September 11, 2013   by

Most chamas that aren’t successful fail within their first year or so of operation. Typically, according to Christine Mugaka of Bank of Africa, the reasons for failure comes down to the same problems, time and time again. Chamas, like many other things, offer much promise; if you successfully avoid a few obstacles. If your new chama can avoid these problems, then your chances of success are much better.

Differing investments ideas

One of the most important considerations, maintains Christine, is that “you should be sure that all of the members of the chama are on the same page for investment ideas.” All the members of a chama should agree on their investment objectives and strategies before you get started. “If some members of a chama are interested in ‘playing the stock market’ rather than a more studied, long-term oriented approach,” she cautions, “the conflict has the potential to tear the chama apart.”

No chama rules

Another problem faced by many clubs comes from not setting minimum attendance and investment requirements for members. Plus agree on the monthly contribution for each member. Chamas are doomed to failure if the members do not participate, according to Christine. If these rules are not followed, you need to make sure that you kick out the member that is not living up to the rules.

Too eager to bring in new members

In many cases, chamas are too eager to accept a new member into the group. This often creates problems, particularly if the new member doesn’t share the chama’s overall approach to investing, or is not clear on what is expected of chama members. Christine suggests that the prospective chama member should attend the chama meetings several times before being invited to join.

Being too trusting

There’s always a chance that you’ll end up with an unscrupulous person in your chama. This is why, if your chama is one that pools money and invests jointly, it’s important to set up the chama formally. Don’t neglect to legal details. Take some precautions. Perhaps set up your systems so that two people have to sign off on any financial transactions. This is important even if your chama consists of family members.


Another problem is that of under-delegation. As the chama leader, delegate as much as possible or you will be stuck with most of the work. Take note of your group’s dynamics and make sure that the work is being shared by all. Anyone who isn’t contributing his or her fair share may be enjoying the free ride and may be losing interest because they’re not very involved. Anyone who’s taking on too much may come to resent other chama members and may burn out.

Rushing into investments

A chama that isn’t paying attention might find itself derailed by a member who has veered off toward unsound investments. Be vigilant. If a member is all excited about some new investment idea that you are not familiar with, or a friend’s enthusiasm over a particular share in the stock exchange, be careful. Stick to the basics, such as a company’s earnings, growth, competition, and future. Otherwise, you might wake up one morning and find that your chama has half its money in some fly by night investment that collapses overnight!

No Time

Chamas take time. Make sure that you and your fellow members have the time to devote to it and are willing to devote that time. But make sure that everyone has clear expectations.

If you avoid the above mentioned problems, your chama will go from strength to strength and not break.






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