, regulators, professional and agricultural unions, and other financial sector players who wish to offer complementary products to credit union members.

By the numbers:

14.34%: The penetration rate of SACCOs in Africa

40,570: The number of credit unions in Africa

39: The average age of joining a SACCO

$17.58 billion: Total savings and shares in SACCOs in Africa

41%: The percentage of women among SACCO members in Africa

$16 billion: The amount of assets held by African credit unions

The case study

Last name: Kwara

HQ: Nairobi, Kenya

Founder: Cynthia Wandia

Launched in 2019, Kwara is a digital banking platform for SACCOs, and brings mobile banking services to their members through a mobile app or USSD – a telecommunications technology that is usually menu-based and involves sending text between a mobile phone and an application via mobile networks.

The platform allows SACCO members to digitally access a number of financial services that previously would have required in-person interaction. Members can now view and download their financial statements, apply for instant loans and make repayments via their phone or the web.

Through the Kwara Dashboard, SACCOs are able to run a modern banking business, where they can register new members through a quick online process, manage their deposits and savings accurately, access credit decision and comply with regulatory requirements.

Where a member application process could previously take a week, Kwara’s automated operations have reduced that time to 15 minutes. Also, because Kwara processes all historical financial histories of SACCO members, loan processing times have been reduced from hours to minutes.

These time savings translate into direct cost savings, allowing SACCOs to focus their resources on offering innovative financial products to their members and providing better customer service.

In 2021, Kwara raised $4 million in a funding round from Breega and SoftBank Vision Fund Emerge to build a neobank app for credit union members to access various financial services. The app uses an API that connects SACCOs to the rest of the formal financial ecosystem, through which third-party services can connect to Kwara to offer additional products and services.

While Kwara’s largest market remains in Kenya, with over 100 SACCO customers, the company is also working with a number of SACCOs in South Africa and the Philippines, with plans to expand into other countries.

In conversation with Cynthia Wandia

Image copyright: Kwara

💪On the influence of his grandmother in his starting Kwara

“She worked as a small coffee farmer in Kenya until she was 92 years old. She was widowed young and left with nine dependent children. It was only through a SACCO that she could take care of her family, maintain the farm and retire with dividends. The institution provided him with a way to survive and thrive, so I wanted to make SACCOs more effective through technology so they could reach many more people – and that’s how we founded Kwara.

📈 On the cost of living crisis

“The way SACCOs have responded during the covid-19 pandemic shows how critical they will be in this coming economic environment. They were quick to offer credit moratoriums to members if you lost your job or your business didn’t work. SACCO members had access to financial safety nets and a level of resilience that was not available to everyone.

💸 On the growth of fintech in Africa

“Whenever a startup picks a certain slice of the economy and works to digitize it, it makes it easier for either an adjacent startup or a next one. I think it’s complementary because no one can solve everything at once.

Other fintech offerings to watch:

Last month, an Ivory Coast-based fintech start-up, Bizaowhich facilitates the end-to-end processing of payment flows from and to the main digital payment systems in Africa, raised 8 million euros in a Series A financing.

In July, the Senegalese-American fintech Vaguewhich offers mobile money services, obtained a syndicated loan of 90 million euros (90 million dollars) from the International Finance Corporation (IFC), the investment arm of the World Bank, and other sources.

XendFinance, a Nigerian fintech start-up, is another company applying decentralized finance to credit unions. The startup has so far raised $2 million from investors such as Binance Labs, Google Developers Launchpad and AU21 Capital.

More from Quartz Africa

🤔 Retail apps in Nigeria are facing a watershed moment

📱 Africans want their apps to do more for them

😺 Why 2022 Could Be A Boom Year For Nigerian Retail Investment Apps

😱 Nigeria punishes lending apps that misuse user data

💥 Africa’s largest telecom operator and how it plans to appeal to Gen Z users

🏦 African credit unions are harnessing fintech for growth

🔀 Why the digital payment landscape in Africa is still very fragmented

🤔 A new African payment is a push for independence from the dollar

🎵 This brief was made by listening to “Mwambieni” from Zuchu (Tanzania)

Have a very motivated weekend,

—Priya Sippy, Quartz Africa contributor based in London

A 🇰🇪 thing

In 2021, Kwara formed a partnership with Lami Technologies, an insurance technology company, founded by fellow Kenyan entrepreneur, Jihan Abass. The partnership provides SACCO members with access to a range of insurance products ranging from life to business to property coverage.

About Miley Sawngett

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