February 17, 2021   by
Chamasoft, a company that helps you monitor your Chama online

The idea of a Chama has been around for several decades as investment groups are simple-structured and easy to operate. They involve the alliance of several people who gather or pool their money together to invest. Although the primary motivation of the groups is to save as much money as possible, they use their money to invest. These Chamas are also grand avenues and sources of moral and social support in addition to the financial support they provide.

Most Chamas started as contribution groups and over the years they have garnered the support of men, youth, and old people alike. The money put in by members is important and therefore it is necessary to ensure it is successful. There are numerous Chamas in East Africa today, a number of them are successful. Some main factors that lead to successful groups are holding the answer to questions such as how to get the most out of a the group, how to choose a savings group, and the type of people in it. Other than the investments, people make up the investment group.

Therefore, if they have interested members, then it will grow and progress. This however does not mean that every Chama has smooth sailing. Most Chama pass through phases before they realize their success. According to some economists, these phases are the reason Chamas fail. The following are ways to ensure the Chama is successful.

Choosing Chama members wisely

Volume Analysis Char
Volume Analysis Char

Members of a Chama set the foundation of a Chama’s growth. These members should therefore share similar visions, missions and goals for the Chama. In addition to this, the members are required to always encourage and incorporate teamwork. All the members in the group need to be chosen in a way that ensures they all play a role in the Chama.

The members also need to have financial professionals to help with financial guidance. This can involve individuals, consultant groups, or applications to monitor the financial health of the Chama. Some of these tools include Chamasoft. While picking a group, the founders or people in charge of selecting members need to make sure that they are strategic and intentional while selecting members.

It is preferable to reject failure by not choosing the wrong members than to choose members who have no value. The new members that the investment groups select should be dependable and goal-oriented. They should have a purpose similar to the group’s, and the role of each member is to remind each other why it exists.

According to research, choosing members is one of the major reasons they fail. To streamline the Chama and ensure it works seamlessly, one needs to choose members that are like-minded and add value to the Chama. That way they can easily achieve the objectives of the Chama.

Elect industrious and leadership-worthy officials

Second, the Chama needs leaders that can spearhead the mission of the group and maintain its focus. The leader needs to be someone that can lead the pack. The leader needs skills such as entrepreneurial skills, and they need to have mastered the art of business development and investment. These people are the best to achieve financial results.

A Chama raises money with the intention of either contributing it to one member, as with merry-go-rounds, or investing it in a business venture. In the second case, there is a required leader who can conduct due diligence and advise the group on the best way to invest the savings. For this reason, they require the leader to have a brilliant business mind. 

Most if not all, Chamas have had a conflict at one phase or another since their foundation. These Chamas need to find a good way to resolve conflict. Although the Chama constitutions play a significant role in conflict resolution, they still need a leader to help prevent such conflicts from happening again.

A leader should therefore know how to solve a conflict. That way they may help the Chama improve both financially and morally. When selecting a leader, it is important to implement democracy and elect the leaders in a fair manner. That way, things may run smoothly. When members feel the leaders are not fair, they should challenge the leadership. To encourage teamwork, the leaders may assign members strategic and well-informed tasks. Chairpersons, Secretaries and Treasurers should have leadership qualities.

Set rules for the Chama.

Ann image of Member contributions in a Chama

Thirdly, there should be rules to govern the mode of conduct in a Chama. The rules may also be referred to as constitutions that help address issues such as the disbursement of funds, and how and what to invest in as a group. These rules are important as they help the Chama to navigate around various issues such as default payment fines, meeting attendance as well as other aspects that ensure the Chama runs smoothly. When making contributions to the fines in the constitution is helpful as they help ensure everyone makes their payment on time.

The fines may be a fixed amount or a percentage. Such a rule keeps everyone on their toes and prevents defaults. It is however important to be careful, as although the rules may seem helpful, if they are harsh, or the Chama has harsh norms, they may lose both new and existing members. The rules should oversee the smooth operation of the Chama and its activities. It should not frustrate members.

Financial Knowledge

Numerous Chamas are centered around finance as their core of existence. These Chamas are purposely fabricated to reach financial goals that individuals could not do alone. This includes investing in real estate, purchasing farms, and buying pieces of land. Digitally they may also be investing in the stock market, or cryptocurrencies. Chamas have also faced difficulties in the past. Not because they did not have sufficient funds, but because they lacked knowledge and discipline. For this reason, critics prove Chamas work if they evade this.

One should create a Chama with at least a member that has a financial background. It requires the rest of the members to chip in and help the Chama grow. Each member should also incorporate some financial education and educate members. This will help make sure that members can keep up with the state of their investments.

Prioritize savings and Investments

In a Chama, members often make their contribution within a certain period. These savings will help make the group successful when invested in revenue. The savings gradually rise as it is a gradual process, and eventually, the Chama does not run out of funds. It is important to find a fine line. The line ensures the process is not too slow or too fast, so it does not strain the members. Once the investment group employs the tough savings mode, the members may feel burdened and they may leave the group.

Therefore, the savings plan should be simple and still affect the group. The decisions made on savings and investing must involve all members. Lastly, while making investments, the Chamas should look and learn from different groups and note down their shortcomings to ensure they become better.

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