Merry-go-rounds; a never-ending cycle of money contribution by members of a group that happens in turn whereby everyone has a chance to get the contribution – or chamas as they are popularly called in Kenya – are very common in Africa. Mostly attended by women, chamas are a major informal way of harnessing capital. Mainly, there are three kinds of chamas:
- One is where a certain fixed amount (mostly the entire contribution for the day) is given to one designated member. Members meet every month or twice a month, depending on the number of members and preferences, to contribute a set amount (each member has a number randomly picked to show who gets money after whom). This goes on until the last member receives their money and then the chama starts again with the person who began. At this point more members may be added or dormant ones eliminated. The cash is then used by members to buy household goods, improve their businesses etc.
- The second one is where members contribute amounts which form shares and are allowed to borrow money from the account (mostly one member keeps the contribution account books). The amount of money borrowed depends on the shares one has in the account. Members still meet at set times e.g. every month. The member then is able to pay the loan at a very minimal interest or sometimes no interest at all. These funds help them start businesses, expand their businesses, etc., and hence improve their livelihood.
- The third one is where the chamas become investment clubs. The members contribute with an aim of investing in jointly owned property, or businesses. This has become a popular mode of self development for both men and women. The banks have seen the potential in these and have developed products to fast track the realisation of the chamas’ vision.
Chamas may have become popular in recent times, but the model is quite ancient. My grandmother once narrated to me that long long time ago, she and her friends in the village had their chama. This chama was however different from the ones we have today because it never entailed money but labour. They would meet every tilling, planting and harvesting season and help each other till and harvest. They would meet like in a normal merry-go-round, pick numbers randomly to decide whose farm they would work on that particular day. As they worked on each others’ farms, singing and sharing stories and advice on their daily lives, it made it easy for them to do their farm work (their farms were very large), and hence finished the work in time every season. This was transformed gradually to the financial chamas that are there today where people support each other. These chamas help the members grow their businesses, educate their children, and cater for their basic needs as well as in their social lives e.g. contributing in times of funerals and weddings.
Many small businesses entrepreneurs in Africa are women as the women have risen up to the challenges faced in Africa e.g. unemployment, poverty, diseases, illiteracy etc. hence the increase of chamas in Kenya. Such-like groups are formed in the countryside as well as in the city and the members empower each other to rise from poverty. The story is the same in almost all parts of Africa. The advantage of these chamas is that they not only support the financial aspects of its members but their social aspects as well. The group members share their struggles and successes and offer each other advice and support, hence lift their morale in life and business. For those that form a kitty for on-lending, the interest rates are also very affordable.
Bayollah, one of MYC4’s employees in Nairobi, is a member of 3 different chamas and had this to say about her experience:
Chamas are very important to my life. Since I started the chama, I have really improved because when it’s my turn to get the money, I can organise myself. Then I can buy household goods without relying fully on my salary.
Many households in Africa have members who belong to such chamas and it is often these chamas that later access financial help from microfinance. Some of these Microfinance Institutions partner with MYC4, e.g. KEEF and Yehu Microfinance Trust. When investing, especially in group loans, it is these wonderful men and women you empower, and a brighter Africa you are developing because these funds help them be progressive in their business and daily lives.
