Kenyan Fintech, Kwara, Secures $3 Million Amid Exclusive Partnership with 4,000...

Crypto lender, Genesis, has filed for bankruptcy in January 2023, becoming the latest casualty from the fall of FTX in November 2022.

DCG Statement on Genesis Capital Chapter 11 Bankruptcy Filing: https://t.co/6SsWj4zo3R pic.twitter.com/j9e8R3mMZv

— Digital Currency Group (@DCGco) January 20, 2023

In its bankruptcy documents, the Digital Currency Group (DCG)-owned company listed over 100,000 creditors in a ‘mega’ bankruptcy filing with aggregate liabilities ranging from $1.2 billion to $11 billion dollars.

Genesis sister company, Luno, is not in immediate trouble following the events, according to its manager.

“DCG subsidiaries, like Genesis, have always operated as independent companies with their own management teams, financial and risk management protocols, and legal and compliance oversight. Luno is a wholly owned, independent operating subsidiary of DCG.” – Luno SA country Manager, Christo de Wi

Luno’s Savings Wallet product worked in partnership with Genesis as a lending partner for the product. Savings Wallet lets customers deposit cryptocurrencies and earn interest from Genesis loans but customers have to opt in to the service.

The Luno exchange (buying and selling crypto) uses a standard wallet and not the savings wallet. Still, Luno insured the Savings Wallet so when Genesis halted redemptions in November 2022 after FTX crashed, the South African firm could return all customer funds.

This is in contrast to US crypto exchange, Gemini, which has a similar product, the Gemini Earn product, letting customers deposit their crypto for investment by Genesis. When Genesis halted redemptions, Gemini Earn customers couldn’t withdraw their balances, with upto $900 million of Gemini customer funds now in question.

Chapter 11 bankruptcy lets a firm continue operating while trying to work ways to repay creditors. Genesis plans to use the Chapter 11 process to try to sell assets or raise money, with creditors ending up owning the reorganized business if those efforts are unsuccessful, it said in a statement.

With customer funds in question and Gemini threatening to sue, there is the larger threat of Genesis and Luno parent company, DCG, having also to file for bankruptcy in what could have ramifications to all its assets.

“These scenarios are highly speculative and we prefer not to speculate at this stage,” De Wit said. “As a significant participant in the crypto market, however, Luno consistently monitors any events that could have an impact on its business or the market more broadly.”

“In light of Luno’s ownership structure and independence, the business is favourably positioned to navigate uncertainty.”

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Kenyan fintech, Kwara, is looking to scale even further in 2023 following a new $3 million seed extension.

The startup reportedly doubled its number of clients in 2022 and has even more opportunity for expansion after signing an exclusive digital solutions distribution agreement with the Kenya Union of Savings & Credit Cooperatives (KUSCCO), the national umbrella body representing over 4,000 saccos in Kenya.

According to Kwara, these saccos will use its banking as a service platform while Kwara also acquires KUSCCO’s own software solutions company for saccos, IRNET.

Kwara’s software solutions also help to digitize a lot of the work done by these Saccos, including much of the paperwork involved in their operations and the need to have physical branches. In addition to the convenience, the software makes it possible to get more clients digitally while also helping to introduce new products.

Have you joined the waitlist for the Kwara Neobank app? No? What are you waiting for? It's the easiest way to join a SACCO, save, spend and get instant loans!

Join the waitlist to be the first to know when we launch https://t.co/N56tBRd6bS pic.twitter.com/4o95jfnRRT

— Kwara (@getkwara) October 19, 2022

“We think we’ve barely scratched the surface in the Kenyan market. And so, we are just going to be really investing in products and services that deepen our relationship here. They are stacking their bets on us but we have been able to prove that we can do it as we continue to grow.” – CEO, Cynthia Wandia

Kwara also has a neobank that targets members of the saccos providing extra services such as instant loans and third-party services such as insurance while it is also focused on improving bespoke features for the saccos.

“We continue to ship more or less enterprise grade features for the large saccos that are well capitalized, the ones who are at the same size and level as some of the banks. There are specific features they need and specific ways they need to be taken care of so we will continue investing in that,” said Wandia.

Participants in the seed extension include existing investors:

• DOB Equity
• Globivest, and
• Willard Ahdritz, the founder of Kobalt Music.

They are joined by new investors:

• One Day Yes
• Base Capital
• Mikko Salovaara, the CFO of Revolut

This funding brings the company’s total seed amount raised by Kwara to $7 million. Initial round saw participation of several investors including:

• Breega
• SoftBank Vision Fund Emerge
• Finca Ventures
• New General Market Partners

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