The word CHAMA is a Swahili word which means an “association”, “club” or “Party” which can be involved in various activities. Wikipedia defines a Chama as “an informal co-operative society that is normally used to pool and invest savings by people in East Africa, and particularly Kenya.” On the other hand, Dr. Edoardo Totolo – who has written extensively on chamas in Kenya – defines them as indigenous institutions or social networks that allow members to face both problems and opportunities as a group rather than individually.
It is estimated that there are about 500,000 chamas in Kenya, managing about KHz. 400 Billion in assets. This is about 7% of the Country’s GDP. Most of us are either in one or know someone who is. The structures of these institutions are mostly informal and the range of activities they do is wide. The most common variations include –
- Merry Go Round – Members agree to contribute a fixed amount at each meeting and the total money collected is given to a member or two.
- Shares Buying – Members contribute money which includes a minimum amount every month and thereby buy shares in the chama.
Being an important part of our lives, it is therefore important for chamas to get their stuff right for the benefit of the members as well as the country’s economy. Here are a few things that Chamas can do this year to attain their goals.
Have Goals
You cannot attain goals that you do not have, so the first step would be to come up with goals for the year. The goals will depend on various things such as the contribution rates etc, and as a result, will be different for each chama. The goals could include things like getting water tanks to every member for those in the rural areas to saving to buy property for those in the urban areas. Whatever the goals are, have them in writing for easy reference. Divide the goals into semi-goals that need to be attained every quarter so as to monitor on the progress and know whether changes need to be made so as to attain the goals before the year ends.
Register the Chama
If it is not registered, then you may consider registering the chama. The problem with an unregistered chama is that it is likely for members not to take it seriously. However, if it is registered with by-laws or a constitution fines or penalties for breaking the rules, members are bound to take the chama seriously. Moreover, in the event of disputes, a registered chama can easily solve the dispute by going to dispute resolution clauses in their constitution. Some Non-Governmental Organizations (NGOs) also finance chamas. The only way they will finance your chama is if it is registered and recognized by the state. The benefits of registering a chama are countless and the process is not that hard.
Get the M-Pesa Chama Account
The M-Pesa Chama Account is an easy way to collect money from members. Chamas have different ways of collecting member contributions. Some have a bank account and require someone to deposit the money there while others have a treasurer whom you take the money to or send the money via M-Pesa. The M-Pesa Chama Account enables members to send money to that account and thereafter, the money can be transferred to a bank account via a portal that Safaricom gives. Getting the account is simple and takes only 48 hours. The money is safer than when you send to the treasurer’s personal M-Pesa number. Moreover, since almost everyone with a Safaricom line has an M-Pesa account, the process is easier and more convenient that queueing up in a banking hall to make payments.
The M-Pesa Account increases accountability and trust within the chama with easy and safe contribution methods enabling your chama to get to the next level. Getting the account is easy. All you have to do is walk to a Safaricom shop or customer care desk and ask for an application form. Upon submission of the form, your account should be ready in 48 hours. The account can hold up to Kshs. 100 Million and there are options to have members log onto a portal where they can monitor the payments. Moreover, the chama is not charged. The only charges are the M-Pesa charges when members are sending the money. If you do not have this account, then you should consider getting it ASAP.
Let Your Money Work
Most chamas contribute money and put it in a bank account for a long time before the money can be utilized in a project. If for example, the project is buying property, money can be in the bank for a year or more before it is utilized. While currently, most banks have no choice but to give you interest in the region of 7%, the inflation rate is also around 7%, meaning you are not gaining anything with your money in the bank. If the interest rate is less than the inflation rate, it means your money is losing value.
For the sake of a few who are not financially savvy, if say you put 100 in a bank account that gives an interest of 6% and the inflation rate is 7%. At the end of the year, your money in the bank will be 106 but what you would buy for 100 at the beginning of the year now costs 107. Now, you have to add another shilling to buy that item. A shilling may not be much but if the value is in hundreds of thousands or millions, it will be a significant loss.
However, if this money can be invested in short-term securities, it will be beneficial to members. Options such as T-bills offer over and above the inflation rate and they would not mess up the cash flows of the chama since they are short-term i.e. from three months to about a year.
Financial Knowledge
Most members of a chama contribute and let a few people manage or handle the investment bit. It will not hurt if members get a few basics in finance management and investment tricks. If members know the basics in investments, it will be easy for them to understand how the chama investments are performing etc. Generally, an enlightened group is easier to explain things to than one that does not understand and has to ask a million questions. There are various people who offer basic financial and investment tips to chama members. A one-hour session, say every quarter will do the chama a lot of good.
Are you in a chama? What are you doing to attain your goals this year? Do let me know in the comments section and let’s share ideas so that we can all attain our goals this year.
