The conservative chamas mainly operated on the merry-go-round principle, i.e., members made fixed contributions at specific intervals and then these contributions were given back to the members according to an agreed-upon rotating schedule. Well, this principle did help, but it has come to be known that investment is a much better approach to chama finances.

The Merriam-Webster dictionary defines investment as an asset intended to produce income or gains, or the act of putting out the money in order to gain a profit.

In 1995 at a golf course in Nairobi, five gentlemen were discussing the best way to make use of their incomes. They had an idea to start an investment group through which they could pull their funds together and invest. Almost 23 years later, what they began as a Chama is now what is Trans Century Group, valued at millions of shillings. This is one example of what can become of a self-help group when the members are keen on investments.

Investments are in three forms. First, there are Ownership investments which include stocks, real estate, investment in the business, collectibles, and precious objects such as paintings. They can also be Lending investments such as a group’s savings account and bonds. These usually pose a lower degree of risk but give a lower rate of returns. Lastly, are money market equivalents which include money market funds.

There are important points to consider when making group investments. Proper research needs to be done so that members are fully aware of the various options available, enabling them to choose the ones that bring the best returns. Such Knowledge of the prevailing market opportunities is indispensable.

Equally important also is transparency and trust among Chama members in the management of group finances. This can be achieved through proper record-keeping openness about Chama’s financial status. This is where group management software such as chamasoft comes in handy, as they give each member easy access to the financial details of the group.

Chamas must also strive to build the right relationships with financial partners such as banks which can help them reach their investment goals. These institutions usually provide invaluable advice and financial assistance to groups, enabling them to make tough investment decisions, and making them indispensable partners in Chama’s success story.

It is also important for chamas to learn to be risk-takers. This is the fundamental quality of anyone serious about investments. Even with proper information, sometimes groups have to step out and take risky but informed investment decisions. It is these that more often than not accrue huge benefits to the investor. However, such investments must be supported by most if not all of the members in the group to avoid blame games and chaos in case of any mishappenings.

Needless to say, thorough and regular stock-taking and progress measurement of a chama’s investment journey is crucial. This will reveal the areas where the group is performing below expectations to be improved upon and the strong areas to be celebrated. This usually happens during group meetings which should be done regularly enough.

So the next time you meet as a  Chama, make it a point to discuss how your group is going to start investing if it has not yet started doing so. Keep your eyes on the ball, having in mind that the little you invest today may turn your chama into the company to reckon with tomorrow. As with all great things, start small, and do not stop. Eventually, you will get there.

Best of luck!

Categorised in: Chamas, Investment groups

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