Chama Handbook

Books & Magazines Chama Handbook 2020-07-09

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What is a Chama?
The Kenya Association of Investment Groups (KAIG) defines an investment group as “Any collection of individuals or legal persons in any form whatsoever including but not limited to: societies registered under the Societies Act, Partnerships and Limited Liability Companies, whose objective is the pooling together of capital
or other resources with the aim of using the collated resources for investment purposes.” The more widely used word for ‘Investment Group or Club’ is Chama (Kiswahili for group).
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Chamas are usually founded on two basic reasons:
• The common bond between the members.​
• The financial goal of the group.​
As most groups begin with trusted friends or family, it is important to have clear objectives in the beginning on the group’s purpose otherwise, the Chama can end up only as a perfect excuse to get together once a month to socialize. However, note that having social activities cements the group’s relationship dynamics by strengthening them.

It is important for Chamas to work towards enhancing their bond outside their financial and investment aspects. Some activities that can improve the relationships between
members are:

• Taking up group insurance covers for members, their families or their businesses
• Setting up a benevolent fund that caters for any eventualities or calamities a member may suffer.
• Having a party or a ‘Goat-eating’ Get-together where member’s families, friends and business associates might also get invited.
• Having training sessions to increase knowledge in any agreed area for the members
done by outsourced professionals.
• Doing or exchanging business services with the members as opposed to sourcing
from outside the group.
• Having group visits to members’ life events like weddings, anniversariesEIU, birthday parties and contributing towards these occasions.
• Engaging in a socially responsible activity like visiting a children’s home, donating
books to a local library or school, offering investment skills at a local prison, etc.

A popular form of Chamas has been the “Merry Go Round” otherwise known as a Welfare Club.
Members contribute a pre-determined amount of money each month and the total amount is given
to one member.

This rotates amongst the members throughout the year. The member will pursue a personal activity with this money i.e. pay school fees, invest in shares or real-estate, upgrade their home. Some of them have been able to keep aside some this contributed money for investment purposes but many remain in this state for years with no additional benefits. However, as times are changing many Chamas are either transitioning from welfare clubs to investment groups or are clearly beginning with a goal of pooling their resources together to seriously invest and grow their portfolios.

The world’s first investment club on record was founded in 1898 in Texas, the United States where individual’s came together to spread the risk away from their cattle business1. Since then, there are hundreds of thousands of investment groups around the world that have generated millions for their members. If properly funded and maintained, a Chama can give it’s members great returns year and after year whilst providing valuable knowledge and experience that lasts a lifetime.
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