Hello and welcome to evefinancialsinsights blogs where we discuss all things finances.Are you in a Chama?
In
Kenya, Chamas (also known as investment groups) have become a popular form of
investment and savings for many people. Chamas are typically made up of a group
of people who come together to pool their resources and invest in various
income-generating activities. The group members contribute a fixed amount of
money each month, which is then used to make investments, pay bills, or support
group members in times of need. Chamas have become an important part of the
financial landscape in Kenya, providing a means for people to save and invest
in ways that are not available through traditional financial institutions. In
this article, we will explore the growth of Chamas in Kenya, looking at how
they work, their benefits, and the challenges they face.
History
of Chamas in Kenya
Chamas
have been around in Kenya for many years, and their popularity has grown
significantly over the past decade. The concept of Chamas has its roots in the
traditional African social structure, where people would come together to
support one another during times of need. This support could take many forms,
including financial assistance, labor, or the provision of food and other
essentials. Chamas have evolved from this traditional structure, and are now
primarily focused on investment and savings.
The
modern concept of Chamas in Kenya emerged in the early 2000s, following the
liberalization of the financial sector in the country. This liberalization
allowed for the establishment of more financial institutions and the
introduction of new financial products and services. However, many Kenyans
still faced significant barriers to accessing these services, including a lack
of knowledge, high fees, and a lack of trust in formal financial institutions.
In
response to these challenges, many Kenyans began to form Chamas as a way of
pooling their resources and accessing financial services in a more informal and
affordable way. Chamas provided a means for people to save and invest in ways
that were not available through traditional financial institutions, and also allowed
members to support one another in times of need.
How
Chamas Work
Chamas
are typically formed by a group of people who come together to pool their
resources and invest in various income-generating activities. The group members
contribute a fixed amount of money each month, which is then used to make
investments, pay bills, or support group members in times of need.
There
are different types of Chamas, and they can be organized in various ways. Some
Chamas are structured as registered entities, while others are more informal.
Registered Chamas are typically more formal, with clear rules and regulations
governing their operations. These Chamas may also have a bank account, a board
of directors, and regular meetings where members discuss the group's operations
and make decisions.
Informal
Chamas, on the other hand, are often organized among friends, family members,
or colleagues. These groups may not have formal rules or regulations, and their
operations may be more flexible. However, informal Chamas can still be
effective, particularly if the members trust one another and are committed to
the group's success.
Once
a Chama has been formed, the members typically contribute a fixed amount of
money each month, which is then used for various purposes. Some Chamas may
focus on savings, with the group members contributing money each month that is
then saved in a joint account. Other Chamas may focus on investments, with the
group members using the pooled funds to invest in various income-generating
activities, such as real estate, stocks, or businesses.
Benefits of Chamas
Chamas, also known as rotating savings and credit associations
(ROSCAs), are informal financial groups that have been used for centuries in
many parts of the world. Chamas are typically made up of a group of people who
come together to contribute regular amounts of money to a central pool, which
is then used to provide loans to members of the group.
Here are some benefits of Chamas:
1.
Access to credit: Chamas provide
access to credit for members who may not have access to formal financial
institutions. Members can borrow from the Chama's pool of funds, which can be
used for a variety of purposes such as paying school fees, starting a business
or making a large purchase.
2.
Social support: Chamas provide a
sense of community and social support to members, who often come from the same
neighborhood or social circle. Members can rely on each other for financial and
emotional support, which can be particularly valuable during difficult times.
3.
Financial discipline: Chamas
encourage financial discipline and savings behavior among members, as regular
contributions are required. Members learn to budget and plan for the future,
which can help them achieve their financial goals.
4.
Collective bargaining power: Chamas
can negotiate better deals and discounts on goods and services for members, as
they have a collective bargaining power. Members can also pool resources to
make larger purchases or investments that may not be possible individually.
5.
Investment opportunities: Chamas can
also provide investment opportunities for members, such as purchasing land or
property as a group. This can help members grow their wealth and achieve their
financial goals.
Overall,
Chamas can provide a range of benefits to members, including access to credit,
social support, financial discipline, collective bargaining power, and
investment opportunities.
I know from
this information you are going to make a decision on whether to join a chama or
not.
At evefinancialinsights
we sort all things. See you on the next Blog.
