My shush’s chama was one of the things I looked forward to when I visited my grandparents over the school holidays. It brought neighborhood women together for afternoon tea, pastries, sandwiches, and cash that was shared with one of its members. Chamas are unregulated organizations that pool funds from their members for investment or merry- go round. Over the years they have evolved into potent investment vehicles that can be tapped into for capital financing for SMEs, investment companies, and cheap deposits by banks.

A few success stories: A chama formed by a group of women from Makueni county that has transcended decades. The group owns and manages slaughterhouses, poultry farming businesses, and real estate properties in different parts of the county. One investment company that started as a chama has since listed on the Growth Enterprise Investment segment(GEMs) on the Nairobi Securities Exchange; Transcenry  Ltd, an investment company that made its founding members very wealthy upon listing and allowed investors to own a piece of the business.

Banks have responded to the needs of Chamas and designed products that provide training and advisory services.iMinvest Chama account by the I&M bank is designed to meet the banking needs of both registered and non-registered groups. Stanbic Bank Group app has features that let members track savings, manage loans digitally, and provide automated reconciliation. The Rafiki Microfinance Bank Chama account offers free training, free bookkeeping software, and competitive interest rates on savings and access to credit.

Why should you join a chama?

It is typical in both rural and Urban areas for people to belong to more than one Chama, as I and a number of my friends and colleagues are. In comparison to an individual, chamas collectively offer more bargaining power and sweetened deals leveraging on members’ pooled contributions. Chamas benefits from a pool of experts who comprise the members and offer knowledge to enhance operations and fortify corporate governance. Saving in a group instills discipline due to accountability and the fear of being expelled from the group and missing out on the compounded benefits. Since chamas are created by individuals with common history of friendship or work relationships, their members benefit from social support. In addition, income-generating chamas earn passive income for members boosting their spending power. It is common for chamas to earn interest income and rental income from investing in government securities and real estate respectively.

What to watch out for and do to make sure a Chama is successful.  

Make sure your objectives and areas of interest match those of the group. For example, if you are looking for an investment group, you should look for a chama with comparable interests. Any group’s success depends on its members’ pleasant behavior, and a spirit of cooperation among them is necessary for making decisions and carrying out the group’s goals. There should be an ethos that members follow and a conflict resolution process in place is crucial.

Drawbacks of Chamas

Chama’s funds come from timely contributions made by its members;¬† failure to do so postpones the accomplishment of the group’s goals and maybe be a reason for discontentment, which could impede its growth.

The benefits of belonging to a group outweigh the drawbacks, and if most groups can get beyond the early growing pains, they can go on and enjoy considerable financial success.

Do you have a successful Chama story?

A quote: “Risk is an essential need of the soul. The absence of the risk produces a kind of boredom which paralysis in a different way from fear, but almost as much.”

Source: The Need for Roots.

Kasiva M,

MA Financial Services Consultants.

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